What is business transformation?

Organizations use business transformation to make significant shifts that accelerate change and growth beyond incremental advancements. The scope of a business transformation is typically strategic and broad, such as moving to a new operating or business model. The umbrella term, business transformation, refers to fundamental changes to an organization’s operations and includes processes, strategies, personnel, and technologies. Company-wide transformations can help businesses become more efficient and competitive while creating additional value for employees and consumers.

Business transformations are typically seismic, multi-year initiatives driven from the top (either the CEO or Board of Directors) that position the organization for sustained growth and success for the foreseeable future. In a dynamic business environment, focusing on new capabilities, methods of working, and technologies is the only way forward. When done right, business transformation can increase revenue, improve customer satisfaction, boost employee engagement and productivity, and enhance overall performance. But such transformations don’t come easy: less than a third of enterprise-wide transformations reach their goal of improving operational performance and sustaining improvements in the long term.

When to start the business transformation process

Business transformation can help organizations reach their highest potential. Most companies turn to an overhaul when their leaders seek to improve growth and efficiencies or capture untapped company-wide potential. The most successful transformations address an organization’s value-creation opportunities, while others find success by focusing on particular themes, such as workforce transformation and adopting agile working methods. Almost every rewarding change includes some form of digital transformation, such as investing in new technologies, tools, or tech-enabled processes. Some digital transformations are such an undertaking that you may consider them a standalone effort.

Many organizations also turn to the business transformation process in pursuit of tackling challenges, including:

• urgent external challenges (disruptive competitors or new market entrants)
• macroeconomic pressures (supply chain issues)
• industry discontinuities (how advanced technology changes consumer behaviour)

Or achieving strategic goals, such as:

• significant mergers and acquisitions (M&A) or portfolio moves
• creating value from environmental, social, and governance (ESG) concerns
• prioritizing equity, inclusion, and diversity principles for a more significant impact

What are the different types of business transformation?

Business transformation encompasses many areas, but activities typically fall into one of five categories:

Management transformation

Top-down bureaucratic hierarchies generally aren’t the best at reacting to new developments or facilitating rapid decision-making, especially when striving for growth in competitive marketplaces. Management transformation involves changing behaviours, mindsets, and entire methods of working. This test-and-learn process focuses on continuous adaptation and improving operations within today’s environment of risk, uncertainty, and experimentation. Transforming your management structure by eliminating middle management and empowering individuals to make independent decisions to reach a consensus can be crucial to change. Management transformation requires socialization, clear communication channels, access to information, and overall transparency in company functions.

Organizational transformation

Resource allocation is key for many successful transformations—and your employees are no exception. Organizational transformation begins by assessing how your staff currently fits their role across various departments and the departments’ structure. Consider factors like experience and skills, how and where you use each team member, and the reporting structures used to identify opportunities. Organizational transformation aims to move your company from its current state to a desired future state. Other organizational changes can include:

• flattening your hierarchy
• breaking down silos
• rightsizing your workforce
• adding e-commerce to your brick-and-mortar store
• rebuilding your website
• launching a new department

Business process transformation

Business process transformation focuses on your methods, processes, and strategies, or “how” you do things. A portion of this transformation may include agile transformation (transitioning your entire organization to a reactive approach based on agile principles). Business process transformation generally involves optimizing and automating repetitive processes so your staff can focus on value-generating projects. Typically an ongoing effort, process transformation begins with your most common methods moving towards those with fewer returns. Your goal is to relieve employees of mundane tasks to innovate and bring higher-value products and services to the market.

Technological transformation

Technological transformation includes upgrading your data, information, and digital technologies to unlock additional value. This transformation is a complete overhaul of your organization’s technical systems, like network architecture, software, and hardware; how you store and access data, and how this all affects your employees, processes, and current technologies. An example of technological transformation is aggregating and sharing your data more efficiently, such as switching to online ordering or a digital CRM system. It also includes leveraging data and technology to offer new products and services using advanced tools to design, build, and distribute them more rapidly.

Cultural transformation

Cultural transformation means shifting individual behaviours to support a shared vision, which is typically the most challenging transformation to accomplish. Corporate cultures usually evolve organically, driven by leadership personalities and employee recognition and reward. Changing your company culture takes longer than other transformations because it’s more challenging to translate intentions and concepts into practice and action. An example of cultural transformation is empowering employees to take risks, make decisions, and express themselves wholeheartedly without fear of judgment, repercussions, or ridicule. Cultural transformation has a higher success rate when paired with management transformation.

Here’s your ticket to success:

• share a strong vision with your team members
• adhere to that vision
• continuously put your vision into practice

The importance of product managers for business transformation

Product managers have a unique role in the organization and are often catalysts for business transformation, yet few people acknowledge or realize it. Since these managers conduct, compile, and communicate competitive analysis results and customer research, they’re usually the first to recognize new opportunities. Product managers provide crucial insights by identifying customer needs and the larger business objectives that products or features can fulfill. Customer-centricity helps them easily spot issues with meeting consumer expectations, delivering innovations, customer support, and bringing products to the market. They also articulate what product success looks like and can rally their team to turn their vision into reality and spark fundamental changes.

How to implement business transformation

Successful business transformation begins with strategy. Any business transformation will fail without a clear picture of your business plans and objectives and how you intend to achieve them. Promoting company-wide transparency of your goals is crucial to ensure none of your steps and processes get lost in translation. You must also identify the capabilities you need to achieve your strategic goals. Do you already have them and must improve on them? Or do you need to acquire them from new personnel, processes, or technologies? There are six capabilities to consider.

• Mission: Derived directly from your strategy and encompasses the why and how of your organization.
• Insights: How will you compile, communicate, and use data to drive decisions?
• Processes: Are your processes well-defined and efficiently designed to reach your desired outcomes?
• Integration: What are your rules, roles, and decision-making responsibilities?
• Talent: What experience and skills do you need for this capability to thrive? Include recruiting new team members and allocating existing staff.
• Technology: What needs upgrading regarding software, hardware, tools, and services?

Every transformational activity must have staying power. There’s no reason to start your business transformation if your organization returns to its old ways once you complete your exercises. You can use the same metrics and data to measure goal achievement to maintain them once you complete your transformation. Successful business transformation is a significant undertaking, requiring a dedicated team. Assign the management of transformational tasks as someone’s primary responsibility rather than as an add-on so they can focus 100% on ensuring accountability for deliverables throughout your organization and help grow your business.

There will always be processes, products, structures, and places that could benefit from an overhaul. For business transformation to be truly transformational, your entire management team must be on board and willing to spend the time, resources, and effort on improving productivity, creating value, and driving new efficiencies.