What is Business Transformation? [Intro to Business Improvement and Growth]

Written By: Eric Kimberling
Date: July 5, 2023

Business transformation is a goal pursued by many organizations. However, it is important to understand what business transformation entails and the key factors for achieving success.

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Business transformations are sought after by many organizations. They seek ways to increase innovation and profitability, aiming to develop capabilities they currently lack. These transformations often involve the implementation of technologies and other strategies to drive change. Today, I will discuss the major components of business transformation and provide insights on how to lead a successful transformation.

Business Model

The first step in a successful business transformation is to reassess your business model. This involves understanding the nature of your business, including your product, its delivery method, and your organizational structure. It is essential to examine the entire picture of your business model and approach it with innovation to differentiate yourself from competitors.

A relevant case study is Netflix, which underwent a significant business transformation. Initially, Netflix focused on mailing physical DVDs to customers. However, as technology advanced and they embraced innovation, they transitioned to a streaming platform where users could access videos and movies online. They further expanded their business model by producing and owning their own content. This example highlights the importance of analyzing your business model and ensuring its alignment with market trends. Moreover, it emphasizes the need to redefine your business model proactively to stay ahead of these trends.

Therefore, understanding and refining your business model are crucial initial steps in an effective business transformation process.

Innovation

Another crucial component of an effective business transformation is fostering innovation within the organization. It's important to note that innovation doesn't solely revolve around product development. Take Apple, for instance. They have been highly innovative in creating products such as iPods, iPhones, iPads, and Macintosh computers. However, innovation extends beyond product development. It also encompasses operational and organizational aspects.

To make your organization more innovative, it is essential to assess your current business model and explore opportunities for future innovation. This entails identifying ways to enhance your business model's innovativeness moving forward.

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Operational Excellence

In addition to the broad categories of innovation and business model analysis, operational excellence is another crucial aspect to consider. It involves enhancing the efficiency of our operations to either deliver our products or services more effectively to customers or achieve lower costs compared to our competitors.

Walmart, a renowned North American retailer and one of the largest in the world, is a notable example of operational innovation. With thousands of stores across the country, Walmart is widely recognized for its cost efficiencies and operational excellence. Their ability to offer low prices to customers is a result of their focus on optimizing operations, seeking efficiencies, and relentlessly driving down costs throughout the organization.

Operational excellence, like Walmart's approach, can significantly contribute to an effective business transformation. By emphasizing efficiency and cost reduction, organizations can drive positive changes in their operations.

Organizational Competencies

Another essential component of effective business transformation involves assessing organizational competencies. This entails examining the skills your organization currently possesses, as well as identifying the skills you may need to further advance your business model and overall transformation. Additionally, it is crucial to consider your organizational structure and how you can maximize the potential of your talent. This includes evaluating your compensation model, organizational design, roles, responsibilities, and talent management practices. A well-organized and optimized workforce plays a pivotal role in effectively delivering products or services to customers. By focusing on building and restructuring organizational competencies, you can drive successful business transformations.

Organizational competencies are closely tied to culture, as they shape the type of culture needed to propel your business transformation and ensure future success. What makes organizational innovation and competencies unique is their difficulty to replicate compared to other aspects discussed earlier. For instance, while product innovation can be easily copied or mimicked, the same does not hold true for organizational innovation. It becomes a secret sauce that drives the success of your business transformation.

When embarking on a business transformation, pay close attention to the people aspect and the overall management of organizational change. These factors are likely to have a more significant impact on the success of your transformation than anything else.

Technology

A key facilitator for all the aspects discussed thus far is technology. Organizations that excel in business transformations often leverage technology to a certain extent. Although this discussion focuses on business transformation rather than solely digital transformation, technology can play a significant role in enabling and driving business improvements.

Technology offers various ways to drive innovation. It can aid in product development, allowing organizations to create better products that resonate with the market. Additionally, technology can contribute to operational efficiency by streamlining processes and optimizing workflows. Embracing technology as a tool to support the discussed elements can enhance the effectiveness of a business transformation.

Therefore, incorporating technology into the transformation process is likely to yield better results, aligning with the objectives and goals outlined throughout this discussion.

Business Results

Ultimately, the purpose of your business transformation should be to achieve tangible business results. It is uncommon for executive and leadership teams to pursue change simply for the sake of change. Therefore, it is crucial to ensure that your business transformation is aligned in a way that delivers concrete business benefits and results.

Consider aspects such as profitability, innovation, market growth, market share, and outperforming competitors when evaluating the impact of your business transformation. These factors should serve as your guiding principles and the "north star" for driving the transformation. When defining your business transformation, it is essential to link your various initiatives and efforts directly to these desired outcomes. This alignment ensures that your actions are effectively contributing to the intended results.

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I would enjoy brainstorming ideas with you if you are looking to strategize an upcoming transformation or are looking at selecting an ERP system, so please feel free to contact me at eric.kimberling@thirdstage-consulting.com. I am happy to be a sounding board as you continue your digital transformation journey.

Be sure to download the newly released 2023 Digital Transformation Report to garner additional industry insight and project best practices.

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Eric Kimberling

Eric is known globally as a thought leader in the ERP consulting space. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.

Author:
Eric Kimberling
Eric is known globally as a thought leader in the ERP consulting space. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.
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