How realistic is your business transformation?
– by Matt English
The famous artist Pablo Picasso once gave a typically eclectic view of transformation when he said, “Some painters transform the sun into a yellow spot; others transform a yellow spot into the sun”. The same transformation setting can be seen through quite different lenses by different people.
Business transformation is a prominent feature in many organisations and industries. For instance, Apple has transformed itself over the years, and has completely transformed industries along the way. IBM has radically transformed its global supply chain with major benefits in efficiency. Media companies are rapidly transforming the way they go to market in response to the digital age. There are many other powerful examples of successful business transformation.
Today across industries, we hear about the transformation in many areas – in systems, in customer service, in finance functions, and in business processes just to name a few. But herein lies the problem. The term business transformation is overused, and is applied to almost any situation in many cases. Change initiatives are now being labelled as major transformation. Corporate wide programmes are being described in the language of transformation.
But is this a problem? Does the terminology matter? Well, yes it does matter for a couple of reasons.
First, it can drive expectations way above the reality of what can be achieved. This can apply to expectations within the organisation, with shareholders and with other key stakeholders such as the capital markets. For example, expectations that surround major new information systems can be over promised regarding transformation. Major new systems may well be necessary but not sufficient for a business transformation.
A second problem is that it could be a lost opportunity for organisations. In other words, why not focus the energy and efforts of the organisation around a real transformation initiative rather than around one with lesser scope and ambition.
So what should a proper transformation initiative look like? What would be the key characteristics and how should these help organisations properly define a business transformation?
There are three criteria to consider. A business initiative that meets any one or more of these would be transformative.
1. Does the business initiative have a significant and visible impact on customers?
A business transformation should mean that customers experience products or services that are significantly better or faster or cheaper, or some combination of the three. This should be the underlying theme of the transformation. To highlight an incorrect approach, consider the front line supervisor in financial services who was heard to say, “I read about our transformation on our intranet, but I am not directly involved”. This initiative may well be important, but does not pass the test regarding transformation. One would expect front line supervisors to be heavily involved in a transformation that involves a significant and visible impact on customers.
2. Does the business initiative encompass a reshaping of the business model?
Major transformations call into question existing business models and the way value is delivered. They help to reshape the way business is done and how organisations go to market. Low cost airlines for example challenge the way value is packaged and delivered to passengers. They operate with very different business models from their full service cousins, and in doing so they create new demand from travellers. The business model can be the integral feature of the transformation.
3. Does the business initiative generate a real difference in the way organisations compete or the way the industry works?
A business transformation by definition will be disruptive and will challenge the way organisations compete. For instance, Apple reshaped the music industry via creation and development of the iTunes platform, and is continuing to do so in areas such as education with iTunes U. Online retailing is another example of how business transformation can be disruptive and reshape an industry.
How do your initiatives measure up against the above, and are expectations set appropriately for both internal and external stakeholders? Do your major initiatives meet one or more of the above criteria?
In his time and in his arena, Picasso was right to highlight the nature of defining transformation. Organisations commit much effort and resources to business initiatives. It is important that the term transformation is applied only to those initiatives that drive major change with customers or the business model or the way organisations compete.