What is business transformation?

If ever there were two professions destined to come up with jargon, they would surely be IT and management consultants. When these twin creators of neologisms get together it’s inevitably time to update the business dictionary.

One term, business transformation, bears the influence of both industries, so it’s not surprising that such a simple business term disguises layers of some complexity.

Indeed, finding a widely agreed definition is astonishingly difficult.

For some, the term business transformation is synonymous with change management, ie a strategy that aligns people, processes and technology with the business strategy.

But I think it’s much more than that.

Scott Anthony’s 2016 HBR article, What do you really mean by business “transformation”?  divides business transformation into three types:

1. Operational transformation – doing current things cheaper, faster and/or better, often with the assistance of digital technology. This seems to reflect the restrictive definition of change management above.
2. Operational model transformation – doing what you’ve been doing but in a completely new way. Also known as Core transformation.
3. Strategic transformation – fundamentally changing the essence of the organisation. Done badly, it’s often called foolhardy or destructive; done well and it’s ‘brave’ or ‘iconoclastic’.

Operational transformation, in Anthony’s view, requires relatively small changes in the way the organisation is managed and may simply lead to a stay of execution.

Operational model transformation, on the other hand, needs a new set of metrics if the organisation has changed in any meaningful way; while Strategic transformation demands a complete review of the company’s competitive set.

Only a combination of these two, says Anthony, can lead to disruptive change; ie true business transformation.

It’s a compelling idea, but not one I agree with.

Searching more widely, however, it’s difficult to find writers who are willing to commit to a better definition. The largely anonymous editors of Wikipedia offer us the woolly:

“Business transformation involves making fundamental changes in how business is conducted in order to help cope with shifts in market environment.”

It’s true as far as it goes, but not useful for distinguishing it from any other form of change. And reviewing numerous other definitions, both academic and from other practitioners has failed to uncover a definition with which  I’m comfortable.

In fact, several consultancies appear to adopt a contingency approach, adapting their definition according to circumstance.

A definition of business transformation

So perhaps it falls to us to put a stake in the sand and establish a definition. Our report, Business Transformation – Why do we keep getting it wrong? set some parameters which I’ll use as the basis of our definition: 

Business Transformation is the process of fundamentally changing the systems, processes, people and technology across a whole business or business unit, to achieve measurable improvements in efficiency, effectiveness and stakeholder satisfaction. As such, a business transformation project is likely to include any number of change management projects, each focused on an individual process, system, technology, team or department.

Yes, it’s a long and complex explanation of an apparently simple term. But I’d argue that – given the lack of consensus – necessarily so.

That’s my definition. Do you agree? Is it definitive or is something missing? Let me know. 

David Cruise, Director of Business Transformation, Change Associates