EXPLAINING
Business transformation
What is business transformation?
Business transformation is a term used to describe different types of major changes to an organization. Organizations undergo business transformations to increase growth or revenue, improve productivity or performance, lower costs, adapt to market or customer changes, adopt new technologies, or achieve their strategic objectives.
Business transformation is a broad topic, and we explain it in relation to using employee surveys to successfully get your people on board with the change and align to the new approach.
Examples of business transformations include:
Examples of business transformations include:
Why is business transformation important?
Today’s business world is filled with rapid changes, making it crucial for businesses to transform and adapt to keep up. Many areas of businesses are continuously evolving, including:
Availability of new technology
The fast-increasing access to digital technology empowers and forces organizations and people to shift their ways of working. They gain access to data and analytics, giving them insights they have not been able to clearly know before.
Evolving customer preferences
The availability of technology and constant pressure to increase business impact influence customers to adopt new preferences. They demand faster, more valuable, and tailored experiences and services.
International expansion
The increasingly interconnected business world brings opportunities for growth. This also brings regulatory, economic, and cultural challenges.
Market dynamics
As new, smarter technology becomes more accessible, governments promote innovation, and people’s life expectations change, markets shift. New market entrants quickly become competitive, modern ways of life and business replace the traditional, and mergers and acquisitions quickly reshape business landscapes.
New employee expectations
The new generations bring different demands than previous ones, and increased diversity impacts an organization’s practices. Organizations adopt a flatter hierarchy with more decision-making at the employee level and shift to an inclusive way of working to ensure creativity, innovation, and employee performance.
Economic conditions
Economic uncertainties, including inflation, recessions, interest rates, global trade changes, pandemics, and booms, require organizations to stay agile.
Regulatory changes
Evolving laws such as data privacy, labor laws, and sustainability regulations impact organizations.
ESG commitments
While many sustainability compliance practices have historically been decided by each organization, they are increasingly becoming laws.
What makes business transformations successful?
What makes business transformations successful differs slightly from one another as they are contextual. However, those delivering at or above expectations tend to have a few things in common.
Successful business transformations view business transformation as a process and adopt it into their daily practices instead of managing it as a one-off project. Adopting a continuous improvement mindset helps to build change into the culture and be ready for when large business transformations must take place. An effective way to work with continuous improvements at scale is to leverage your modern employee survey to focus your people on the areas that matter the most and involve them in improving existing practices by asking for their input.
Successful business transformations also need innovative thinking to push past existing practices and benchmarks. Creating an organizational culture based on social belonging and inclusive leadership enables the psychological safety needed for people to access the brain chemicals conducive to innovation and creativity. While senior leaders are often responsible for the stretched thinking needed, gaining input from the entire organization can help them form the right business transformation strategy.
Another success factor is driving change from the middle out. A team-focused approach with regular continuous improvement dialogues helps to lead business transformation from the middle. When part of people’s daily work, business transformations are more successful.
Ensuring enough capital for the business transformation is also key. While it may be difficult to budget for business transformations, they are often underfunded. Providing access to capital early on and along the transformation helps to ensure its success.
Impact measurement must be designed from the initial planning stage, ensuring a way to plan for ROI, track progress, and make changes along the way. In addition, a modern employee survey tracks the people side of the business transformation and uncovers what works and what prevents employees from implementing the new approach. It is a way for managers to hold regular team and one-on-one conversations and effectively manage the business transformation from the middle out.
Why business transformations fail
Still today, few transformations succeed. “70% of transformations fail to achieve their initial goals,” according to BCG. Similarly, Bain explains, “Only one in eight transformations can be considered successful—and that rate has remained constant since 2013.” Every transformation is unique, and there are many reasons why business transformations fail, including:
- Not getting your people on board: “Humans are creatures of habit and routine” and often require good reasons to change.
What is business change vs business transformation?
Business change is considered the more daily, or smaller, changes an organization and its people undergo. It means “stepping out of familiar routines and trying new approaches to achieve different and improved results.” Organizations must be open to continuous business change and find ways to incorporate risk-taking, new ideas, and innovation. Without it, organizations often lose their relevance and competitiveness sooner or later.
Business transformation is a more fundamental change to an organization, requiring substantial effort and management of interdependent and interconnected changes. It includes digital transformation, re-organizations, strategy shifts, and cultural transformation. While many may view business transformation as a project, successful transformations are considered processes that require innovative thinking, often more capital than expected, and often involve many people in the organization.
What is the business transformation process?
The business transformation process is the method an organization uses to fundamentally change an area of the business. A senior leader owns the business transformation, and the business transformation process is managed by a designated process manager, often called a Chief Transformation Officer (CTO). The objectives and strategic direction belong to the CEO, and the CFO owns the financial aspects of the business transformation. Other important areas in which to define roles and responsibilities are HR, communication, digital technology, analytics, and finance. A key part is deciding decision-making rights for each person involved in the business transformation process.
The business transformation process varies between organizations and involves several steps. Successful business transformation processes often include:
Impact measurement and milestones
A means to measure the business transformation process along the way must be established upfront. This helps define objectives, manage obstacles, and ensure the transformation achieves its objectives. Establishing the measurement, including milestones, enables you to show visible performance as the organization reaches each milestone.
Clear objectives
It is essential to know where you want to end up and what you want the business transformation process to achieve.
Gap analysis, strategy, and plan
Assess your current position, compare it to your desired position, analyze the gap you must close to achieve your goal, and define a strategy that will take you there. Set a detailed plan with due dates, but be flexible to adjust it along the way.
Stakeholder buy-in
Ensure you have the backing and commitment of the senior management.
Transformation team
Ensure you have the relevant people on board who will take responsibility for implementing the transformation.
Digital technology
Ensure you evaluate and find the right technology to help you through the business transformation process.
Communication
Clear, open, and timely communication before, during, and after the business transformation process is key to ensuring everyone is on board.
Change management
Ensure you support employees and managers throughout the business transformation process. If needed, create the relevant training programs for employees and managers to learn the necessary skills and behaviors for the new approach.
Employee engagement and empowerment
Involve the employees by asking for their input and feedback in the planning phase, during the implementation, and after the new approach has become daily practice. Not only will you lift their engagement levels by making them feel involved, but you will also draw on their innovative ideas and learn what works well and what prevents them from working in alignment with the new approach. A modern employee survey with strong analytics capabilities is a great way to gain authentic employee feedback and recommend steps for improvement.
What is digital transformation?
Digital transformation is the process of implementing digital technology or tech-enabled processes in an organization. It can streamline operations, increase employee engagement, improve process efficiency, better serve customers, increase data-driven decision-making, enhance communication, shift the business model, reduce operating costs, gain better customer insights, or ensure better data protection.
Why is digital transformation important?
Digital transformation is important for organizations to stay competitive, better serve customers, attract and retain talent, and improve operational efficiency. Digital technology can significantly increase the output of how people spend their time at work and allow them to work smarter. In addition, the younger generations who grew up with technology expect a high digital maturity in organizations.
Why digital transformation fail
Digital transformations fail due to various reasons, including employee or leader resistance, lack of clear objectives, insufficient planning or resources, poor technology selection, unrealistic expectations, lack of skills or upskilling programs, a non-supportive organizational culture, ignorance of customer feedback, or existing legacy technology challenges.
What is workforce transformation?
Workforce transformation is fundamentally changing the way an organization’s people work or are structured. Reasons for conducting a workforce transformation include shifting market dynamics, mergers and acquisitions, supply chain revamp, globalization, strategy shift, different business needs, or technology advancements.
A workforce transformation includes:
Objectives and communication
The workforce transformation must be based on clear reasoning, which must be communicated upfront and explain how everyone contributes to the new, improved way of working. Progress must be communicated throughout the change and the outcome when people have shifted their way of working.
Shifting the organizational culture
Workforce transformations might require the culture to change too. A new structure might mean a more agile approach, pushing decision-making down the reporting line, in which people need another framework in the form of new values and culture.
Adopting new technologies
A workforce transformation often includes the use of new technologies. People must learn how their work is changing with the new approach.
Employee engagement
The way employees experience the workforce transformation can make or break it. Ensuring employees’ well-being and engagement throughout the change is a key to success.
Change management
People must be given support throughout the transformation to do a good job in the transition and their new way of working. Training programs are important to upskill or reskill employees and leaders. A workforce transformation often provides development and opportunities for new roles that require equipping people with the new skills needed.
Redefining roles
In a workforce transformation, existing job scopes might need to be redefined to align with a new structure or way of working.