What are the types of business transformation?
"Business transformation" describes the different types of widespread organization change needed to deliver better customer and employee experiences. The concept of transformation is not new. Companies have always had to innovate and adapt. The history of IBM, for example, shows how the technology pioneer has reinvented itself multiple times during the last 100 years.
A survey by Gartner revealed that 42 percent of CEOs have recently prioritized a business transformation to develop “new-era technology skills and capabilities.” This is because digital advances are driving a fundamental shift in customer expectations. Modern customers choose to do business with organizations that are able to provide them with a personalized, hassle-free, and complete experience.
Undertaking a meaningful business transformation requires a company to rethink all aspects of how it operates. This change is necessary to maintain growth in today’s highly competitive marketplaces. To successfully transform, each business needs a unique strategy that is centered around the customer and the people within the company who get the work done.
Types of business transformation
Three core strategies are used to achieve meaningful business transformation. They are often adopted independently, but many companies are employing all three as they work to increase the value they deliver. These include applying new technologies, focusing on solutions, and leveraging data.
Digital transformation
A digital transformation applies new technology to improve all aspects of the customer experience. This includes developing or adopting the right technologies to modernize products and the underlying processes and services that support them.
This goes beyond building up digital capabilities. It requires a deep understanding of what modern customers want and rethinking their entire business models with a strategic digital mindset.
Focus | A digital transformation includes the following initiatives:
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Impact | Technology is driving deep changes in the way organizations operate and the ways customers consume services. Notably, analog companies are having to develop new skill sets to understand the potential for technology-aided innovation. They have to change how they operate and the types of people they hire to make technology a core competency. |
Benefit | Investing in the right technologies can help companies deliver meaningful customer outcomes. Benefits include:
This allows companies to acquire, retain, and assist customers more effectively while simultaneously reducing spend. |
Example | Domino’s Pizza created a digital platform called Anyware to improve the ordering and delivery experience. This allows customers to order pizza through a broad range of channels, including Google Home, Apple watches, Ford cars, and others. The company has also digitized its operations to provide complete transparency to customers from order to delivery. Today, 60 percent of Domino’s sales come from digital channels and 50 percent of the people working at the company’s headquarters work in software and analytics. |
Solution transformation
A solution transformation focuses on solving a customer’s challenges in a holistic way. This means rethinking how products are built, bundled, and sold to provide a Complete Product Experience.
A solution transformation realigns all parts of the organization around what customers really want. This particularly impacts well-established companies that have built and acquired many products over the years but still go to market with an isolated set of point solutions.
Focus | A solution transformation includes the following initiatives:
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Impact | To address customer challenges and needs in a complete way requires redefining how products are built and sold. Companies must shift away from individual products and focus on delivering a better end-to-end customer experience. |
Benefit | Shifting to a customer-centric and solution-oriented mindset makes it easier to do business with a company. Benefits include:
This approach enables companies to increase revenue by serving the needs of customers in a more complete and lasting way. Companies that deliver complete solutions become fundamental to the customers they serve and are difficult to replace. |
Example | Product management at IBM went through an evolution from focusing almost exclusively on technical features to emphasizing the importance of delivering a complete product experience. IBM's focus is on providing an “iconic end-to-end user experience from the design of the product to the go-to-market strategy to service operations and to building ecosystems.” As part of this transformation, IBM also introduced a new design-thinking approach to prioritizing the user experience over features in their product planning process. |
Data transformation
A data transformation changes the way organizations make decisions by putting information at the core of the innovation and product development process. It allows companies to gain deep intelligence into all aspects of the customer experience and informs areas for improvement.
In addition to developing new data management capabilities, organizations must create a data culture that relies on business intelligence rather than opinion to continuously test, experiment, and learn what customers want. Then product builders can validate that customers are actually using the product functionality that has been delivered.
Focus | A data transformation includes the following initiatives:
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Impact | As data becomes increasingly vital to business success, companies must create a strategy for organizing, governing, and analyzing their information assets. This requires creating a data architecture that combines data sets from key systems — including product, marketing, sales, and customer service — to support all aspects of decision making. For most established companies, this is a major challenge because data has historically been an afterthought. And for companies that have been collecting data, they often gather it in an isolated way. |
Benefit | Data is increasingly recognized as a strategic business asset that can deliver a significant competitive advantage. Benefits include:
The right data strategy keeps the entire organization focused on delivering better customer outcomes. |
Example | Airbus Group recognized the strategic importance of using data to deliver more value to customers. Leonard Lee, VP of new business models and services, explained in a recent interview: "We have tons of data. An aircraft is a very talkative machine. It produces petabytes of data. In the aerospace industry, only two percent of that data is used in any constructive way. So, our plan is to leverage all the richness in that data, to help improve our customer experience by driving initiatives like predictive maintenance. This way, our customers can get airplanes back in the air as quickly as possible.” |
Misconceptions about transformation
Several misconceptions often surround business transformation. These relate to the role of technology and the role of process in achieving meaningful change. Both are required to deliver better customer experiences — but neither address everything that is necessary to provide real value to customers.
The first major misconception is that transformation is about technology. There is no doubt that many transformations include the use of new technologies. However, a recent survey by Bain & Company revealed that only five percent of digital transformations are meeting the expectations of the executives who mandated them. This is because isolated technology initiatives are not sufficient to deliver better customer experiences. Companies must leverage technology in conjunction with other strategies and shifts in thinking to satisfy customer needs.
The second major misconception is that transformation is about getting lean or going agile. While changing underlying processes is a necessary aspect of transformation, it should not be viewed as the primary reason for transforming. How work gets done is secondary to what work needs to get done and why. The “why,” “when,” and “what” should always come before the “how.” Companies must understand what their customers want before accelerating the development and delivery of new products.
Any organization can become agile, but agility is not a purpose in itself; it’s the means to a broader purpose.
Bart SchlatmannCOO at ING Netherlands
Investing in new technologies and improving process efficiency are important aspects for change, but they are not ends unto themselves. They are just two of the six areas of change that may be required to successfully transform an organization. At a high level, it takes changing mindset, people, processes, technology, go-to-market, and measurement.
Getting started
Business transformation looks different for every company. But every company needs it, no matter what it is called. This is because every company has different strengths to leverage and challenges that it needs to address. The following questions can help companies understand the right transformation strategy to pursue:
How satisfied are customers today?
What change is needed to improve their experience?
What challenges prevent the company from delivering that today?
How would investments in technology improve the experience?
What problems are customers looking to solve with your products and services?
How effectively do your products and services address these needs?
What data does your company need to better understand customer behavior and preferences?
What customer outcomes do you want to achieve?
How will success be measured?
Regardless of whether a company transforms via digital, solution, data, or all three, what matters is delivering exceptional customer experience — and setting a clear vision and strategy to get there.
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