Video: What is Business Transformation and Why Should You Care?

There’s a lot of chatter about transformation….possibly because the entire world just got through (still going through, processing, reeling from?) a pandemic. We saw first-hand just how important agility is when reacting to massive disruption. However, an organization’s ability to be nimble is just as important when the landscape is steady. 

One way for organizations to prepare for the next disruption, whether caused by competition, new technologies, or global dynamics, is to build the internal capabilities necessary for pivoting, persevering, and harnessing change to their advantage.

Enter Business Transformation. 

But what is Business Transformation and how does it relate to, and differ from, other transformations like digital, product, and Agile? 

I sat down with Enterprise Transformation Coaches Randy Hale and Richard Dolman to discuss the benefits of Business Transformation, why it’s worth consideration despite the investment, and how you can get started. 

What is Business Transformation?

Randy Hale

Business Transformation from my perspective is, first off, very holistic. And a lot of organizations are lacking focus in some of the areas that Ultimately it’s about defining what this better state is that they’re pursuing and looking at all of the aspects, the entire operating model, how funding investment decisions are made, hiring practices, compensation incentives, bonuses, role structures.

And notice, I haven’t mentioned anything about technology or process yet. Certainly, that’s all a part of it. It’s a very complex space and I think that’s one of the challenges where a lot of organizations have fallen short. Richard, what would you add?

Richard Dolman

Yeah, I agree. It’s certainly challenging. You know, the term business transformation carries a lot of potential sub-definitions. The transformation word itself is really about fundamentally changing who we are, how we operate, etc.  And I think most organizations are finding that they’re being confronted by internal needs, external forces, etc.,  and the need for change and transformation is growing and is present.

There’s a lot of talk about different types of transformations. I think they all have some similar factors as Randi just mentioned. There’s not a single clear definition of that, but looking at the need to change and to be able to thrive is paramount these days.

When you’re looking at things like changing the funding model and hiring and organizational structures, that sounds like a huge investment of time and resources. Why would an organization want to undertake something like this?

Richard Dolman

Yeah, it can be and typically is a huge investment. For some organizations, it’s not an option. So if we’re trying to adapt to a dynamic market, for example, if the market is moving faster than we are, we’re losing market share, we’re being threatened by competitors, we’re losing customers. That is a compelling purpose that really forces our hand as an organization needing to find a competitive advantage.

The why is often discovered through understanding what’s really driving the organization’s change right now. I think you hit on an interesting point, right? The investment that’s required in real change in an organization, particularly an organization that is of large size or spans the globe, etc., is really important. Fundamentally a lot of organizations, the mistake they’re making is undercutting that investment.

They’re looking at these drivers, these things that they need to do as projects, and they’re going to have a very finite amount of funding. They’ve got very limited staff resources to be able to apply to this and understanding that investment and understanding where all of their investments are going is a critical blindspot in a lot of organizations.

Randy Hale

Yeah, I agree. What I would add to that is you invest because what got you here is not going to get you there. If you want different results, you want improved performance for your business, you want improved outcomes, and you need to make changes in a number of areas to be able to get those improved results.

One of the things that I’ll throw out is something that I pretty closely correlate when we start using the transformation word is the term “operating model.” I see a lot of different organizations with a lot of different perspectives on what the operating model is, what it means, and whether it’s in scope or not. I had a conversation session with a VP of Strategy and Transformation who in the same conversation made two very conflicting statements.

One, our CEO and CIO have said getting Agile right is our top priority as a company. Later in that same conversation, I also heard, that we’re not looking to make changes to the operating model right now.

And so talk about Business Transformation. That’s what we’re talking about, looking at the entire picture. It’s an extremely complex space. The other thing I would add to Richard’s point is most organizations, at least that I’ve worked with, sort of have this mindset that their operating model is almost something that they rent versus something that they own.

They go engage a top strategy firm to define the next version of their operating model and they get great insights. They get really great guidance. But the thing that’s missing is the own dynamic. You know, this is version 17 of our company operating model. What we think is important is working within the organization with leaders to really build that ownership dynamic and really understand how you continually adapt and evolve your operating model. To me, that’s really the ultimate goal of business transformation.

Richard Dolman

I agree. I like what you’re talking about: rent versus own. Too often clients just want us to tell them what to do and they’ll go do these things. While I appreciate the base intent behind that, it’s a trigger for me, particularly when we’re talking about true transformational efforts to really transform the way we operate.

If we’re simply saying, just tell us what to do, we’ll go do it, or sometimes we even get to just do it for us. Just go implement these changes for us. That’s a renting mentality and that’s not going to create sustainability in most cases. It’s not going to create real resilience as an organization. The threats that organizations are facing shouldn’t be DEFCON whatever. They shouldn’t be really putting us on the brink of chaos. We should be able to look at these things and anticipate what we’re able to confront as an organization and then start making those changes or start thinking about those changes. Often it’s due to that rent versus own mentality or it’s we need to change but we can’t change certain things.

So whether it’s our operating model, our hierarchical structures, or processes, etc., one of the first ways to break through that is to make sure that we’re not limiting ourselves and we are open to all of the potential opportunities that are in front of us. But that’s hard because we’ve got things that we have to accomplish and expectations that we still have to meet while we’re doing this in parallel.

We’ve heard Agile Transformation and we’ve heard Product Transformations, Digital Transformations. Is that all within business transformation? How is everything related?

Randy Hale

Yeah, I think it’s all a bunch of branding malarkey. If you look at the core, the underpinnings are the same no matter what you call it. From my perspective, it’s just who has what core competencies and what they want to focus on more. What do they want to dial up in terms of their marketing focus?

How I would differentiate, just off the cuff, is Digital. Digital Transformation tends to be a bit more technology-led. It’s more about infrastructure, and cloud enablement. How do we build flexibility so that we can do things quickly? Those are all really important capabilities. How do we get the most out of automation?

Certainly looking at processes, how to accelerate, improve processes and remove waste–that’s a very important part of the picture. But it’s not everything. Similarly, from a Product Transformation perspective, organizations that focus there are leading with the customer-centricity aspect of it–looking at things like how they organize around delivery to customers.

Those are all really important things. Agile Transformation, a lot of times what we see is it’s viewed as “go do this thing with the team, make the team better.” The real opportunity lies beyond the team level. So those are a few different ways I would differentiate the different flavors of transformation. Richard, what would you add?

Richard Dolman

Yeah, I agree for sure. Digital Transformations, Agile Transformations, Product Transformations–they tend to focus on specific areas, but I think they have a common thread that is either ignored or just not well understood. A lot of organizations, and I’ve been coaching and training on this for many, many years working with many, many organizations around transformations, it’s still heavily viewed as an IT thing.

Similarly, Digital Transformations get often relegated to IT although I have worked with a few organizations that see the uniqueness of that and can separate that a little bit. Agile Transformation has always been about business success, business continuously satisfying the customer. So at the core, these are all business transformations. The mistake I think gets made is that they get relegated to an IT thing or as Randy mentioned, just go do this to the teams. 

As long as the teams are doing this Agile thing, we’re done. While I think the focus area may vary, whether it’s product, digital, etc., the core underlying theme needs to be that this is about building and responding to the business needs. And the point of that being is that we need business stakeholders to be alongside us, to those of us that are helping organizations drive change.

But we need real business stakeholder engagement, not just sponsorship. Not just we will show up at a demo every once in a while when you have something to show us. We need real business leadership to engage. We’re seeing that still today, a lot of these transformations get relegated to a department or a PMO or some other group to go manage the thing rather than really understanding the holistic opportunity here.

Randy Hale

I want to quickly add to what Richard said because I like that point a lot. The whole partnership between IT and the business. I can only think of one case in the 12-plus years I’ve been focusing on this domain where it was the business that brought me in. IT tends to have this,  “we’re here to serve the business” mentality, and that leads them to want to go to the business with a bunch of answers that say the plan. Here’s exactly what we want to do. Here’s how you plug in. 

In my experience, it is way more impactful to engage your business as partners. Set a directional intent. We believe that moving in this direction will help us collectively improve and we want to figure it out together. So that’s one of my taglines I use is “you do it with the business, not to the business.”

Richard Dolman

Yeah, that’s a great point. I think the intent of how we serve the business is admirable. But to your point, Randy, it often manifests in some anti-patterns that aren’t necessarily healthy and imbalanced. You know, another cliché I hear from the business stakeholder perspective is that this isn’t their day job.

But it absolutely is their day job. Any transformation that we’re talking about here, that is helping us survive or thrive as an organization by definition is our day job. And it comes back to the investment point that you brought up earlier–that this investment is not just financial. It’s not just about hiring consultants or buying technology or implementing tools. It’s an investment in people’s time, energy, and passion. If our business stakeholders are treated as simply receivers of things that we do versus partners that are at the table and engaged in this, then we’re simply at risk of sub-optimizing said transformation.

So it sounds like all of these different types of transformations are definitely related if not one and the same. As Randy said, some of it is branding and marketing malarkey. So they can build on each other,  but can there be too many transformations happening at one time?

Richard Dolman

I use the term change fatigue. For this topic, we’ll rebrand as transformation fatigue. I definitely think that there’s a risk of taking on too much as an organization. As we talked about earlier, the impetus, the motivation, for taking on a business transformation, may be driven by some internal need or some external force. That’s important to acknowledge. If it’s something that’s being driven externally, that could be from regulatory changes or market or competitor changes, then we likely don’t have a choice. Those are things that we are confronted with and we have to deal with these if we expect to survive and thrive.

If we’re talking about internal needs, then we have more discretion. We can choose: Is this really a priority? We can calibrate the pace at which we do these things because it’s internal and it’s ostensibly something that we have a choice. The reality is that virtually every organization today, I believe, is confronting more than one business transformation need and they can work together; they can build on each other. 

I think they have some common complementary components to them, starting with culture and culture change. If we expect to bring real transformational change to our business, and to our organization, this is not just about implementing processes or implementing something. We have to start to get people’s mindsets to shift toward a new reality.

We have to understand our cultural dynamics and our cultural orientation so we can move in the direction that we need to move. If Randy and I are both leaders in the same organization, but we’ve got two completely different leadership styles and we have completely different interpretations of our cultural orientation, then we have to be able to deal with that.

We’re going to have to understand the tension that might exist between a culture in one part of the organization and a cultural norm in another part of the organization. So that mindset shift and dealing with cultural change, which we can’t manufacture, that has to evolve over time, is central to any type of transformation that we’re having to deal with.

So if we’re dealing with multiple transformations in parallel, we can actually leverage both of those in a positive sense if we’re bringing that mindset shift and we’re working on that cultural change. If we’re talking about team empowerment, a very common theme behind Agile transformations is we want to create more autonomy and empower our teams, whether we’re talking about software development teams, marketing teams, talent resource, HR. 

If we want to truly bring change that is systemic and sustainable, we have to create team empowerment. I think that’s another common thread across any real transformation that we’re looking at in an organization today.

Randy Hale

I’ll share an anecdote where Digital Transformation meets Agile Transformation. I’ve worked in a couple of different scenarios where there were parallel efforts. One Digital Transformation flavor, much more focused on cloud enablement and DevOps, and an Agile Transformation happening in parallel, focused more on how we are building better software. Without the right kind of overarching oversight and coordination, those two things were conflicting in a lot of different ways. 

We had the Digital Transformation get kicked off with a very traditional approach–continuing to have functionally siloed teams and trying to bring new capabilities to bear– but managing it through a series of dependencies and hiring more and more project managers to coordinate the dependencies among these different cloud teams.

It was a little bit of insanity because when we came across that area, with more of an AgileTransformation focus around how we focus on the customer, how do we build cross-functional teams that minimize the dependencies? We ran into that head-on and, sort of like while we were here doing it this way first, you’re going to have to wait until we get through this wave of capabilities that we’re trying to build out. 

Even though there was a ton of opportunity for them to make some relatively minor shifts to improve the way they were delivering. But just two different leaders driving two different agendas and not fully aligned. That kind of dynamic shows up in a lot of different ways in a lot of organizations.

The holistic approach is definitely the way to go, even though that can be scary because of the scope. It’s very complex but it’s better to map out and understand the complexities and chart a path through it than to overly focus and sub-optimize.

Richard Dolman

One other point, is if they are complementary. If we’re taking on multiple transformation initiatives in parallel, how do they work? If all of a sudden we’ve got chaos in one area, does that mean we hit the stop button over here so that we can focus over there?

A couple of things that I always like to remind leadership about is, we need to develop a sense of urgency around these. If we’re trying to bring about change, it has to have a compelling purpose and we have to really understand why we are doing this. Why are we bringing all of these resources, people resources, financial, etc., to bear to do this?

It also requires patience because true transformational change is not happening overnight. It doesn’t happen by just going through some training. It doesn’t happen by just spending a few weeks or a few months doing different things. True transformation takes time and so we need to have patience, but also that sense of urgency and balance that. 

Randy and I have seen this play out many times, when we start an Agile Transformation working with an organization, oftentimes we’ll be confronted with some competing priorities and we have to hit the pause button. Well, we have to slow down this Agile Transformation because we have this other burning platform over here. Well, the reality is that by doubling down on agility allows us to better respond to these other demands.

Richard Dolman

So if we’re trying to succeed with Digital Transformation or trying to succeed with a Product Transformation, having the ability to build more agility into our organizational DNA is how we’re going to succeed on these other fronts. So there are certainly complementary components and we build on these as we go. It is complex and it’s hard for a lot of leaders to be able to see through that complexity because they have expectations that they need to meet as well.

Having the right type of coaching support and the right type of guiding coalition that understands how all these fit together, is really critical for organizations to develop.

If an organization wants to undertake a transformation, what’s the first step?

Randy Hale

For me, absolutely step one is to align on the why. I use the phrase a lot that organizations want to get better. They want to improve some aspects of how they’re performing. Get clear on what better looks like, because there’s a lot of different tools, a lot of different approaches, and a lot of different ways that you can optimize things in different sequences.

There’s not one universal recipe so align on your why and focus on that. Then the next step from my perspective is to stay zoomed out for a moment. Don’t zoom in too quickly. There are all kinds of things and it’s very easy to jump right into them. At least take a beat and look at it from the 40,000-foot level and say, “What are all the things that are part of this complex model that makes up our company and all of the different aspects of it.”

Really ask yourselves as an organization, “What aren’t we willing to change?” Because odds are if there’s anything on that list, you’re going to be limited in the benefits that you’re able to achieve. Focusing on those two things, I think, is the right place to start.

Richard Dolman

That’s always a good starting point–understanding why we think we need to do this. I referenced earlier, whether it’s an internal versus an external factor, and I wanted to make a quick reference to the Harvard Business Review article that you shared with us. One thing that I really liked about that article is it talks about a way to categorize the source or the impetus of that change.

If it’s coming from an external [source], there are certain things that we might need to understand about that versus if it’s coming from an internal need. As Randy said, we need to understand the why but also really understand what we’re dealing with. As you talk about the why, you also need to be realistic about all of the other competing priorities you had. 

It’s going to take a lot of time. It requires essentially building a volunteer army within our organization to be able to take on change. And if we understand the base characteristic of what we’re being confronted with and understand how that aligns with our other priorities, then build that understanding that this is going to take time. We need real leadership to take ownership of this, not just somebody who’s going to sponsor it and fund it, but someone who is really going to lead people through change. Getting those foundational building blocks in place is really critical.

Randy Hale

The one final thought that you spurred for me, Richard, is getting clear on the intent from a sustainability perspective, because I’ve seen a lot of go-fast transformations that can get an initial lift faster. But the ceiling on what’s possible is, pretty much in every case I’ve seen, lowered so that that’s a cost.

What often happens when you add on the side of going fast is you lose sustainability. So really take a look in the organizational mirror to see if we are wanting a rapid cure or are we wanting a sustainable cure. How do we want to balance that? I think that’s an important part of the conversation.

Richard Dolman

We have to calibrate the pace of change at times. So we may want to go fast. We may need to go fast, because that external force also brings with it some time box constraint or something like that. I believe that some forward momentum is always important, so we have to throttle it back a little bit because we’re dealing with competing priorities and we don’t want to burn our people out. We’re not just trying to go fast and throw some gasoline on a wildfire. We need to understand that we can calibrate the pace of change, particularly for those transformational efforts that are internally driven, because, theoretically, we’ve got more discretion there.

Organizations in general aren’t always that good at being able to recognize how to calibrate the pace because everything has to get done. We’ve got limited budgets; we’ve got limited time. What we end up doing is we just keep spreading out our effectiveness and overburdening our people.

That includes from senior leadership down to the team level. It’s not just team-level individuals that get overburdened and burned out. You know, leaders are juggling too much or trying to solve too many problems all at the same time. So the art of figuring out how to calibrate this, how do we work together to manage the pace of change and knowing where and when to speed it up or where when to kind of slow it down a little bit.

 

We’re going to keep discussing business transformation and other ways organizations can achieve outcomes faster and better. Don’t forget to subscribe to our YouTube channel and our newsletter for the latest videos from our experts.