What is Business Transformation?
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.
Business transformations are 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. This may mean unlocking the potential of employees, harnessing intellectual property and proprietary technology for additional purposes, or becoming more efficient to maximize the company’s potential.
Business transformations are large, multi-year initiatives requiring wholesale changes to fundamental aspects of the companies being transformed. 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—with the goal of positioning 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 now being completed in months versus years.
What are the 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, so the organization can focus on higher-value projects. This is typically an ongoing effort, starting with the most common processes and then continuing onto those with lesser returns. The end goal is to relieve the company from the burden of these tasks, so it can innovate or provide higher-value services and offerings to the market.
- Information/data/digital transformation—These transformations are specifically focused on using technology to unlock additional value. This may come in the form of 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 completely new products and services; both by using the technology to more rapidly design, build, and distribute them as well as using digital assets as part of the new offerings themselves.
- Organizational transformation—Altering resource allocation is key to many transformations, and a company’s most precious resource—its people—are no exception. Organizational transformation is based on assessing both how various departments are staffed, and the structure of those departments themselves. Looking at in-house skills and experience, how staff is deployed, and the various reporting structures in place allows companies to identify opportunities. These opportunities could point to either streamline 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 important. 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 the personalities of leadership, 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 rate of success when it comes on the heels of management transformation. A strong vision, adherence to that vision, and practicing confirming it are all essential to success.
What do product managers need to know about 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 at the fulcrum of so many aspects of the organization; from 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 the results of customer research and competitive analysis, 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 both 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 onboard 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.
How do you Implement 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 very clear to downstream individuals to make sure 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 at all, or areas that could use significant improvement or redirection. Deloitte defines each capability along these six lines:
- Mission—Derived directly from the strategy, it’s the why, how and what of the capability.
- Insights—How data is compiled, communicated and used to drive decisions.
- Integration—Rules, roles, and decision-making responsibility.
- Processes—Well-defined and efficiently designed to reach the desired outcomes.
- Technology—What’s required for the capability in terms of hardware, software, tools, and services.
- Talent—What skills and experience are needed for this capability to thrive, including allocating existing staff and recruiting additional team members.
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 be used to ensure they’re being maintained once the transformation is complete.
Dedicated staff are also key to a successful transformation. The management of these programs should be someone’s “day job” and not an add-on responsibility. For a massive undertaking like this, it requires dedicated headcount with the appropriate experience and authority to hold people accountable for their deliverables.
Any established organization interested in maximizing performance, increasing efficiency, and actually being around in five or ten years should be exploring business transformation opportunities. There will always be places, processes, and structures that could benefit from an overhaul; and bypassing these chances 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 own organizations and for 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 products that are produced.