A recent SAP and Oxford Economics study reveals that two thirds of respondents believe the term “business transformation” is often misunderstood, and 45% say it’s not even part of their organization’s vocabulary. Furthermore, 70% believe the definition of business transformation has continuously evolved, making consensus hard to achieve.
This ambiguity adds a profound layer to the challenge of planning and carrying out successful change. With 96% of respondents agreeing that a proposed definition matches their own understanding of business transformation, it's obvious that there's a widespread want for clarity. To ensure different parts of your organization work together toward the same goals, it's essential to speak the same language.
Why a unified understanding of business transformation matters
Achieving a shared understanding of business transformation is essential for organizations aiming to coordinate efforts and align on strategic goals. While each transformation journey demands a tailored approach, reaching an organization-wide consensus on what business transformation means to your company serves as a critical starting point. When teams are aligned, they can better identify and prioritize value creation opportunities, ultimately leading to a more successful transformation journey.
The definition of business transformation proposed in the study by Oxford Economics and SAP:
Business transformation refers to the strategic evolution of a business from its current operating or business model to a new operating model or way of doing business. This kind of wide-ranging, strategic evolution, whether pursued stepwise or all at once, typically involves four core dimensions of any business—people, processes, applications and technology, and data—and necessarily takes all these dimensions and their interactions into account. Organizations typically undergo business transformations not only to meet strategic objectives but also to develop the critical business capabilities needed to remain agile, resilient, and sustainable in the face of new and emerging opportunities and competitive pressures.
Whether this definition exactly fits your organization’s view of business transformation or not, it begins to highlight what your organization must be able to do to make transformation possible. Business transformation requires alignment between management and stakeholders, effective communication, and thorough documentation.
That can start with alignment around this definition, which not only sharpens focus and improves decision-making throughout the organization but also fosters a positive culture of transformation. It provides a foundation allowing companies to establish strategic goals that guide them effectively and to succeed in reaching these goals.
Digital transformation: One piece in the business transformation puzzle
When discussing business transformation, another term: "digital transformation" often enters the conversation. While the terms sound similar, there's a notable difference. Digital transformation is actually one type of business transformation, emphasizing the use of digital technology to enhance operations and customer experiences. Digital transformations have traditionally focused on replacing manual processes or in-person interactions with digital alternatives, such as online banking or chatbot-driven customer service.
Digital transformation emphasizes using technology to improve efficiency without transforming core business operations. Although incorporating new technologies or adapting existing ones to meet new business needs is part of business transformation, these technological changes should align with and support the overarching strategic vision of the transformation.
Achieve success with robust business transformation management
While every company may have their unique take on business transformation, there are certain universal keys to transformation success. A transformation journey requires careful coordination every step of the way, from discovery to implementation and continuous improvement. Business transformation management refers to the structured approach of guiding and executing changes within an organization to improve its processes, strategies, and performance. It’s built on four pillars: people, processes, applications, and data:
- For people, it involves guiding employees through change with careful planning and clear communication.
- Processes focus on understanding current operations and creating a plan for transition from the current state to the future state.
- Applications require assessing current dependencies and designing a future-ready IT landscape.
- Finally, effective data management helps ensure high-quality data transitions, improving insight in the new state.
Focusing on these core organizational pillars helps you build and develop the business transformation capability necessary to break through internal growth barriers and adequately respond to market or technology–inflicted change triggers.
The main goals of business transformation management are:
- Alignment between goals, strategy, and execution
- Securing employee buy-in and increasing digital adoption
- Ensuring timely delivery of transformation efforts that lead to sustainable growth and long-term success, while staying on budget.
Business transformation management helps organizations navigate the complexities of change while minimizing risk. By building out the transformation capability, companies can continuously improve operational efficiency and productivity while having companywide transparency throughout the journey.
Uncover the meaning of business transformation for clarity and focus
In a constantly changing world, developing business transformation skills is essential. Armed with a clear, unified understanding and strategic approach, organizations can not only navigate change but also thrive in it by identifying and realizing previously untapped value. Regardless of the industry, cultivating this capability is crucial for organizational success.
Eager to learn more about the current business transformation landscape? Dive into the comprehensive report, “The Estimation Game: What do business transformations really cost?”, created in partnership with Oxford Economics.