What is business Transformation?

Business transformation is realignment of people across the organization with the direction and strategy envisioned by the leadership and making necessary changes in systems, processes, technology to make it happen. There are primarily three types of Business Transformation:

1) Operational Transformation: Making changes to the way of doing things to make operations better, faster, and with minimum waste. Toyota exemplifies the operational transformation, generating profits of over $20 billion annually for several years. Since 2004, it has earned around $180 billion, that is more than the total sum of earning by GM, Ford, Volkswagen, and Honda combined.

2) Strategic Transformation: Changing the very essence of the company to a new focus. Apple exemplifies a strategic transformation, when on the brink of fizzling out in the early 1990’s, they instituted a change of direction under Steve Jobs to focus on creating beautiful consumer products. Today Apple's success story is well known to all.

3) Core Transformation: Moving to a fundamentally different way of doing business. Netflix exemplifies a core transformation, shifting their entertainment business model from DVD rental service by mail to online streaming service. Creating the most successful entertainment companies with 182 million subscribers worldwide.

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What are the Drivers for Business Transformation?

Competitive market conditions, disruptive technologies and changing customer expectations are constantly challenging the traditional business models. The ability to adapt to the changing circumstances is critical for profitable growth of any business. A research among the business leaders initiating some kinds of transformation shows that, efficiency drive and cost reduction are the two transformation drivers. But, in the real sense, both these drivers are actually having cause and effect relationship and is actually continuous improvement program and reactive in nature. These are not real business transformations. A transformation needs to be primarily based on:
1.    An obsession with delivering value to customers
2.    Meta-system to solve complex problems, with priority to the customers’ problems
3.    Constant learning and experimentation to build people capability and team work 

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Why businesses must transform?

Lifespans of companies had been shrinking. This is driven by a complex combination of technology shifts and economic shocks, some of which are beyond the control of business leaders. But frequently, companies miss opportunities to adapt or take advantage of these changes. Often companies are slow to respond to disruptive competitors. Mostly the companies fail to adequately envision and invest in new growth areas that takes longer to pay off. Shift to "Shareholder- First" from "Customer-First" often results in a company downfall.

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Where the leadership team shall focus?

Transformation will always require leadership to assume a new role of evaluating the emerging scenario and setting the new direction for the company. People across the organization must collectively understand customer requirements to develop and improve products and processes. The thinking as well as the working must get reoriented to start from customers’ need and move backwards to the beginning of the supply chain. A culture of Gemba- “Go See. Ask why? Show respect” – must be practiced, across the organization, to develop the art of listening, observing and learning about the three aspects of the customers’ requirements – must be quality, performance quality and attractive quality. 

 

Another critical management role is to align organization’s functions, process, activities and people with the company strategy. It eliminates the waste due to inconsistent direction and poor communication. Everyone in the organization must get a good idea of the decisions and actions for which he or she is responsible. It facilitates development of a specific plan with precise goals, actions, timelines, responsibilities, and measures. The primary goal is to identify the business improvement required, engaging people across the functions and effect positive changes throughout the organization. Though the process starts top down, only to becomes bottom- middle - top- middle - bottom. Every part of the organization proposes actions for what they are going to improve. These synchronized improvements take the organization to new performance level.

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Disrupt rather than being disrupted

Business transformation shall reposition your business to maximize its resilience, while at the same time create new growth engine for tomorrow. For this we need to develop difficult-to-replicate assets and capabilities to create new business models, products, processes and services. Attractive quality products and services attracts competitors faster. So, by the time competitors play the catch-up game, you must be ready with new and more attractive value for the customer, keeping the competitors always behind. One can never disrupt the market, just by doing better. So a disruptive model like the one shown below is needed. We term it as Combined-Cycle-Transformation.