What Is Business Transformation And Why Should You Care?

The world is changing fast than it ever has before, and where there is change, there is both risk and opportunity. Canny business leaders are accepting business transformation as a way to stay ahead of the market and succeed where others are failing.

What Exactly is Business Transformation?

 three key types of business transformation:

  • Operational: doing much the same thing but doing it better, quicker and more efficiently (e.g. adopting digital technologies to speed up a supply chain)
  • Business Model: achieving the same outcomes but finding a new operational model to achieve it (e.g. a retailer moving from mail order to e-commerce)
  • Strategic: changing the premise of the organisation to meet new needs (e.g. Amazon selling cloud computing space as well as online retailing)

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Operational

Of the three models, operational transformation offers the lowest risk - it will potentially allow you to reduce costs, decrease time to market, increase user satisfaction and so on without introducing huge costs or major changes.

The drawback is that the benefits are limited: the immediate business challenge may be solved but it is very much a reactive approach and will not help with tomorrow's challenges. In other words, it will help with the immediate problem but you may be back in the same position if somebody comes along with a better way of doing things.

Business Model

Business model transformation increases the degree of risk but offers greater returns. It will typically involve redesigning services and finding news ways of doing things rather than just improving the ones you already have.

This might mean a local council restructring its waste collection and environmental services into a single entity or a retail business moving to direct-from-manufacturer delivery to redeuce warehousing costs and customer waiting time.

Strategic

Sometimes a step change is needed and this is where strategic transformation comes in. Transformation at this level looks at the whole purpose of the business and adjusts or even replaces its underlying goals. It may result in a business re-structure, setting up a spin-off to develop a new product or even re-launching the business in its entirety.

For an example of this, Google is a well-known search provide who, over the last decade, has branched out into cloud data storage and driverless cars. Cloud services were arguably a natural evolution from their already huge data centres but driverless cars represent a major shift. It is no surprise, therefore, that in 2015 Google re-structured with Alphabet being formed at the top, Google becoming one subsidiary and Waymo, specialising in self-driving cars, another.

Why You Should Care

Imagine that, not too many years ago, you were the only reasonable supplier for a region and you could get away with a little inefficiency - the product didn't HAVE to be there next day, the price could be a few pounds over the odds and so on. You could always negotiate on specific orders and your customers possibly even saw this as charming. Your traditional values have served you well over the years and you continued prizing personal service over operational efficiency.

Then a leaner competitor moved in, offering rapid delivery and low costs, and now you are finding business is getting harder and your margins are getting squeezed. Worse, you are having to make cut-backs and the service you were renowned for is starting to suffer. Looking at the trends, you can see that in a year's time you won't be able to compete. There are no free hand-outs coming your way you so have only one option: you need to work out how to compete and win your market back.

This is not a made-up horror story - it is reality for many businesses and ever-decreasing funding means it applies to the public as well as private sectors. If any of it sounds familiar, you really need to care about business transformation, and you need to care about it now: the challenges you face will only get worse and competition will only get tougher.

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