September 7, 2022

4 Necessary Steps to Successfully Start a Business Transformation Effort

Your Executive Tells You to Start a Business Transformation Effort. Now what?

“We are going to transform our business. And we want you to lead the effort.”

I am sure like many of you, my first reaction would be, “who, me?!?!”

Considering that business transformation is one of the hottest CXO topics, along with security and risk, cost, supply-chain and workforce management, many of you have likely had these conversations within your businesses.

The question then is: what do you do first and how do you get a business transformation effort started?

First, Figure Out What Your CXO Means

The first and most important thing to figure out is what your CXO means by business transformation.

Do they really mean to transform the business? In other words, taking on completely new and different business and operating models? Or do they mean optimizing current business and operating models? Or do they mean modernizing or digitizing current business and operating models?

These are very different efforts, which we have discussed in other blogs and research notes.

Business transformation is a significant investment in people, business, processes, information, and technology.
Business optimization and remediation is a less significant investment that is focused on evolving current business processes, information, and technology.
Business modernizing is most often referring to IT modernization, which can include moving some or all existing applications and systems over to cloud services.

What makes business transformation such a significant investment is that it is a fundamental business model change.

Starting a business transformation effort means introducing new business models, new ways of working, new ways of engaging with customers and partners, and thus new business processes, solutions, information, and technology.

It is critical that organizations clearly determine what they’re actually doing in order to ensure they are not wasting resources, making appropriate investments, and incurring unneeded additional costs.

Second, Determine What Part of the Business Will be Affected

The next thing you need to determine is what part of the business is going to be transformed.

Realize that you might be focusing business transformation on just a small part of the business, and simply modernizing or optimizing other parts of the business. Again, be clear about this so as to not incur expenses, risks and disruptions where they’re not needed.

I’ve worked with a number of large organizations that have a stable part of their business that is generating strong ongoing revenues that they simply need to modernize or optimize.

A large financial services organization I worked with had significant banking systems that they didn’t want to disrupt. However, they supported a number of new customer-facing business models that they needed to transform in order to be competitive. Their goal is to keep a steady state for the back-end banking systems and support business transformation for some of the customer-facing parts of the business model.

It is critical to recognize and clearly communicate what the strategy is in terms of business transformation, modernization and optimization for different parts of the business.

Clearly communicating strategies should not just be to the executive staff, but also managers and users in different departments so that they understand the strategy and can support execution and operations.

Determine Driving Business Strategy and Future State

Next, it is important to start to define the business strategy and future state business architecture for the parts of the business that are actually going to transform. As I have written extensively in blogs and research, it is important to determine the future state first and foremost, and then use this to determine how to evolve the current state.

You cannot transform your business if you start with the current state first.

By nature, focusing on the current state first will limit your ability to think about your potential future state. And thus, will limit your ability to even consider business transformation.

It is more important to think competitively as if your business is a startup and think about the potential future state. Then look back on your current state and see how it will evolve to that future state, or how you may have to adjust your future state given your current state.

It’s a balancing act. But it must start with the future state first.

Architect For Business Transformation

Begin to develop road maps, decision frameworks, guidance, policies and principles that help business and technology leaders understand how they can contribute to transforming the business.

Engage with information architects and designers, technology architects, leaders and developers, business leaders and strategists, security and risk specialists and architects, and users and partners.

Business transformation is not just a business issue, and it is not just a technology issue. Staring a business transformation effort requires coordination, collaboration and communication across business areas and technology areas.

Business transformation should have a dramatic impact on how everyone understands and works in the business.

It is also important to engage customers in business transformation.

Communicate with major customers and partners what your plans are and how they might engage with you. Communicate with your customers as a whole so that they understand how the ways that they work with you might evolve. Don’t surprise customers and partners because they are part of your business transformation.

Bottom Line

When your senior executive tells you that they want to start a business transformation effort, your answer should be, “yes I can help.” and then next, you can help to guide them through the topics I’ve discussed in this blog. Don’t go ask them what they mean directly, because they may not know.

Understand the differences between business transformation, optimization, and modernization, and help your CXO understand what is best for your business.

This is a great opportunity for you to take a strategic leadership role in your organization if you approach it from the outside in and from a future state first. It is a significant risk if you just try to run forward and implement business transformation.

Take a moment. Understand. Scope. Strategize. Architect.