Senior Writer: Priya Naha
Summary: Business transformation is an umbrella term that fundamentally changes how a business or an organization operates. The blog will help you understand business transformation, its types, and its benefits. You’ll also learn about the critical steps of transforming a business and much more!
It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.
The demand for business transformation is ever-rising. Adapting to change is one key factor for any organization and numerous companies are working on it. As a result, the global digital transformation market size is expected to reach 1,548.9 billion by 2027 with a CAGR of 21.1%.
With a significant business transformation project, companies can survive with innovation-driven opportunities that emerge with shifting market demands. But before indulging in transforming a business, having an in-depth understanding is crucial. Read about the business transformation process, its types, benefits, and more.
What is Business Transformation?
Business transformation is a broad term that makes fundamental changes in an organization or business. It includes digital, cultural, and operational processes. The transforming business aims to increase customer satisfaction, generate new value and help in cut costs.
Business transformation process gives a competitive advantage to organizations and helps them become more effective and efficient.
As you’ve understood what is business transformation, let’s move on to its types.
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Why Does An Organization Need Business Transformation?
An organization needs business transformation to boost productivity, transparency, execution, accountability, and the speed of decision-making.
Organizations undertake business transformations to accelerate growth and change beyond typical incremental advancements.
Businesses undertake company transformation to create additional value. Additional value may mean harnessing intellectual property, unlocking the potential of employees, proprietary technology for various purposes, and becoming more efficient in maximizing a company’s potential.
Business process transformation programs focus on long-term productivity improvement, taking a better and cheaper approach to how companies work.
Transforming a business is usually a multi-year narrative requiring wholesale changes to the transforming company’s essential aspects.
Considering the undertaking’s size, scope, and timeframe, business transformation must be driven from the top-like the Board of Directors or the CEO-to position the company for sustained growth and success in the inevitable future.
What are the Benefits of Business Transformation?
The 5 benefits of business transformation are:
1. Increased Efficiency
New integrated technologies provide intelligent automation that allows streamlined processes in manufacturing. With innovative machinery and edge computing, company transformation provides instant data insights for rapid decision-making.
You can make data-driven decisions across your business, from recruiting and hiring to assessing your market campaigns.
2. Better Productivity
Businesses adopting digital technologies can minimize waste and maximize their output. By tracking automated data analytics and production, companies can easily predict and manage the number of materials. With better visibility, you can implement better business processes.
With improved data insights into various departments’ operations, your development and IT teams can integrate numerous databases allowing collaboration and cross-team communication, ensuring better productivity.
3. Return on Investment
Better efficiency and better productivity leads to a better return on investment. Various companies are hesitant to invest large sum of money into digitized systems. And, in this way, they miss out on the long run. After approximately five years, the payback period sets in, and businesses gain double the amount invested.
4. Better Sustainability
With business transformation efforts, a company can implement smart energy management systems. In addition, by meeting and monitoring sustainability targets, an organization can publicly protect the environment and strengthen its brand image.
5. Increased Safety
With automated systems, human intervention remains at a minimum. In addition, artificial intelligence and robotics protect the workforce and provide greater control by replacing manual labor from hazardous conditions.
What are the Types of Business Transformation?
The 5 types of business transformation are:
1. Organizational Transformation
Organizational transformation is a strategic transformation that changes management, intending to move your organization from the present scenario to a desired future state.
Such company transformation initiatives start with redesigning a company’s structure and operation mode.
The organizational transformation process focuses on the employees and is driven by the general management. However, an actual transformation can only occur if the employees are supportive and on board with the new work processes.
2. Management Transformation
Management transformation is where management leads the organization through a transformation in processes, direction, and other essential elements of the operation.
Management transformation is a prerequisite based on sharing information, persuading, and explaining to ensure a complete change within the company. It redefines hierarchical structures and internal relations by removing intermediaries and rigid systems that make it challenging to foster natural talent and hinder growth.
3. Cultural Transformation
Cultural transformation is a shift in individual departments or an entire organization. It is one of the most challenging business transformations for long-established companies.
Cultural transformation requires changing the workforce’s minds, hearts, and skills to support the desired culture. Establishing clear communication channels is necessary in cultural transformation. People must first have the conviction to change their behavior. Implementing a new corporate culture requires a managerial transformation and a vision.
4. Digital Transformation
Digital transformation is the method of using new technologies to modify existing or develop business models, customer experiences, and cultures to meet changing market and business requirements. The reimagination of business in the digital age is digital transformation.
A company needs to rethink its business model using a digital strategic mindset in the digital transformation process. Digital transformation efforts leverage data and technology to offer new services and products by using the technology to build, design rapidly, and distribute them. In addition, it uses digital assets as part of the latest offerings.
5. Information Systems Transformation
Information systems transformation is the complete reassessment of an organization’s information technology (IT) systems to improve efficiency and delivery in a digital economy.
The transformation of the IT system lies at the core transformation of business. It includes all information management resources, processes, staff, and technology. In addition, information systems transformation allows companies to differentiate themselves from various applications, including process security, information sharing, data sharing, and digitalization of services.
7 Steps to Implementing a Business Transformation
The steps to a business transformation include:
Before proceeding with any decision, a company needs a genuine business transformation process. It is crucial to understand the present state of the business and map out a vision for the future in a target operating model. And, every decision the company follows after that must align with the vision.
2. Establish Leadership
Along with managerial transformation, a company needs to assign a team or a program director who oversees the complete transition and transformation to a new operating model. It involves tasks like controlling the budget and ensuring that the central vision is at the center of all decisions. The ideal candidates for such roles are usually the CFO, CEO, and board members.
3. Planning and Scoping
Here, the entire business strategy is taken to the next level:
- A business needs to identify all the work processes, areas, and systems that transforming a business will affect.
- It helps to outline their goals, sub-projects, budget limits, and time frames.
- It is also essential to plan ways to communicate the changes to the customers and employees.
4. Set Up a Program for Management
The director appoints transformation managers in individual work streams like Finance, HR, and IT to establish program governance. They are responsible for motivating the team, sticking to the roadmap, and delivering on time. Many companies develop a program management office to catch potential problems early on and monitor their success.
5. Build Resource
You cannot assume that an organization’s current team is well equipped to manage a successful transforming business. So, many companies outsource experienced professionals who work with the internal transformation manager and program director. A well-blended team ensures that a balanced perspective meets valuable insider knowledge.
A company transformation doesn’t happen overnight. There are multiple layers and steps involved. Depending on the size of your organization, transforming business from strategy to execution can take up to several years. So, it’s crucial to engage the staff, re-evaluate the implementation plan, and adjust it along the transformation journey accordingly.
The most exposed and vulnerable period during the entire business transformation process is immediately after implementing changes. New ways of working and new systems can be challenging in the beginning. So, employees need dedicated support during the integration phase and training before the execution phase when the integration architects provide essential data about the integration within your organization.
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What is the Modern Business Transformation Framework?
The Modern Business Transformation (MBT) framework is a holistic, repeatable, and systematic approach that enables organizations to tackle the challenges of transforming themselves predictably, continuously, and consistently.
The MBT framework is helpful in a climate of constant innovation and technological advancements as organizations struggle to keep pace and transform themselves to meet internal and external pressures. The Modern Business Transformation process framework aims to tackle innovation, transformation, change, and consistency issues.
Along with the value chain of change, the framework is divided into three phases, and there are connected points between each step, which are the points of tension in the value chain of MBT. The points are known as discourses.
The Modern Business Transformation framework consists of three intrinsically connected pillars:
1. Uplift Capability
Uplift capability addresses and identifies business operations aspects that need optimization to support innovative change.
2. Enhance Systems
Enhance systems outline a thoughtful and innovation-centric approach to improving the capability of the internal system by incremental adoption.
3. Embed Innovation
Embed innovation champions and established several processes for organizations to extract maximum value from top-notch ideas.
Embed innovation is the framework’s core and represents innovation but is strongly influenced by how rapidly and structurally the outer pillars function. The MBT framework relies on the efficiency and effectiveness of the external posts to extract the most value from incremental and innovative improvement.
3 Examples of Successful Business Transformations
There are various examples of successful business transformations that you can use as a source of inspiration. Let’s look at the top three company transformations that stand out from the others.
1. Business Transformation of Netflix
The video streaming platform Netflix has displayed exceptional use of technology and is among the most recent examples of successful business transformations. It has quickly adapted to the changing market.
Netflix started as a DVD rental by mail service and then switched to digital distribution. Today, Netflix’s revenue after every twelve months ending June 2022 was $30.031B, a 12.49% increase yearly.
Netflix is the first company to have switched from monolith architecture to a cloud-based microservices architecture to avoid server outages.
2. Business Transformation of Nokia
Nokia Corporation is also one of the great examples of a successful company transformation. Between 1985 and 1995, the corporation expanded its original product portfolio of paper, cables, and rubber to specialize in consumer electronics. And later, it was again replaced by a mobile telecommunications network.
Along with the product portfolio, its corporate action pattern also keeps readjusting. The periods of acquisitions and mergers were always followed by organic growth. Moreover, the company was always quick to react to market changes, insufficient production, and customer complaints.
3. Business Transformation of IBM
The multinational technology company IBM services is another example of a successful transforming business. The corporation initially started with the production of typewriters and clocks.
As computers rose to prominence, the company expanded its portfolio and is still the leader in business machines.
With the changing market trends, IBM is shifting its focus away from hardware to embrace the software and services model to follow the most significant trend in the IT industry. IMB achieved the transition by acquiring companies in the software and services industry.
Is Business Transformation really Helpful to Companies?
The answer is a definitive yes. Business transformation process is the necessary ingredient for success and profit in the long run. With the above examples, you’ve obviously understood what business transformation can do!
If you want to maximize your profits and improve efficiency, the business transformation process is the right option. But, a significant reworking of present working models in an established organization doesn’t happen overnight and requires innovative company transformation management and a dynamic workforce.
With a keen eye for innovative technology, the right business management consultants and architects’ help, any company can undergo digital transformation and maximize its performance to unlock new potential opportunities.
Frequently Asked Questions
The obstacles to business transformation are:
- Employee Pushback
- Lack of Expertise in Lead Digitization Initiatives
- Organizational Structure
- Lack of Digitization Strategy
- Limited Budget
A business transformation strategy is a change management strategy defined as an essential change in business operations. It aims to change people, systems, or processes to align the company with its brand strategy and vision.
The methods used to transform businesses are:
- Organizational Transformation
- Management Transformation
- Cultural Transformation
- Digital Transformation
- Information Systems Transformation
Digital business transformation integrates digital technology into various business areas to change how you operate and deliver customer value.
As the business transformation process incorporates technology in every nook and corner of a business, it delivers more value to customers and improves a company's bottom line.