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In management it has been said that Business Transformation involves making fundamental changes in how business is conducted in order to help cope with shifts in market environment. However this is a relatively narrow definition that overlooks other reasons and ignores other rationales.
A better understanding is achieved by considering that "Transformation ... is generally a response to two things. First, there are underlying problems or causes of organisational pain that need to be addressed. They have to be properly understood but nevertheless they are a key component. Second, there is a desire by the top management and other senior stakeholders to use the opportunity of addressing these causes in ways that fundamentally alter the paradigm of the organisation." Others describe Business Transformation as "the process of fundamentally changing the systems, processes, people and technology across a whole business or business unit. As such, a business transformation project is likely to include any number of change management projects, each focused on an individual process, system, technology, team or department."
When business transformation is used
The need for business transformation may be caused by external changes in the market such as an organisation's products or services being out of date, funding or income streams being changed, new regulations coming into force or market competition becoming more intense. This management approach may also incorporate Business Process Reengineering: However application of BPR does not of itself constitute a business transformation, the outcome should be the deciding factor as to whether any activity is truly transformational or simply improvement. Other methods like Lean or Six Sigma are rooted in incremental improvement rather than paradigm shifts in the way things are done.
Business transformation is achieved by one or more of: realigning the way staff work, how the organisation is structured, the core product or service portfolio of the business and how technology is used. Typically organisations go through several stages in transforming themselves:
- recognising the need to change and gaining consensus amongst stakeholders that change is necessary
- agreeing what form the change should take, the objectives of the change and a vision that describes a better future
- understanding what the organization is changing from and what needs to change in detail
- designing the new organisational way of working and its support and management
- testing and implementing changes, usually in waves (this may take place over a number of years)
- bedding in the change so that the organisation cannot move back to how it was and achieves the intended benefits.
Business transformation can lead to developing new competencies and making better use of existing competencies.
Examples of organisational transformation include:
- General Motors' transformation and restructuring
- BBC's Delivering Quality First programme
- Box's pivot from consumer to enterprise
- British Airways' strategic transformation programme in response to low cost airlines
- . Harvard Business Review January 2007 Kotter
- Wherrett, Rob (10 March 2020). "Explaining Business Transformation".
- Cruise, David (14 Sep 2017). "Business Transformation".
- McKinsey Survey 2010
- Harvard Business Review January 2007 Kotter
- Bak, O. (2016). Investigating Organizational Transformation in Automotive Supply Chains: A Case Study on B2B and Extranet. Strategic Change, 25(3), 299-314.
- Transformed GM back in the game 2010
- BBC website October 2011
- Box: The Path From Arrington’s Backyard To A Billion Dollar Business "Josh Stein started to connect the dots on doing an SaaS enterprise model. We credit him to being able to shine light for us on something we couldn’t see.” 2012
- British Airways simple route to business transformation 2005