BUSINESS TRANSFORMATION IS A TERM IT MAKES FUNDAMENTAL CHANGES IN OPERATION HAVING THE AIM OF ENHANCING BOTH OPERATIONAL AND FINANCIAL PERFORMANCE.
BUSINESS TRANSFORMATION IS A TERM IT MAKES FUNDAMENTAL CHANGES IN OPERATION HAVING THE AIM OF ENHANCING BOTH OPERATIONAL AND FINANCIAL PERFORMANCE.
INTRODUCTION
The transformation has become a big business buzzword. Technological developments create a need for digital transformation. Climate change creates a need for green transformation. Shocks, such as Covid-19 or the war in Ukraine, create a need for crisis transformation. Business transformations vary in terms of content, pace, and place of initiation — and it’s rare that companies are only undergoing one at a time. Doing business today means navigating a complex landscape of interconnected and interdependent issues, each having multiple stakeholders and agendas. Hence, organizations need to understand the various types of transformations and know how to manage each.
Business transformation: Its various aspect
Business transformation is an umbrella term for making fundamental changes in how a business or organization runs. This includes personnel, processes, and technology. These transformations help organizations compete more effectively, become more efficient, or make a wholesale strategic pivot. It is bold, seismic shifts that organizations make to accelerate change and growth beyond typical incremental advancements. The scope is broad and strategic, such as switching to new business or operating models. Organizations undertake business transformations to create additional value. It may mean unlocking the potential of employees, harnessing intellectual property and proprietary technology for other purposes, or becoming more efficient to maximize the company’s potential. It is large, multi-year initiative requiring wholesale changes to fundamental aspects of the transforming companies. Given the size, scope, and timeframe of the undertaking, it must be driven from the top—be it the CEO or the Board of Directors—to position the company for sustained success and growth for the foreseeable future. These transformations used to take many years. Now, the urgency of these changes and the support available have accelerated the timelines. Many are completing them in months versus years.
PRESENT CONTEXT: BUSINESS TRANSFORMATION NOW MORE KNOWN THAN DIGITAL TRANSFORMATION
Digital transformation is the incorporation of computer-based technologies into an organization's products, processes, and strategies. Organizations undertake digital transformation to better engage and serve their workforce and customers and thus improve their ability to compete. It is the incorporation of computer-based technologies into an organization's products, processes, and strategies. Organizations undertake digital transformation to better engage and serve their workforce and customers and thus improve their ability to compete.
Often large in scope, this initiative can require an examination and reinvention of all facets of an organization, from supply chains and workflows to employee skill sets and org charts, to customer interactions and value propositions to stakeholders. Successful digital transformations yield ongoing business benefits: Digital technologies and processes enable organizations to adeptly respond to customer demands in the present and as demands evolve. Digital transformation also builds the infrastructure and skills required for taking advantage of fast-evolving technologies that could confer a competitive advantage.
This strategy positions organizations to survive and thrive in a future where technology is the key economic driver. The digitization of society started in the late 20th century and underwent rapid acceleration in the first two decades of the 21st century, spurring a growing need for digital transformation across industries.
TYPES OF BUSINESS TRANSFORMATION
With an all-encompassing scope, business transformation can be many things. There are plenty of ways to break it down, but business transformation activities typically fall into one (or more) of these five categories:
Business process transformation
This transformation focuses on the “how” of getting things done and might include agile transformation. It typically involves lots of optimization and automation of repetitive processes to focus on higher-value projects. This generally is an ongoing effort, starting with the most common methods and then continuing onto those with lesser returns. The end goal is to relieve the company from the burden of these tasks to innovate or provide higher-value services and offerings to the market.
Information/data/digital transformation
Focusing these transformations on using technology to unlock additional value. It may come in aggregating and sharing data in new, more efficient ways (such as a digital CRM system or online ordering). It also includes leveraging technology and data to offer ultimately new products and services, both by using the technology to rapidly design, build, and distribute them and use digital assets as part of the new offerings themselves.
Organizational transformation
Altering resource allocation is key to many transformations. A company’s most precious resource—its people—are no exception—base organizational transformation by assessing how to staff various departments and the structure of those departments themselves. Looking at in-house skills and experience, how the staff is deployed, and the various reporting structures allows companies to identify opportunities. These opportunities could point to either streamlining or build-out to better achieve growth and success. Other objectives may include breaking down silos, flattening the organization, and right-sizing the headcount.
Management Transformation
As companies strive for growth in competitive marketplaces, top-down bureaucratic hierarchies aren’t always the best for facilitating rapid decision-making and reacting to new developments. Transforming the management structure may be part of the solution (getting rid of the middlemen, etc.), but empowering individuals to make decisions themselves or quickly reach a consensus is far more critical. This requires socialization and access to information, establishing clear communication channels, and overall transparency in organizational functions.
Cultural transformation
Cultural transformation is, in some ways, the hardest business transformation activity. Corporate cultures tend to evolve organically, driven by leadership personalities and how people are rewarded and recognized. Changing the culture usually takes much longer than any other type of transformation, in part because it’s harder to translate concepts and intentions into action and practice. It also rarely takes place in a vacuum and has a much higher success rate when it comes to the heels of management transformation. A strong vision, adherence to that vision, and practicing confirming it are all essential to success.
Product managers should be aware of business transformation
Product managers are often the catalyst for business transformation in their organizations, but people rarely recognize or acknowledge it. They have a unique role in the fulcrum of so many aspects of the organization. The downstream implications of the insights they provide to the directions they prescribe for their products can create—or at least spark—these fundamental changes. By conducting, compiling, and communicating customer research and competitive analysis results, product managers are often the first to spot opportunities. With customer-centricity in mind, they can easily recognize issues with delivering innovations, meeting customer expectations, bringing products to market, and supporting customers. By pushing the development organization to deliver new products and services, they’re instigating additional investments in new technologies that are more efficient and provide a platform for entirely new offerings.
By implementing or utilizing one of the many decision-making frameworks, product managers are laying the groundwork for management transformation; instead of running every tiny decision up and down the old chain of command. By preaching Lean innovation principles, conducting A/B tests, and mandating MVPs instead of fully-baked products, they’re breaking free from the traditional enterprise way of thinking. Product management is creating dozens of Petri dishes for business transformation that can illustrate the potential upsides of these endeavors and provide examples that can be replicated across the entire organization and on a larger scale. For these transformations to be truly transformational, it requires a larger buy-in than just the product team; the whole management team must be on board and willing to invest the time, effort, and resources. Product managers excited about and interested in playing a key part in the transformation should be sure organizational support truly exists before “getting out over their skis” and assuming the executive team has their back.
Implementation Business Transformation
It all starts with a strategy—without clear, big-picture objectives and plans on how to get there, any business transformation is destined to fail. This strategy must also be apparent to downstream individuals to ensure nothing is lost in translation, as a business transformation’s steps and processes shouldn’t be left open to interpretation. Next comes identifying which capabilities are needed (or must be improved) to achieve those strategic goals. These are either things the company can’t or doesn’t do now or areas that could use significant improvement or redirection. Deloitte defines each capability along these six lines:
Any transformational activity also requires staying power because there’s no reason to go through this entire process if the company falls back into its old ways as soon as the exercise is completed. The same data and metrics used to measure if the company has achieved its goals can also ensure they’re being maintained once the transformation is complete.
A dedicated staff is also key to a successful transformation. The management of these programs should be someone’s “day job” and not an add-on responsibility. A massive undertaking like this requires a dedicated headcount with the appropriate experience and authority to hold people accountable for their deliverables.
THE EVOLVING CIO ROLE: FROM IT OPERATOR TO BUSINESS STRATEGIST
Business transformation
The big difference between business transformation efforts and other kinds of business improvements is the commitment by company leadership to a wholesale change in how something is done, as opposed to making incremental changes to a business process or product.
Different types of business transformation
Business transformation can involve multiple types of transformational change, including the following:
· digital transformation
· cultural transformation
· organizational transformation
· management transformation
Business transformation initiatives can involve mergers and acquisitions, staff changes, outsourcing, supply chain reorganization and new business models. In practice, the business transformation process typically involves making major changes to an organization's people, processes, and technology.
Business transformation can be opportunistic or responsive.
Netflix adding a streaming movie service to gain a competitive advantage in a new market is an example of an opportunistic business transformation. The radical changes some companies had to make to support remote work in the wake of COVID-19 restrictions is an example of responsive business transformation. The reorganization of a supply chain in the wake of new trade restrictions is another example of a responsive approach to business transformation.
The evolving CIO role: From IT operator to business strategist
· Which also includes:
There are different dimensions of business transformation. Efforts focused on performance improvement include basic business goals such as cost savings and adding new revenue streams. A business portfolio transformation could involve mergers and acquisitions, the creation or termination of product lines, new sales channels, and new partnerships. Technology often plays a central role in transformation initiatives, as, for example, when the implementation of a modern enterprise resource planning application, customer resource management platform, or electric health records system drives major changes to how business gets done. Other kinds of transformation, however, such as outsourcing a business function or terminating an unproductive product line, might have less impact on existing technology or not require new technology.
Based on our work on business transformations, we’ve developed a typology that helps clarify four types of business transformation based on two dimensions: 1) Is the transformation driven by internal organizational needs or external forces? and 2) What is the pace of the transformation?
Slow-Motion Transformation
This is when organizational leaders introduce a new vision with a long timeline for implementation. Cultural changes and corporate turnarounds are typical slow-motion transformations.
A recent example of a high-profile, slow-motion transformation can be seen in the digital transformation efforts taking place at Maersk Line, the Danish container-shipping firm. These ongoing efforts to provide more visibility and transparency in customer supply chains require technical, organizational, and cultural change. And despite the significant investment, which started in 2016, there is still an ongoing dialogue about the company’s strategic positioning and corporate identity: While digitization enthusiasts proclaim that Maersk Line is now increasingly a tech company, other high-ranking executives argue that it’s first and foremost a container-shipping company. The managerial challenge with slow-motion transformations is to keep focused on the direction and target of the change. This requires a long-term view and patience, as well as a spirit of continuous learning and improvement throughout the transformation process.
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Sprinted Transformation
These initiatives are also introduced in response to internal needs, but they are characterized by an urgent challenge to the status quo. Examples of a sprinted transformation include a sudden corporate restructuring or the introduction of a new strategic initiative. These are sometimes enacted in response to management fads or new corporate buzzwords, but when the right initiatives are set in motion, it can be a very efficient and effective way to change.
Setting Your Corporate Strategy
An example of a recent sprinted transformation is Facebook’s evolution into Meta. When Mark Zuckerberg announced in October 2021 that his company was all in on the metaverse, it sparked a sweeping and unprecedented transformation for the 68,000-person social networking company. All of a sudden, Facebook and Instagram engineers were being told to forget their job goals for 2022, and instead apply for new positions in the burgeoning augmented reality and virtual reality teams. This sprinted transformation was sudden and swift, creating uncertainty and stress among former Facebook and Instagram employees. Yet, it could also be argued that Facebook needed to sprint toward becoming Meta in order to gain a first-mover advantage.
The managerial challenge in a sprinted transformation is to build a powerful narrative to create the needed energy and motivation for change. Without a motivated workforce, it will be impossible to follow through on the desired direction.
Negotiated Transformation
These initiatives are typically undertaken in response to external demands, such as regulatory efforts, where the firm can’t change, but rather only influence, the contents of the transformation. They are characterized by a slow pace and extensive stakeholder management efforts.
Take the European Union’s General Data Protection Regulation (GDPR), for example. These requirements were passed in 2016 and applied to all businesses operating in the EU; however, they didn’t go into effect for several years. While the legislation has arguably had some unclear aspects that have been up for further clarification and interpretation along the way, firms were forced to transform many of their operating procedures accordingly.
The managerial tasks in a negotiated transformation are to engage in debates, exercise influence, and skillfully prepare the organization for transformation. A common mistake is to move too quickly — which may result in a need for subsequent efforts when the true scope is finally known.
Hijacked Transformation
These initiatives are characterized by sudden, disruptive changes brought about by outside forces. As such, external parties essentially hijack the company’s agenda, forcing a transformation to align with the new reality.
An example of hijacked transformation can be seen as a result of Russia’s invasion of Ukraine. In a matter of days, many companies had to leave or end their Russian operations to avoid sanctions, boycotts, or political repercussions. Hijacked transformations can also occur when new disruptive competitors enter an industry and change the rules of the game, such as how streaming companies (e.g., Netflix, HBO, Amazon Prime, and Disney+) have threatened conventional flow TV, cinemas, and the movie industry, essentially hijacking their transformation agendas in the years to come.
The managerial challenge with hijacked transformations is to move quickly and not invest extensive efforts in debating the trigger. Failure to accept the external demand and the set timeframe will have detrimental effects on businesses.
Managing the Multi-Transformational Reality
While it’s essential that managers correctly diagnose the transformation they’re facing, it’s even more important that they also hone their capability for managing multiple transformations at once. This means they must be able to:
1. Spot the need to transform.
Managers need to be able to identify and diagnose the kinds of transformations they’re facing. We recommend making a regular practice at weekly or monthly meetings to ask yourself which transformations you’re facing or will soon face, how they differ from each other, and what can be done about them.
2. Develop the appropriate process for each transformation.
You won’t be successful in trying to manage a hijacked transformation with processes aimed at managing a slow-motion transformation, or vice versa. It’s critical that you’re aware of the different processes each transformation type requires, and that you develop all four processes and deploy them accordingly.
3. Understand the interconnection between transformations.
While different transformations require different approaches, the transformations may also be interconnected. For instance, a hijacked transformation of your supply chain, such as those imposed by the war in Ukraine, may put pressure on a sprinted transformation of your e-commerce transformation in your home market. Therefore, make it a priority to also understand the interconnections of the transformations.
Transformations are inherently complex and they vary — but they are typically seen as being just one thing. Let’s avoid that by grappling with the complexity head-on in order to better manage it.
Organizational Transformation Is an Emotional Journey
4 Business Ideas That Changed the World:
In the 1980s, Clayton Christensen cofounded a startup that took over a market niche from DuPont and Alcoa. That experience left Christensen puzzled. How could a small company with few resources beat rich incumbents? It led to his theory of disruptive innovation, introduced in the pages of Harvard Business Review in 1995 and popularized two years later in The Innovators Dilemma. The idea has inspired a generation of entrepreneurs. It has reshaped R&D strategies at countless established firms. And it has changed how investors place billions of dollars and how governments spend billions more, aiming to kickstart new industries and spark economic growth. But disruption has taken on a popular meaning well beyond what Christensen’s research describes. Some critics argue that the theory lacks evidence. Others say it glosses over the social costs of lost jobs of bankrupted companies. And the debate continues over the best way to apply the idea in practice. 4 Business Ideas That Changed the World is a special series from HBR Idea Cast. Each week, an HBR editor talks to world-class scholars and experts on the most influential ideas of HBR’s first 100 years, such as shareholder value, scientific management, and emotional intelligence.
Disruptive Innovation :
developing new product lines outside the scope of existing business lines; terminating unsuccessful product lines or services; refactoring Capex products to provide similar functionality as-a-service; consolidating multiple business systems into one integrated system; migrating core business applications to the cloud; streamlining the supply chain to improve efficiency or resilience; consolidating different types of risk management into a single group; business process reengineering; Business process outsourcing or insourcing; democratizing application development or analytics across business users; cultural transformation aimed at driving data science literacy; implementing new data governance to keep pace with privacy regulations; adopting a new security process to cope with changing threat landscape; and adopting a new incentive model to align employee and company goals.
What are the drivers of business transformation?
Many factors can trigger the need for business transformation, including the following:
Business slump. A decline in business growth can incentivize businesses to invest in new product lines, R&D, or customer satisfaction initiatives to stay relevant.
Efficiency gains. Enterprises can realize efficiency gains by automating and improving the processes that help fulfill business goals. Advanced tools like process mining can trigger a business process management initiative by automatically identifying opportunities for eliminating, streamlining, and optimizing business processes.
Leadership change. The introduction of a new leader provides an opportunity to rethink the business's strategic priorities. A new approach to profitability, the desire to dominate a particular market segment, or an interest in ESG (environmental, social, and governance) issues are examples of regime change transformations.
Mergers and acquisitions. The integration of multiple organizations under one structure after a merger or acquisition provides many opportunities to streamline back-end processes and product lines or combine technologies for competitive advantage.
New business restrictions. Social distancing restrictions implemented in the wake of COVID-19 required most businesses to adopt a work-from-home model. Changes ran the gamut from shifting meetings online to reworking business processes that required physical steps like signatures or access to dedicated banking terminals.
New technology. Innovations in cloud architectures, services, or capabilities like machine learning can encourage leaders to adopt new technology to improve costs, pursue new opportunities or create a more efficient process.
Reduce costs. Various ways businesses might pursue significant change to cut costs include outsourcing certain low-value activities or taking advantage of new services that perform a similar function at a lower price.
Supply chain disruption. Trade wars, pandemic shutdowns, logistical bottlenecks, and new political considerations can all reveal kinks in fragile supply lines. As a result, companies may shift their focus from supply chain efficiency to building a more resilient supply chain. For example, Tesla recently announced plans to go into the mining business to stay on top of the rising cost of Lithium.
Steps to implement business transformation
1. Clarify goals. Teams first need to develop clearly defined goals that clarify the purpose of the business transformation and a theory about what steps could help address these goals.
2. Executive buy-in. Next, it is essential to enroll an executive champion to support the goals. This person can help flesh out the initial theory into a more substantive business strategy with specific steps, participants, and funding requirements. The champion can also help overcome any hurdles or conflicts around funding, departmental control, or communication.
3. Develop metrics. At this stage, the core team needs to clarify what success looks like. What are key metrics to pay attention to that indicate the business transformation is moving in the right direction? What are some potential risks that could derail the efforts, and how can these be mitigated and managed?
4. Employee buy-in. Once the overall vision is clarified, the core idea must be translated to characterize how it can positively impact employees. This might be as simple as coming up with a new message and broadcasting it across various corporate channels. Another approach may involve attracting employees to the new vision to allow the effort to slowly blossom.
5. Demonstrate success and build on it. Change of all kinds of hard. Early success on a few pilot implementations can build enthusiasm and buy-in for a new idea across the organization. A center-of-excellence model can consolidate enterprise learnings related to the initiative in a single location and help share success stories to inspire others to participate.
Best practices for a successful business transformation
Many business transformation efforts fail to reach their goals. An oft-cited 2018 McKinsey study reported that only 30% of digital transformation efforts succeeded. The group defined success as equipping the organization to sustain performance and equipping the organization to support improvements over time. Prior McKinsey surveys claimed success rates were as low as 20% in 2016 and 2012. Boston Consulting Group made a similar observation in 2020. However, BCG discovered that businesses that adopt the following six practices increased successful transformation rates to 80%: Craft a clear, integrated strategy -- focus on simple goals and a map to get there. Secure committed leadership from the top through the middle -- get buy-in from managers at multiple levels. Put the best people in the right places -- include business and tech experts and provide strong incentives. Adopt an agile governance mindset -- apply agile to tech, new business experiments, and other areas. Monitor and measure your transformation progress -- track clear, quantifiable goals. Create a business-led tech and data platform -- align technology with business goals.
CONCLUSION
Any established organization interested in maximizing performance, increasing efficiency, and being around in five or ten years should explore business transformation opportunities. There will always be places, processes, and structures that could benefit from an overhaul, and bypassing these changes in favor of the status quo often proves short-sighted and detrimental. Product management can serve as inspiration, a testing ground, and a momentum-maintaining cheerleader for turning these ideas into reality by incorporating business transformation fundamentals into their organizations and the products they oversee. Innovating how the company works can be just as pivotal in its success as the innovative thinking that goes into the produced products.