The current business climate has made it increasingly necessary to transform the way an organization’s business functions. Whether it’s the rapidity of technological evolution or Covid19, businesses are now revisiting their business model and building a strategy to transform it.
In simple words, business transformation is the strategy of changing, restructuring, or renovating the fundamentals of business operations. The goal is to change processes, stakeholders, leaders, employees, systems, and technologies to align better with the company’s vision.
If you have ever wondered how to start your business strategy, this guide should come in handy. I will outline the basics of business transformation and how you can create a solid strategy for your business.
Organizations would want to transform their business for different reasons. However, in most cases, businesses transform because they are reacting to change, in today’s world, it is mostly about survival.
Markets have become highly competitive, and the basic business models are changing due to disruptive technologies. As a result, even customers and employees are expecting more. Companies that can adapt to change are doing well, and therefore, other companies are also following the same path to survive.
In a 2017 BIE survey, 94% of business leaders said that increasing agility was the main priority for their organizations. The next essential parameters were leadership and radical change in business operations.
Here are some of the primary reasons why businesses want to transform:
There’s little doubt that technology has changed the whole game for businesses. Whether it’s migrating to a cloud-based system, using Machine Learning, or automating processes, companies are now looking for new ways to improve their business.
Cost is always on the table for discussion when it comes to business transformation. Cost-saving is an excellent trigger for change within an organization. It may include reduced outgoings, space, and lower budget allocation for unnecessary business meets.
Lack of growth in any business is a good reason to transform. The company’s current operations may be sufficient to support the organization but not good enough to provide time or space for innovation and growth. General Motors is a good example.
If the customers are dissatisfied with the current products and services, they will leave. With increased competition, businesses cannot afford a low retention rate. Customer satisfaction, therefore, is a strong driving force to identify problems and create transformation strategies.
Brexit is a good example of how political climates can drive transformation. It changed a wide range of regulations across the country in terms of how companies do business with others. So, businesses have to adopt new policies to conform to these new regulations.  They also have to come up with new strategies to make up for the reduced investment and productivity.
To create a successful business strategy, you need to understand the different types of business transformations that exist in the market today.
The Harvard Business Review categorizes business transformation into three broad types:
The first type is operational or changing what you’ve been doing so far to run your business. A good example of operational transformation is companies that are automating their processes. Instead of relying on the same old cumbersome processes, companies adopt one solution for many problems.
An operational change may not always be forced. At times, companies change how they operate because they want to upscale their products, expand, or move into new businesses. This change requires time and cost-cutting, which they can achieve through a well-organized operational transformation.
Core transformation is all about doing the same things but in a more effective way. One of the famous examples is Netflix. The company’s main job was to provide entertainment to people. They did this by sending DVDs via mail. Now, they still do the same thing but via their online streaming service.
The final type of transformation is strategic. It’s the most dramatic of the three changes since companies use it to transform themselves completely. One of the best examples is Samsung. It started as a trading company for dried fish, noodles, and groceries but evolved into a tech giant.
Strategic transformation is all about planning and execution. Companies that do it well can not only survive but also get ahead of the race.
The three broad categories defined by HBR can also be broken into five specific types of transformation. This categorization is important because businesses often focus on particular areas rather than general transformations.
The most crucial resource of any organization is its people. No transformation can take place without involving the people who are a part of it.
By looking at in-house skills, experiences, and how the staff contributes to the business operation, you can identify opportunities for transformation. Many businesses transform themselves by relocating employees to other departments, giving people the chance to upskill themselves, or down-sizing and streamlining the process.
It’s similar to the operational transformation which I spoke about earlier. Transforming the business process is all about ‘how’ you can do things that lead to growth. In today’s world, it involves optimization and automation of long and complicated processes.
Changing the business process in any organization is always an ongoing effort whose end goal is to reduce the operational burden and increase revenue for future growth.
In the last two decades, digital transformation has become one of the most talked-about changes in the business arena. Digital transformation can include using newer technologies to solve old problems or reaching out to new customers who want digital solutions.
Cloud services itself is a 400 billion dollar industry, and it is just one part of SaaS (Software as a Service). Every department, including HR, Sales, Marketing, etc., is adopting SaaS to transform their work. It gives them the tools to solve problems quickly and helps them tap into other markets and customers.
There are times when the upper management needs a serious transformation to change the way the company works. Leadership, especially during organizational growth, is crucial, and bad decisions from leaders can be disastrous.
Transforming leaders should be more about empowering individuals than changing the management because the former is more effective in the long term.
Company culture is a multifaceted feature of every company that depends on things like leadership, technology, talent, growth, mindset, etc. Cultural transformation is, therefore, the hardest to achieve. Moreover, the transformation might take months or even years to come to fruition.
However, the most integral part of company culture is the leaders and the employees. If the understanding between the two is in alignment with the company ethics and vision, the cultural transformation will be successful.
You can never make a business transformation strategy outside the organization. Not only does the transformation have to take place inside, but it also has to move without disrupting the current culture, leadership, management, and process. It’s like changing the wheels of a car while driving.
So, you need to understand the different elements that make up your transformation strategy and then proceed accordingly.
There can be no transformation strategy without first setting goals. It will help you create a plan of action, but more importantly, it will always remind you why you’re looking to transform.
Follow the steps below to set the perfect goal for your transformational strategy:
- Recognize the need to change. The first step is to recognize that your business requires a change. You can make sure through discussions with the stakeholders, the management, or employees.
- Revisit the company’s vision. Now and then, you need to revisit your company’s vision to see if you’re heading on the right track. If you’re not, it’s time to either change the way you work or change the vision.
- It should be accepted by all. Your transformational strategy should be accepted by everyone, including your employees, although it’s not realistically possible in a large organization. But you should still share your strategy and ask for their opinions.
Without people, there’s no business. You can use all the automation tools and software in the world, but if you want to run and scale a real business, you need people.
When you’re making a change in the organization, it will certainly impact other areas. For example, changes in finance might affect the HR department. Changes in technology might affect everyone. So, you cannot have a transformation strategy without involving the people in the organization.
The first people on your list are the stakeholders. They’re the ones you’d have to convince the most. Next on the list will be the management. It might be easier to convince them since they’re the decision-makers of the company. And finally, the employees.
What are the tools that will help you transform your business? It could be a tool for reviewing performances or evaluating current technology standards. It could even be about optimizing project management or customer retention.
What you choose will depend mainly on how your company is doing now versus how you want it to perform. If you’re losing out on customers, it could be your product, services, or technology. If it’s market share, then it could be about customer satisfaction.
Whatever you choose, it should be directly tied to your transformational strategy.
One of the biggest challenges of creating a business transformation strategy is resistance from the stakeholders. While it’s understandable why they want to resist change, you should convince them that business transformation is an opportunity for them to become even bigger and better than they are.
To successfully implement your business strategy across various departments, you need to prepare them first. Thanks to the ‘transformational’ mindset of businesses and leaders these days, it has become easy. Leaders now increasingly understand that it’s either transformed or perished.
Here are some of the factors that you need to keep in mind.
Disrupters can be external or internal. External disrupters are the ones that shape the market. It is your competitor, technological changes, political environment, and anything which you can’t influence. Internal disrupters are leadership failures, poor culture, old technology, and everything else you can change.
To understand external disrupters, you need to conduct purposeful market research and follow the current trends in your business. You can either outsource the work to an agency or hire people specifically for this job.
Creating a culture of change is extremely important. As a leader, you need to influence the mindset of the people in your organization because true change will happen when the people accept it.
You can create this culture through a reward system that encourages change. Use incentives, rewards, and recognitions to support people who are ready to accept change.
It’s impossible to do anything today without technology. So, you need to understand it thoroughly for the sake of your business.
One of the things that people fail to consider when choosing technology is the type of competition it creates. DVD creators never imagined the impact online streaming would have on their business. And look where the DVD-making industry is today.
Changing is often equated with defeat. Businesses often want to boast about how they have been doing something for decades and weathered every storm. But not everything is the Coca-Cola recipe. In the modern age, things are constantly shifting, and businesses also need to transform accordingly.
Accepting the need to change the current way of doing business is probably the first step in creating a great transformation strategy. And yet, it is something that leaders and management fail to consider.
Your business transformation strategy should first begin with understanding what a business transformation is and what it means for your company’s future. There are different types of transformation, and you need to decide what’s best for you.
You should decide what goals you want to achieve and use the right tools to reach that goal. Involve people and convince them why it’s crucial. And remember that your business transformation first starts with accepting that you need to change.
- BIE Executive: Guide to Business Transformation
- Harvard Business Review: What Do You Really Mean by Business “Transformation”?
- Oracle: How to Lead Business Transformation
- Product Plan: Business Transformation
- Chron: What Does Reorganization Mean in a Corporation?
- Beingfirst: Building a Transformation Strategy that Achieves Your Vision