What is business transformation? This is the initiative that ensues when a company decides to fundamentally change how it operates. In most cases, businesses transform with the hope of improving both operational and financial performance.
This means more than simply updating your hardware and technology. It also involves improving processes and shifting employee roles and responsibilities. When an organization makes these types of long-term changes, it can gain efficiencies, bolster performance, and improve its bottom line.
Today, we’re taking a closer look at how these transformations occur and the steps they include.
What Drives a Business Transformation?
How do you know if your company needs to pursue business transformation? There are a few telltale signs that it’s time to pivot the way your organization is currently doing things. They include:
- A decline in overall business growth
- A change in leadership
- A need to gain efficiencies
- A recent merger or acquisition
- A need to reduce costs
- New business restrictions
- New technology implementations (e.g., ERP systems)
- New supply chain disruptions
All these challenges might not appear at the same time. However, when you recognize one obstacle that’s holding you back from long-term growth, it could be an impetus to restructure and transform your current operations.
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5 Types of Business Transformation
There isn’t one type of business transformation that applies to every enterprise. While this movement looks different for each company, there are five categories that it typically falls into:
- Business process transformations
- Digital transformations
- Management transformations
- Organizational transformations
- Cultural transformations
Let’s break down the basics of each one.
1. Business Process Transformations
A business process transformation takes a close look at the individual workflows that must occur to meet the needs of employees, stakeholders, and customers.
Often, this effort goes hand-in-hand with business process reengineering. As companies map their workflows, they may discover pain points or inefficiencies that are slowing their teams down. They may also notice manual, time-consuming efforts that they can automate to free up employees to focus on more value-added work.
Some companies may look to some of the top ERP systems to offset the administrative burden of tasks such as accounting or inventory management. By investing in ERP, they can automate these processes and help everyone work together more seamlessly.
The goal of a business process transformation is to help a company identify and mitigate its inefficiencies. It’s about breaking each process down into its smallest components to pinpoint where bottlenecks and siloes are occurring on a day-to-day basis.
2. Digital Transformations
Digital transformation is about modernizing legacy systems.
While organizations have long been adopting cloud-based software to run their operations, there are still those that rely on outdated software or manual, paper-based processes for a majority of their work. When they adopt modern technology, these companies can unlock additional value.
This might mean investing in digital platforms, such as a manufacturing ERP system, customer relationship management system, or supply chain management system.
With these platforms in place, employees can more easily organize and share data. As they become more data-proficient, companies can offer new products and services as it’s now easier for them to design, build, and distribute both physical and digital assets.
3. Management Transformations
As its name implies, this type of transformation alters the managerial structure of an organization.
While some companies thrive with a top-down, bureaucratic hierarchy, this isn’t ideal for rapid decision-making. At the same time, it makes it more difficult for companies to pivot strategically or respond to new developments as they occur.
When most companies transform their management approach, they’re looking for ways to empower their individual employees. If team members have the tools and knowledge they need to make decisions or quickly reach an agreement, the organization as a whole runs more smoothly.
To get there, employees must:
- Be able to easily interact with one another
- Have quick data access
- Have clear communication channels
- Have transparency in all organizational functions
By prioritizing autonomous decision-making and employee empowerment, companies can move beyond many of the obstacles that slow their teams down. This also creates a culture of innovation where team members feel capable of suggesting new ideas and actively participating in organizational changes.
4. Organizational Transformations
Organizational transformation is similar to management transformation, but the focus is more on the workforce as a whole. With this approach, companies examine how they’re allocating resources to each department and determine if all sectors have what they need to succeed.
A company’s most valuable resource is always its people, so it’s important to make sure departments have the right personnel. This requires looking at several factors, including:
- In-house skills and experience
- Ways that staff members are deployed
- Current reporting structures
By examining these elements, companies can identify opportunities for growth and development.
5. Cultural Transformations
Organizational culture is multi-faceted and complex. It refers to the way a company operates and the values, goals, and missions that define it.
If a culture is strong, employees feel creative and inspired. They come to their supervisors with new ideas and are constantly on the lookout for ways to make their departments more productive.
However, when culture is lagging, the opposite can hold true. A culture that stifles or restricts employees can lead to frustration, resentment, and dissent.
If this energy is already in place, it can be challenging to reverse it because cultures tend to evolve slowly. They’re the natural output of several factors, including:
- The personalities of each leader
- Systems for reward and recognition
- The ways that interaction and socialization occur
Even if an organization knows that its culture needs improvement, it can be hard to translate high-level ideas and intentions into real action. Focusing on cultural transformation can make those ideas actionable and revolutionize a company for the better.
Note: It’s easier to manage this transformation when it occurs immediately after a management transformation.
5 Steps to a Successful Business Transformation
Once you’ve identified the need and decided to pursue a business transformation, what’s next? While there’s not a one-size-fits-all method that works for every company, there are a few essential steps that define all transformations.
Step 1: Set Goals
What does your company hope to gain from this transformation? Which steps could you put in place now to help you reach those goals?
Step 2: Achieve Executive Buy-In
Any enterprise-wide project requires support and resource allocation from your C-suite. Make sure your leaders understand why the transformation is necessary and how they can support it.
Step 3: Set Key Performance Indicators
Define how you will measure transformation success. What metrics can you measure to gauge whether the effort worked? At this juncture, your project team identifies any risks that could hinder the project and outlines the steps they can take to mitigate them.
Step 4: Achieve Employee Buy-In
While it’s important to make sure your executive team is on board with the transformation, it’s equally critical to ensure your employees are ready to embrace it. Any time you require them to change their current processes, you can expect some degree of hesitancy.
By prioritizing organizational change management, you can communicate the change in a way that encourages adoption and minimizes concern.
Step 5: Demonstrate and Build on Success
One way to help employees understand the potential benefits of a change is to show them how successful these types of projects can be.
A pilot implementation is a smaller-scale version of a company-wide change. If you can find success in a pilot project, you can inspire your workforce and encourage them to participate in the rest of the transformation. Approaching the initiative in increments also takes some of the stress off your workforce and leadership team.
What is Business Transformation? Your Ticket to Sustainable Success
It can be tempting to sweep them under the rug, but operational, financial, and organizational issues only become more compounded when they’re ignored. A business transformation addresses these issues head on.
What is business transformation? It’s a fundamental change to every aspect of your company, such as your management structure, your technology investments, and your business model. This type of change can be intimidating, but it’s often necessary for long-term growth.
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