The Business Transformation Elephant – It’s Not What You Think
This week I’ve spent a lot of time with business process leaders who are chartered with making Business Transformation a reality in their organizations. These individuals are largely C-level executives and vice presidents who work in a number of process improvement and operational excellence roles, as well as lines of business leaders.
This dialog occurred at the PEX Exchange, an event hosted by IQPC. The event largely addressed process/operational excellence topics, and across the board IQPC focuses squarely on hosting forums that help companies make process and operational excellence a reality.
It’s interesting—in all the roundtable discussions I attended, these senior level participants typically started with the Business Transformation mandates they’ve been handed by their boards or other top level executives, and drilled rather quickly into how to operationalize business process changes. At one point in the discussions I suggested that usually business transformation is catalyzed by digital disruption and unless business transformation initiatives take the disruption in their industries and fast-changing customer expectations into account, they are bound to fail. The moderator agreed but said the roundtable participants are typically given mandates to make internal transformation happen within the organization. Fair enough. But I couldn’t resist adding that digital transformation is so pervasive that to ignore it would doom any business transformation initiatives, no matter how strong the internal process improvements may be.
Interestingly, one of the panelists from Sonora Quest Labs drove home this very point about digital disruption when she observed, “the big problem with strategic planning is when something so innovative happens and you didn’t see it coming.” Another panelist noted, “everything keeps changing; we’re just trying to keep our heads from spinning.” Sound familiar?
Given that context, here are the aggregated comments from several roundtable and panel discussions. (The panelists came from a number of companies, including: Global North, Honeywell, Microsoft, Nationwide Insurance, NCR Corporation, Sanofi, Sonora Quest Laboratories, and Turner Broadcasting Systems.) The panelists didn’t necessarily agree on all the points below, but I found these nuggets to be valuable observations that at least some of the panelists found noteworthy.
- Understanding that business transformation’s purpose is to change business results is essential, such as moving the stock price or improving the balance sheet, etc. Sometimes business transformation should be made from a financial angle—like making an acquisition, launching a new market or product line.
- Creating a shorter horizon for strategic planning is crucial—pretty much everyone agreed that the timeframe for strategic planning should be no longer than 2-3 years. (One of the companies does annual planning for its strategic plan, with longer term planning at 2-3 years, and financial planning within a 5-6 year horizon.)
- Developing a one-page business plan with incentive plans aligned to the roadmap was overwhelmingly the preferred approach. One panelist noted that creating a vision statement wasn’t that helpful but asking each executive to bring stories to the strategic planning process was very helpful. There was a lot of agreement that cascading goals (that are tied to the strategy) down to individuals is essential to create the environment for transformation.
- Transforming the enterprise requires the creation of a service operating model. Critical enabling processes within the operating model are often: innovating, developing, marketing, selling, implementing, and delivering.
- Creating a Chief Process Officer role to guide Lean and Six Sigma practitioners and engage with business leaders can help drive better results in process and operational excellence.
- Incorporating business agility and digital agility (Agile) is crucial to successful business transformation.
The panelists also turned their attention to what’s not working. Problem areas included:
- Communicating throughout the organization is difficult but crucial for operationalizing the business transformation strategy.
- Defining transformation too narrowly, and not thinking through the change management approach were the biggest problems identified by one large financial services company.
- Failing to align Six Sigma and Lean teams with the business transformation strategy and goals was another pitfall for not getting transformation operationalized into the business.
Business transformation and strategic planning had a lot of overlap in these discussions. I don’t think they are the same but they seemed to be tangled up in many of these exchanges. Transformation means creating something new or different from what was before, whereas a business strategy seems more run of the mill or business as usual to me. When you throw in digital disruption, and recognize that disruption isn’t a one-time only thing, but is a new way of existing in today’s business world, that forces companies to move closer to transformation and not just settle for the annual/two year/three year strategic planning process.
In my opinion, the big fallacy in these discussions was how myopic some of the companies were about the extent to which digital disruption is (or will be) sweeping through their industries—not just once, but over and over again as technology changes advance, accelerate and become pervasive in everything we make and do. Too many of the process and operational excellence leaders have an internal-only, one-time view of the business. Which led me to assume that the biggest problem for these teams would be in how to optimize the business from the outside in, and how to get ahead of changing customer behavior.
That wasn’t the elephant in the room that everyone was wrestling with. Instead, it was change management—as in how to encourage individuals in the organization to accept and even embrace all the changes that business transformation spawns. Here are some of the comments:
- Driving business transformation dictates that you drive cultural change and get people to accept the changes. For business transformation to stick, it’s crucial to develop best practices in measuring cultural change.
- Implementing business transformation requires clear, constant communications at all levels, across all geographies, while leveraging technologies like the web, video and teleconferences, and holding person to person events like town halls, workshops, and announcements. Without repeated communications, employees will resist change and possibly thwart process improvements. [This is probably the singlemost valuable statement during the whole event, in my way of thinking.]
- Leading business transformation initiatives requires executives to have a dialog with their teams at least every month about the business strategy and honestly assessing how effective the strategy is being executed.
- Creating change requires process excellence teams to make the organization’s automated systems better than they are now and then deploy the changes in code. This brute force approach requires people to change, whether they want to or not. In essence, “if you want to change behavior, change the system they use.” But, there was a lot of push back from panelists, and the moderator said that level of organization change management isn’t enough. Employees may not buy into the change, and, even worse, they may not understand the reason for the change and resist it even more actively than before.
Business transformation is on every executive’s mind, but there’s a lot of confusion between transformation and strategic planning, and many so-called transformation initiatives give lip service to customer experience (at best) and instead delve right into operational excellence.
To transform an organization so it becomes (or stays as) a leading company in its industry, the process and operational excellence leaders need to keep digital disruption and the customer experience at the forefront of their thoughts in addition to internal process excellence; and then work extra hard at organizational change management when beginning to implement strategic changes. (That’s the elephant in the room everyone is talking about and wrestling with–change management.) For more insights see: