What Is Business Transformation?
by Betsy Burton
One of the most common questions we hear from technology providers and end-user organizations is about business transformation. Whether they are seeking to transform their own business or provide solutions and services to help other organizations transform their business, this remains a hot topic for discussion.
In this blog, we explore what business transformation really means and how it differs from business modernization and digitalization in terms of focus, activities, and investments.
Business Transformation Is About Business First
Business transformation is the process of specifically designing new business strategies, models, and operations to support new business models (such as digital business) and changing existing solutions, systems, processes, and information to support new business models.
These new business models are enabled by current and emerging new technologies, such as IoT, cloud, AI, analytics, etc.
Modernization and Digitalization May Not Be Transforming
I find a lot of organizations get business transformation and business modernization conflated (see Cloud Transformation and Modernization Are Not Business Transformation). I had a client once tell me that they were “transforming their business; they were installing an ERP solution.” Clearly, using any number of applications and solutions can be part of business transformation. However, just using X application does not mean one is transforming their business.
Digitalization (also called digitization) is the process of converting assets and processes from an analog format to a digital format. For example, converting documents, sound, video information to a digital format. Or converting a manual or hybrid manual/digital process to all digital.
Again, you could support business transformation in the process of going digital. However, going digital doesn’t automatically mean you are transforming your business.
Why Do We Care About Identifying These Differences?
Its important that organizations are clear about which they are doing because it requires a different level of investment, and can have a significantly different potential business value.
- Organizations that are just “going digital” are largely keeping existing business models, but rather moving over to digitalized processes and information assets.
- Organizations that are just modernizing are updating their legacy technology to modern applications, solutions, and infrastructure. Often this occurs during a move to cloud services.
Both transitions can require a significant IT and technology investment, but a lower business change investment because they are not changing business models.
Business transformation means your organization is making a significant investment in defining, creating, and deploying new digital business models, that are then supported and enabled by technology investments. Business transformation also means your organization is hopefully creating innovations as well as new sources of revenue and growth.
Is It All or Nothing?
No, the reality is most larger organizations will support some digitalization, some modernization, and some business transformation, as well as combinations of all the above.
I spoke with a financial services organization that was looking for opportunities to take a part of their business and transform it completely to open some new digital business channels. They were also working on modernizing some of their existing transaction and banking applications. And they were digitalizing some of their administration and operations functions that were still stuck in manual processes.
Technology providers must be clear with your customers as to what you provide and enable so that your customers can understand the business and technology investments that are needed. If you don’t you are going to risk confusing, disappointing and alienating your customers.
End-user organizations must be clear about what your organization is trying to achieve. If you are trying to modernize and transform at the same time, this is both a significant business and technology investment. Make sure you are clear within your organization and set expectations accordingly. And, be clear with your technology and service providers to ensure that they can support your business and technology needs. And remember, think future-state business first, not technology first.