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'Business process transformation’ is a phrase you’ve probably seen flying around a lot recently, and with good reason.
How we live, work and spend our leisure time has changed drastically over the past two decades, and there’s more to come. Given the advent of Covid-19, many transformational trends are set to accelerate, rapidly.
Optimizing your business along these lines - and anticipating how you’ll adapt your processes to on-the-horizon technologies - will be essential in making sure your business can adapt, scale and thrive over the next decade.
Yet for all those Forbes newsletters piling up in your inbox, it can be tricky to pin down exactly what it is, and why it’s suddenly become so important.
That’s why we’ve put together this complete guide to business process transformation, covering the whats, whens, whys, hows and whos of the topic. We’ll delve into:
- What business process transformation is
- When you should consider it
- Why now is a good time to reevaluate your business processes
- How you should manage business process change
- Who’s done it well - a few real-world examples to finish off
What is Business Process Transformation?
Business process transformation involves changing the way your key business processes work, usually to meet new business goals or drive cost and operational efficiencies.
Business process transformation is arguably an essential step in every type of business change. There are three broad types of business transformation:
- Operational - Making changes to the way you do things to make operations better, faster, or cheaper, for example digital transformation;
- Core transformation - Moving to a fundamentally different way of operating;
- Strategic - Changing the very essence of the company to a new focus.
Of these three areas, ‘operational’ and ‘core’ business change are entirely based on process transformation...but it would be impossible to make any strategic changes without re-evaluating and changing your current processes. Business process transformation is therefore a useful goal in itself and a key building block for major strategic shifts.
Business Process Transformation and Digital Transformation: Is There a Difference?
Digitizing processes to reduce inefficiencies and keep up with demand is number one on many a CIO’s priority list.
You might see ‘digital transformation’ and ‘business process transformation’ used interchangeably elsewhere - but it’s important to keep in mind that digital transformation is just one prominent subset of process transformation more generally. Right now, any process transformation project is likely to include at least some element of digital transformation, but this doesn’t make them the same thing.
That said, we’ll be focusing on the digital aspects of business process transformation in this article (we are a software development agency, after all). This is where our advice will be the most relevant.
Examples of Business Process Transformation
What does business process transformation look like in real terms? The examples below should provide some solid examples of what we’re theorizing about above:
- Implementing a new supply chain management solution to free up time previously spent on manual processes and reduce labor costs.
- Creating a store app for your clothing retailer so that customers can request sizes they want to try on in-store in advance.
- Changing who needs to sign off on employee requests for leave, so they can be processed more quickly and you’re not left accidentally short staffed.
When Should You Consider Business Process Transformation?
Making any sort of change to your business’s status quo involves a degree of risk. It’s a well-known fact that poorly-planned process transformation projects can tank productivity and create a black hole of time, resources and money - not to mention project manager reputation.
So, when is the risk worthwhile? When do the scales start to tip so that taking a calculated, managed risk looks tempting for the rewards on offer?
According to a recent survey by business consultancy BIE, the three most common reasons for business transformation were:
- Efficiency drives (cited by 58% of respondents). For example, implementing a productivity app to reduce project time lost to admin errors.
- Cost reduction (43%). For example, automating manual repetitive manual processes to save on labor costs.
- Lack of business growth (38%). For example, implementing the ‘endless aisle’ concept in stores to expand the business and appeal to new demographics.
Other reasons included desire to take advantage of new technologies, changing customer expectations, political climate and changes to business structure such as new leadership or mergers/acquisitions.
Proactive vs Reactive Business Process Transformation
Often, leadership teams start to think about transforming their business processes when they realize that something isn’t working as well as it should be. In business, of course, something is always ‘not working as well as it should be’. If something is ‘not working as well as it should be’ to the extent that senior leadership know, it’s likely to have become quite a significant problem indeed.
The issue with this model is that it’s reactive. You wait for your legacy systems to become a major roadblock rather than pre-empting new technology, or you wait until your business can’t grow any more before taking action. In these cases, the scales are tipped far too far one way - you’ve avoided taking a calculated risk for too long, to the extent that it is having a major impact on your revenues, operations and ability to scale.
Instead, you should see business process improvement as a key pillar of long-term strategic decision-making. So, rather than ‘we’ve outgrown our ERP system, we should replace it now’, think ‘we’re planning significant expansion of our manufacturing operations over the next five years, so we should review our ERP in two to make sure it’s still up to the job’.
Why is Now the Time to Act?
There has never been a more strategically important time to reevaluate your business processes.
The amount of technological change we’ve seen over the past decade is huge, and there’s more on the way. It’s also worth considering the impact of Covid-19 on accelerating these trends, and whilst long-term effects aren’t clear yet, data suggests that the pandemic has already accelerated digital transformation efforts by a staggering five years.
If your business wants to thrive in this environment, you’ll need to be ready for:
- Digital automation: using technology to complete processes that were previously done manually. For example, using automated applicant tracking software to sift CVs for matches against a defined set of criteria.
- Augmented reality (AR): using computer-generated graphics to enhance real-world situations, often via camera or video. For example, IKEA uses an AR Mobile App to let customers visualize what a piece of furniture would look like in their own homes.
- Internet of Things (IoT): using a closed internet connection to allow devices to communicate with others. For example, adding sensors to machinery to regulate performance and need for maintenance.
- Machine learning: using computer algorithms that improve automatically with experience. American Express has saved millions using machine learning algorithms to detect fraudulent behavior.
- Advanced analytics: using the ever-increasing amount of data available to predict future outcomes. For example, using insights from property data to identify which areas of town will be most desirable to home buyers in the future.
Right now, we’re at a tipping point. Companies across a range of industries are incorporating these technologies into their everyday processes and seeing significant results - but they’re by no means embedded universally.
In other words, companies that adapt their processes to incorporate these technologies now are still ahead of the curve. Act now to realize those cost, efficiency and growth benefits before your competitors do, or act later and play a frantic game of catch-up in five to ten years’ time.
Companies that transform their processes to support these new technologies will:
- Offer standout customer experiences: until recently, all customers expected from an online retailer was good service, fast delivery and fuss-free returns. Advances in AR and video APIs are set to transform online shopping experiences, with customer expectations evolving with them. Transforming your processes to support these new technologies will put you at a major strategic advantage.
- Accelerate their rate of growth: automation significantly reduces the time spent on those tedious but necessary processes that anchor business growth. If you can sift CVs quicker, you can beat your competitors to the best hires, for example. Combine this with predictive analytics to identify key strategic areas ahead of the game and you’re onto a winner.
- Adapt to change quicker: it’s not always about being the first to implement a particular technology. It’s about having the capacity to implement it when it makes strategic sense for you. You might not want to implement AR immediately, for example, but you should know that you can implement it quickly, effectively and on your own terms.
How Should You Manage Business Process Transformation?
Like any change management operation, business process transformation needs careful planning, clear goals and confident management. Without these three key ingredients, your project is liable to become a major time and budget drain.
Here are a few key areas to focus on when planning and managing your business process transformation:
1. Define your goals and indicators of success
Be as specific as you can here. What do you want this business process transformation to achieve? Which specific metrics will indicate that you’ve been successful?
For example if you’re looking to transform your employee experience, you use absentee rates, employee turnover, performance reviews and surveys to gauge success. What are your base stats for these currently, and where would you like to see them go? Which of these metrics will you give more weight to?
2. Break your project down into phases
The problem with having a small number of long-term goals rather than several smaller stepping stones is that it creates two binary outcomes: absolute success or absolute failure. Because there’s nothing riding on what goes on in between, there’s less of an incentive to check in on progress, analyse how well you’re doing and make adjustments accordingly.
Breaking your project down into smaller phases not only makes it more manageable; it also encourages regular analysis of progress so that if anything’s starting to go south, you can catch it early.
3. Have a visible, transparent leadership team
The rest of your organization will buy into your business transformation more quickly if they know what the plan is, how it will impact their role and who to address any concerns to. Making sure your project leaders are visible and approachable, and having an enthusiastic executive sponsor onboard, is essential for this.
4. Understand the limits of your current resources
According to the BIE research cited above, only 42% of business leaders believe they have the internal resources to deliver business transformation successfully. It’s definitely not a given that your teams will have enough experience in managing disrupted environments to assume you’ll be fine going it alone. For optimum results, blend external resources like agencies and consultants into internal teams.
Who Has Transformed Their Business Processes Successfully?
If the above sounds like a lot to take in...you’re absolutely right.
Successful business process transformation takes time, resources and dedication. Like any sort of business change, it’s a risk. If, however, you plan adequately, execute well and keep your strategic objectives in mind at all times, the rewards can be immense.
The great news is that business process transformation is 100% achievable, if you put the work in. We’ll end on a high, leaving you with three examples of successful business process transformation:
Nike transformed its in-store business processes to blend digital experience with the potential of brick and mortar ‘concept’ stores to engage customers with the brand. Using the Nike store app, customers can scan the clothes they want to try on using a QR scanner, for example, and have them ready and waiting to try on.
In 2004, Shell committed to the long-term Shell Downstream One transformational project in the face of tanking share prices. The project involved a massive overhaul of key business systems, including financial processes and the distribution network, with stakeholder antipathy anticipated, addressed and assuaged.
In 2018, Walmart announced their vision for a digital transformation in partnership with Microsoft Azure. Readying their business to integrate new technologies was essential in securing the partnership for Walmart, for whom greater scope for automated warehousing and use of AI were key priorities.