Five Steps for Successful Business Transformation
It has been said that the only constant in business is change. Meanwhile, numerous studies have shown that up to 70% of change efforts fail. Luckily for managers, this doesn’t have to be the case. With proper planning, thoughtful management, and appropriate timelines, even the largest of complex change initiatives will be successful.
Change initiatives can vary widely in scope and complexity. Large-scale projects are typically at the enterprise or business unit level, while small-scale projects could be at the program or process level. Business transformation typically refers to medium and large scale projects that impact strategies, management systems, or multiple business processes. Large-scale transformations may result from the acquisition of a new company, market disruption, business model innovation, restructuring for revenue growth, or performance improvement and operational change.
Once the need for change is recognized, either due to an event similar to those above or through the identification of a specific performance gap, the transformation journey can begin. Combining multiple operational and change management methodologies into one easily applied framework, the five-step process outlined below can serve as a guide for organizations undertaking business transformation initiatives on any scale.
Step One: Complete a Current State Assessment
In order to effectively pursue the transformation of a business, it is critical to begin with an understanding of the current state of its operations. Current State Assessment includes developing an understanding of the current strategy, measuring baselines for key performance metrics, mapping various business processes, outlining the staff’s existing skill sets, and documenting the capabilities of technology and information systems.
Once an understanding of the current state has been developed, it is best communicated through the use of two specific tools: the SIPOC (Supplier → Input → Process → Output → Customer), diagram and the organizational alignment matrix. The operational aspects of business can be mapped using the SIPOC while the organizational alignment matrix can be used to holistically document the business landscape (Strategy, Management System, Processes, Technology, and People & Organization).
Step Two: Establish an Organizational Strategy
The organizational strategy establishes the initial parameters governing the business transformation. Assuming the entity being transformed is not an entire company, the strategy that applies most directly to the transformation is that of the affected business unit itself. It is important to note, however, that this micro-level strategy should be supportive of the company’s macro-level strategic direction.
A simple approach to strategy for business transformation typically contains four components: a Mission Statement, a Vision Statement, Core Values (typically those of the larger entity), and Guiding Principles (for the transformation initiative itself). There is an important distinction to be made between mission and vision: while the Mission Statement defines the organization’s purpose, the Vision Statement outlines its future aspirations, or what it hopes to be post- transformation.
Step Three: Develop an Organizational Change Management Plan
It may seem that the logical next step following the Current State Assessment and development of the organizational strategy would be to design the future state. Proceeding to that step immediately, however, would put the success of the transformation immediately in doubt. Given that a business transformation is by nature a transformational change for the organization, it is critical to consider and plan for its impact on all aspects of the business and its employees.
Organizational Change Management (OCM) is the “soft” side of business transformation. While there are numerous technical considerations in defining and implementing the future state vision, the focus of OCM is to make employees aware of, and engaged in, the change effort. Executed properly, OCM can remove obstructions that prevent change from occurring, accelerating the transformation and positively impacting post-transformation sustainment.
Three common components of OCM are stakeholder analyses, communication plans, and training plans. The communication component of OCM is critical to successful business transformation. If employees and stakeholders do not understand the purpose and vision for the change initiative, they may become resistant, stopping progress in its tracks. Effective communication plans will often overcome these challenges by communicating the vision for the change repeatedly through all available channels.
Step Four: Design the Future State and Develop an Implementation Plan
Once the need for Organizational Change Management has been addressed, the business transformation effort can proceed to the Future State Design and development of the implementation plan. At the conclusion of this step the organization should have defined the way forward and developed a plan for making its vision a reality.
Using the organizational strategy as a starting point, business leaders should outline the technical aspects of the changes that need to be made. The organizational alignment model from step one can be re-used to test the completeness and alignment of the future design. Is the organizational strategy supported by adequate measurement and management systems? Do the processes and technology solutions achieve the desired result relative to the strategy? Are the organization’s resources (employees and/or equipment) aligned to the new production system?
If the answer to each of these questions is “yes,” then management can proceed to the development of an implementation plan that, in concert with the Organizational Change Management Plan, can be used to make the aspirational vision a reality.
Step Five: Implement Changes and Sustain Improvements
Although implementation and sustainment are the final components of the business transformation initiative, plenty of risks to success remain. Rushing implementation can place extreme pressure on existing operations and staff, resulting in the reemergence of employees’ resistance to change. Business leaders should be careful to ensure that the change initiative doesn’t fall victim to “the way we’ve always done it.”
The most direct method to ensure the proper pace of implementation is to apply the Plan, Do, Check, Act (PDCA) model commonly used in lean management. The PDCA model dictates that required changes should be made one at a time and in proper sequence. This meticulous approach allows each change to be properly implemented, measured, and adjusted as needed prior to moving on to the next item on the implementation plan. Implementing multiple changes to the system at once makes it difficult to ensure that each change is having a positive effect on the operation. Furthermore, the PDCA model can be used to drive a post-transformation continuous improvement program, a critical component to ongoing sustainment.
Following these five steps, in sequence, and with the appropriate timelines, will be a giant step in the right direction for any business transformation initiative.