Management teams worldwide are realising that the incremental, one-at-a-time changes of the past will not deliver the uplift they need today. That is why more companies are turning to enterprise-wide transformations to handle the challenges of today's disruptive global business environment. Estimates suggest that over 80 percent of Fortune 500 companies have some form of business transformation initiative underway.
In the retail sector, for instance, once-cohesive markets are fracturing into bipolar affluent and basic segments as the formerly sizable mass market between them dissolves. At the same time, digitally-savvy consumers demand seamless buying experiences across formats and channels.
Global players like Starbucks has standardised their processes and systems across different global markets to achieve tremendous margin improvements and procurement savings. Unilever has successfully launched the integrated platform to simplify, streamline and standardise operations across the enterprise for higher cost savings and optimised business performance. Procter & Gamble also revamped and digitalised workspace portals to enhance decision making with real-time information.
Typically, transformation programmes generate benefits in excess of 5 percent to 15 percent of annual operating costs and in cases where dramatic changes are implemented over the course of three to five years; benefits have exceeded 25 percent of operating costs.
However, amongst the many success stories, nearly 50 percent of business transformations fail because of the lack of management commitment, inadequate goals and strategies to achieve anticipated and unsustainable benefits. Understanding what business transformation really means and taking the right approach will be the key to success.
Key Drivers for Transformation
Business transformation initiatives can be driven by a number of challenges and strategic objectives. There is a need for leaders to make strategic choices regarding their role in the business ecosystem, their business model and their operating mode. Therefore, it is crucial that they understand the various types of transformation triggers and how they can affect a business or industry.
This happens when a business has very aggressive expansion targets but lacks the capabilities to hit them. This could result from a number of factors, such as the emergence of a new customer segment in the market or a new revenue target set by leadership. It focuses on driving revenue and enabling growth via new operating structures and partnerships.
This takes place due to external disruptions such as digital transformation and new regulations. These commotions tend to make the existing business or operating model less viable.
This is when a business is underperforming its own objectives or experiencing severe performance erosion. They are unlikely to be able to address these problems through individual point solutions or programme.
Roadmap to Business Transformation
A true enterprise-wide transformation will fundamentally disrupt a company's business and operating models. It represents a multiyear journey that is linked directly to a clear management value agenda and business case, and typically occurs in five core phases.
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