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Business Transformations have become a necessity in the fast-changing technological and competitive business environment. Transformation is characterized by significant and risk-laden Restructuring of a company, with the objective of accomplishing Operational Excellence and changing its future course.
Business Transformation is a priority for many top executives but it is usually a reaction to challenging circumstances rather than being a preemptive measure.
Business Transformation is prompted by a combination of 2 situations:
- Need to address inherent problems causing organizational drag—these problems may be internal and/or external.
- Aspiration by the top management and other senior stakeholders to seize the occasion of addressing these problems, in ways that deeply alter the Business Model of the organization including Value Creation.
Business Transformation entails not just making incremental changes but fundamentally changing all or some of the following:
- Organizational Structure
- Core Product or Service Portfolio
- Systems
- Processes
- People—the way employees work
- Technology
Undertaking such arduous effort requires approaching the task in a structured way. Research shows that quite a few of such undertakings are based on anecdotal beliefs instead of being based on empirical data.
Countering this trend, the Boston Consulting Group conducted an empirical study of financial and non-financial data-set comprising 300 U.S. public companies. The data spanned a period of 12 years from 2004 to 2016. Selection was based on the following criteria:
- Companies that had a $10 billion or more market capitalization between 2004 and 2016.
- Of these, companies with an annualized deterioration in Total Share-holder Return (TSR) of 10% or more relative to their industry average (2 years running or more) were identified.
Based on extensive analysis—that included use of methodologies like trained proprietary algorithms, prediction models, and Multivariate Regression Analysis—a pattern pertaining to Business Transformation emerged. The pattern depicted the following themes:
- Frequency of Failure
- Impact of Digital Disruption
- Impact of Downturn
- Competitive Volatility
The study also suggested the following 5 evidence-based Critical Success Factors (CSFs) for achieving Transformation Success.
- Cost Management (drives short-term success)
- Revenue Growth (drives long-term success)
- Long-term Strategy and R&D Investment
- New, External Leadership
- Holistic Transformation Programs
Let us examine in a bit more detail some of the CSFs.
Cost Management
In order to launch the Transformation effort on the correct footing, Cost Management is key, in the short term especially. Predictably, empirical analysis suggests that the leading driver for organizations recovering from severe TSR deterioration is a determined Cost-cutting effort during the 1st year of Turnaround. By year 3, Cost Reduction is accountable for the major share of TSR growth as companies divert their portfolios and make available funding for growth investments.
Revenue Growth
Merely short-term operational improvements do not augur well for a sustainable Transformation. There has to be a long-term Growth Strategy put in place. For this to happen, leaders have to challenge the foundations of the company’s Business Model.
Research divulges that Revenue Growth progressively becomes the driver for TSR recovery after year 1 in all the successful Transformation efforts. Revenue Growth overshadows, by far, all the initial drivers for TSR recovery by year 5 of all successful Turnaround efforts.
Long-term Strategy and R&D Investment
Turbulent competitive environments, particularly, require long-term Strategic Planning and investment in Research and Development for fruitful Business Transformations. Empirical research and analysis demonstrates:
- A 4.8% difference between Transforming companies showing above-average long-term strategic direction compared to companies with a below-average orientation.
- More pronounced findings in transforming companies operating in turbulent competitive environments—long-term orientation linked with a TSR increase of 7%.
- Companies with above-average R&D investments had upwards of 5.1% TSR impact in contrast to those with below-average spending.
These CSFs strengthen the odds of success in Business Transformation individually. When used together, most of them produce an impact that is larger than the totality of their individual parts.
Interested in learning more about the 5 Critical Success Factors for Successful Business Transformation? You can download an editable PowerPoint on 5 Critical Success Factors for Successful Business Transformation here on the Flevy documents marketplace.
Want to Achieve Excellence in Business Transformation?
Gain the knowledge and develop the expertise to become an expert in Business Transformation. Our frameworks are based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. Click here for full details.
“If you don’t transform your company, you’re stuck.” – Ursula Burns, Chairperson and CEO of VEON; former Chairperson and CEO of Xerox
Business Transformation is the process of fundamentally changing the systems, processes, people, and technology across an entire organization, business unit, or corporate function with the intention of achieving significant improvements in Revenue Growth, Cost Reduction, and/or Customer Satisfaction.
Transformation is pervasive across industries, particularly during times of disruption, as we are witnessing now as a result of COVID-19. However, despite how common these large scale efforts are, research shows that about 75% of these initiatives fail.
Leverage our frameworks to increase your chances of a successful Transformation by following best practices and avoiding failure-causing “Transformation Traps.”
Learn about our Business Transformation Best Practice Frameworks here.
Do You Find Value in This Framework?
You can download in-depth presentations on this and hundreds of similar business frameworks from the FlevyPro Library. FlevyPro is trusted and utilized by 1000s of management consultants and corporate executives. Here’s what some have to say:
“My FlevyPro subscription provides me with the most popular frameworks and decks in demand in today’s market. They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions. I strongly recommend FlevyPro to any consultant serious about success.”
– Bill Branson, Founder at Strategic Business Architects
“As a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power. For us, it is an invaluable resource to increase our impact and value.”
– David Coloma, Consulting Area Manager at Cynertia Consulting
“FlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients. In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over! The quality of the decks available allows me to punch way above my weight – it’s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.”
– Roderick Cameron, Founding Partner at SGFE Ltd
Today’s information-based, knowledge intensive, and service-driven economy has forced organizations to make substantial changes to the way they compete. Changing perspective and responsibility of top management amidst rapid Business and Digital Transformation and the shifting role of HR from being an auxiliary function to that of a driver are some of the dynamics of the evolved competition.
This evolution of Competition has been reached by passing through 3 phases:
- Competition for Products & Markets
- Competition for Resources & Competencies
- Competition for Talent & Dreams
Throughout the evolutionary phases of competition, the focus of Growth Strategy, the tools used, and the key strategic resources have been shifting. The strategic objective of front-running organizations is on continuous evolution and Transformation, and motivated Human Capital is their key resource. This realization is now at the forefront of Strategy Development as competition for scarce Talented Human Resources becomes more intense. However, modern-day managers are still using old tools to deal with an emerging reality.
Dexterity in leadership and management is a prerequisite for leaders now. Research suggests that the 3 important changes that the CEOs must make in terms of their strategic perspective are in:
- Strategic Resources
- Value Creation and Distribution
- Role of Senior Leadership
More on this topic in our editable PowerPoint presentation on Strategic Human Resources.
With the fast-changing focus in Strategy, Human Resource Managers are finding themselves leading the strategic charge. However, a large majority is ill prepared for the role. With Human Capital becoming key strategic resource and basis of Competitive Advantage, HR must adopt 3 core processes to evolve into the strategic HR function that has become their new realm:
- Building
- Linking
- Bonding
Let us delve into the first 2 core processes to strategic HR function in a little more detail.
1. Building
The first core process of Building is all about creating human resource systems, processes, and culture to counter the deep-rooted bias towards financial assets and recognize the value of Human Capital. For instance, Microsoft annually scans the entire pool of 25,000 U.S. computer science graduates for the best 500 to be given offers, of which 400 – top 2% of that year’s graduates – accept. This only fills 20% of the positions. For the rest, Microsoft maintains industry linkages with 300 recruiting experts who scour the industry for the best and the brightest individuals, often wooing them for years.
2. Linking
Developing Knowledge Sharing Networks is core to leveraging Human Capital. Converting individual expertise into embedded intellectual capital is what linking is all about. For example, British Petroleum in the 1990s introduced the Knowledge Management and Organizational Learning program. The main feature of the program was the “Peer Assist” where frontline workers in one location would help solve a problem for workers in another location without the usual hierarchy intervening. Peer Assist was augmented by the “Peer Groups” of business units—i.e. business units engaged in the same assisting activities as frontline individuals. This way managers of decentralized operations compare experiences and share ideas. Once this Information Sharing Network took root it was supported by setting up information-sharing infrastructure – e.g., video conferencing, chat rooms, video clip encoders etc.
Interested in learning more about the details of the 3 Core Processes required to evolve your HR into a strategic HR function and Key Actions needed to implement these? You can download an editable PowerPoint presentation on Strategic Human Resources here on the Flevy documents marketplace.
Want to Achieve Excellence in Human Resource Management (HRM)?
Gain the knowledge and develop the expertise to become an expert in Human Resource Management (HRM). Our frameworks are based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. Click here for full details.
The purpose of Human Resources (HR) is to ensure our organization achieves success through our people. Without the right people in place—at all levels of the organization—we will never be able to execute our Strategy effectively.
This begs the question: Does your organization view HR as a support function or a strategic one? Research shows leading organizations leverage HR as a strategic function, one that both supports and drives the organization’s Strategy. In fact, having strong HRM capabilities is a source of Competitive Advantage.
This has never been more true than right now in the Digital Age, as organizations must compete for specialized talent to drive forward their Digital Transformation Strategies. Beyond just hiring and selection, HR also plays the critical role in retaining talent—by keeping people engaged, motivated, and happy.
Learn about our Human Resource Management (HRM) Best Practice Frameworks here.
Do You Find Value in This Framework?
You can download in-depth presentations on this and hundreds of similar business frameworks from the FlevyPro Library. FlevyPro is trusted and utilized by 1000s of management consultants and corporate executives. Here’s what some have to say:
“My FlevyPro subscription provides me with the most popular frameworks and decks in demand in today’s market. They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions. I strongly recommend FlevyPro to any consultant serious about success.”
– Bill Branson, Founder at Strategic Business Architects
“As a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power. For us, it is an invaluable resource to increase our impact and value.”
– David Coloma, Consulting Area Manager at Cynertia Consulting
“FlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients. In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over! The quality of the decks available allows me to punch way above my weight – it’s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.”
– Roderick Cameron, Founding Partner at SGFE Ltd
Growth strategy is typically the crux of any organization’s business strategy. Achieving sustainable growth is a challenge faced by all companies, whether you’re just a startup or a gorilla.
There are several main barriers that inhibit continued growth. These include coming up with break-through innovations, execution challenges, and balancing growth at the expense of profitability.
In framing the growth challenge, there are typically 3 “horizons” a company must cross and overcome. The first is to extend and defend it core business. This is critical for near-term performance and, oftentimes, too much of a focus. Successfully growing through this horizon requires very strong operational managers and leadership. The second horizon is to build emerging businesses. The objective is to drive or invest in ventures that leverage or replicate the existing business model and capabilities. Successful navigation through this horizon requires entrepreneurial members and business builders. The final horizon focuses on creating viable options for future growth. This requires input from “visionaries” and unconventional thinkers.
LearnPPT has a comprehensive Growth Strategy toolkit, which discusses these growth challenge and presents several frameworks in addressing, creating, and managing sustainable business growth. You can find the document here:
This toolkit is 31 slides. It presents and compares the traditional approach to growth strategy, such as Porter’s Five Forces, to the newer age Blue Ocean Strategy methodology of creating an uncontested market. In addition, it lays out a framework for undertaking a growth strategy project initiative. (You can find a detailed description of the document at the bottom of this post.)
LearnPPT is a leading online resource for presentation materials. Its range of products range from PowerPoint templates to business strategy frameworks (like the one on pricing strategy). All documents were created for an by top management consulting firms. Since its founding in 2010, the LearnPPT documents have been used by customers in Fortune 500 companies, top MBA programs, and leading management consultancies across over 45 countries.
DETAILED DESCRIPTION OF THE GROWTH STRATEGY TOOLKIT
The Growth Strategy Strategy Toolkit is a 31-slide PowerPoint. It contains both instructional slides about growth strategy frameworks and editable templates. This document is divided into 4 sections:
- Growth Challenge (6 slides)
- Traditional Strategy Thinking (5 slides)
- Modern Strategy Thinking (11 slides)
- Growth Strategy Project (5 slides)
Growth Challenge
In this first section, we explain how all companies are faced with the challenge of achieving sustainable growth. Specific growth challenges and situations are identified and explained. We show how a successful company must navigate across 3 growth “horizons,” which involve both optimizing the existing core business and creating new ones. Specific barriers and paths to growth are enumerated.
Traditional Strategy Thinking
This section discusses the focus and thinking of traditional growth strategy frameworks, such as Porter’s Five Forces and the GE-McKinsey Matrix. There is a deep dive into Porter’s Five Forces, including template slide for presenting a Porter’s Five Forces analysis summary.
Modern Strategy Thinking
This third section is the largest section of the document. It includes a detailed comparison between Traditional Growth Strategy Thinking versus Modern Growth Strategy Thinking across the areas of industry, strategy, market, resources, among other components. The focus is on teaching the Blue Ocean Strategy framework, include the related topics of portfolio positioning, value identification, and value curves. Specific examples are provided, along with template slide for presenting a Value Curve analysis summary.
Growth Strategy Project
This final project teaches how to conduct an actual growth strategy project. A three-phase approach to strategy development is introduced. Specific work streams, activities, and deliverables are identified for each phase of the project. This is the same approach to conducting a growth strategy engagement used by many strategy consulting firms.
