What Drives Business Transformation?
This is the second post of our series on business transformation. Read the first one here.
This series is intended to open up a discussion on how business leaders and business consultants can envisage and implement business transformation.
Over the next few posts, we will explore:
- Keys to Business Transformation Success
- The Role of the Business Leader in Transformation Success
- And many more aspects of change and transformation
“The more successful organisations will be those that are fleet of foot and ready to move fast in a different direction.” Katherine Garrett-Cox CBE, CEO of GIB Asset Management
Why do leaders take on business transformation?
Necessity is the mother of invention, and by extension, of change and transformation also.
Many are driven by the need to turn adversity into opportunity or through strategic ambition.
Drivers of business transformation
From a study in the pre-pandemic world, the factors that drive transformation include:
- Stagnant growth in core business areas
- A financial crisis
- Threat from disruptive competitor or technologies
- Opportunities to ride a global megatrend
- Strategic vision and systematic planning for the future
We know now that the global COVID-19 pandemic has driven many businesses towards transformation often in ways that were neither planned nor anticipated.
The New Normal
Times are rife with uncertainty. An overwhelming majority of UK CEOs (86%) and global CEOs (83%) are concerned about uncertain economic growth according to the PwC’s 24th Annual CEO Survey in early 2021. Even while being extremely concerned about pandemics and health crises (52%) and cyber threats (47%), global CEOs are optimistic about global economic growth and confidence in their own growth prospects. It is interesting to ask why.
According to PwC, UK CEOs are looking to ‘no regrets’ moves — those within their control that will deliver positive change, sustainable growth, including organic growth and cost efficiency. But they are also moving on decisions to avoid regrets of inaction by investing in digital transformation, cyber security sustainability and on their people. The goal is to turn disruption into a catalyst for positive change.
Why go beyond change management?
Think of how today’s world is different from the pre-pandemic world. Can change management alone help you effectively meet the pandemic era challenges of the ‘new normal’?
Yes, we heard your resounding, NO!
Change management has traditionally focused on business process reengineering and other means to squeeze out efficiencies from the same old three capitals— natural, human and financial — ref: John Adams’ era. Change leaders scrutinised existing structures, processes and business models seeking efficiencies that were increasingly more difficult to find. That was when we realised that something bigger was necessary.
At the same time, the world was changing, or should we say transforming? Leading up to the 21st century, the power of computing, mobile telephony, telecommunications, the internet and the concept of platforms evolved and converged bringing about that transformation. The process continues today at an accelerated pace.
Now nearly everyone has a tiny and powerful smart phone in their pocket. Some have multiple connected devices all around the household.
Look at how many industries have been transformed or been made obsolete as a result:
- Online shopping drove the largest retailers either online – the alternative has often been bankruptcy. Many bookshops closed because of Amazon.
- People watch movies less in movie theatres and more in front of a big TV or online on mobile devices. Movie makers and television companies transformed, offering online and on demand programming – example Netflix
- People do their banking, file their taxes and pay utility bills online.
- Everybody buys and consumes music online and the music industry has adapted to that reality.
- Newspapers moved online. New York Times offered a $15 per month subscription in 2011 but now unlimited digital access is at $0.25 per week for one year.
This is a very short list of how the internet transformed various industries. If your industry has not transformed, it is only a matter of time.
Innovative assets- the new capitals
Technology integration brought us new avenues for wealth creation.
- Behaviour capital. Big data modelling and analytics yield better insights into consumer behaviour.
- Cognitive capital. Gains in computing power, automation, artificial intelligence and machine learning has given us analytical abilities that were not previously available. This cognitive capital enables us to deploy behaviour capital more effectively.
- Network capital helps us create wealth through the mobilisation of networks, including the Internet of Things (IoT), business ecosystems and platforms.
A 2012 story from Forbes about how Target knew a teen was pregnant before her father did, shows how long ago companies began mobilising behaviour capital for marketing. All those suggestions you get on Amazon and the search results on Google demonstrates their ever-increasing capacity for leveraging new capital.
Companies today deploy natural, human, and financial capital just as before, but now with the new technological revolution, they can also release tremendous wealth using innovative assets. Mobilising these new capitals require business transformation. Change management is not enough.
Share your thoughts with us
Feel free to open up the discussion by sharing your experiences in business transformation and change management efforts so all of us can benefit from the discussion.