BY NORMAN G. GRILL
A surprising 98 percent of U.S. businesses are transforming their organizations this year, according to “Business Transformation: Driving the Optimum Value,” a report issued by KPMG.
The report culled survey data from almost 1,000 U.S. executives in every major industry on the topic of significantly modifying their business models ”“ that is, transforming.
Before you decide to undertake a business transformation, you need to be sure you truly want to transform your company rather than simply change it.
As its market and technological needs evolve, every company must change. There”™s even a formal term for it: “change management.” But, from an operational standpoint, change management involves opening up the hood and switching out old engine parts for new ones. Even if it affects the business as a whole, change means focusing on specific areas and making alterations over relatively short periods.
For example, say a large commercial construction company was having trouble meeting its sales goals because of environmental regulations. So, it decided to augment its sales teams with environmental engineers who could better assess the compliance impact. The company applied change management principles ”” such as building a case for the idea and adjusting its business culture ”” and was successful. This was no doubt an important change, but the business itself wasn”™t transformed.
Transforming a company is much different. Business transformations aren”™t so much about switching out parts as overhauling the entire engine, possibly modifying the frame and even applying a new coat of paint.
The objective of a true transformation is to essentially reinvent the company and implement a new business model. And that model needs to be a carefully, formally devised chain of interlocking strategic initiatives that apply to the entire organization.
Perhaps the most obvious and universal example of a business transformation is Apple. The technology giant, once a head-to-head competitor with IBM on the personal computer market, found itself struggling in the 1990s. So, it transformed itself into a mobile technology company. It still makes computers, of course, but the company”™s transformative success can really be attributed to its mobile devices and operating systems.
Every business transformation differs based on the history, nature and size of the company in question. But there are some best practices to this ambitious undertaking:
”¢ Start with your customers. The best place to begin transforming your business is at the end of the sales process, customers. First, visualize a truly engaged, satisfied customer base. Then work backward, connecting this happy constituency with the aforementioned chain of initiatives that will revise your business model to give the buying public what they really want ”” even if they themselves don”™t know it yet.
Ӣ Build your chain. This chain of initiatives is the backbone of your transformation. If your objectives arenӪt clear and they donӪt spring from an end result that thrills your customer base, youӪll not likely achieve maximum value from your efforts.
Again, specific initiatives will vary by company. But some examples might include shifting major revenue goals to a new product or service, moving toward a leaner organization, looking to external consultants or partners to develop new ideas and aggressively hitting the mergers and acquisitions market. You may also need to establish cultural initiatives that change the tone or atmosphere of your business and revise your performance management approach to get more targeted production out of your workforce.
Ӣ Use metrics. One common mistake of many business transformations: The company simply seeks to reduce costs. So the only number the owner and management team ever look at is company expenses. In fact, only 14 percent of survey respondents in the report said they had defined metrics and aligned them with a strategic vision and targeted outcomes.
Everything is about the data these days. The metrics you use must go far beyond the last line of an expense report. You need to monitor and measure data related to project scope, schedule compliance, budgeting, resource usage and quality assurance.
Norm Grill (N.Grill@GRILL1.com) is managing partner of Grill & Partners LLC, (GRILL1.com), certified public accountants and advisers to closely held companies and high-net-worth individuals, with offices in Fairfield and Darien, 203-254-3880.
