Innovation by its very nature could play a role in how business transformation occurs. Innovation tends to be focused on a product or service or at the solution level, as opposed to the higher organizational level of a transformative process. But innovation still makes an impact on the overall blueprint that is occurring with a business undergoing transformation. Indeed, innovation of a product or service can be part of what guides a company in an entirely new direction, such as Apple’s original development of its iPhone or even the creation of its music store, iTunes.
Innovation Versus Transformation
Seth Adler recently discussed the subject of innovation versus transformation in an All Things Innovation blog post. Many people think digital transformation and innovation are one in the same, but according to Mike Hatrick, Group Director of IP Strategy & Portfolio at Volvo Group Trucks and Technology, while they are closely related, there is a difference. Digital transformation typically refers to change at an organizational level, while innovation more specifically happens at the product, service or solution level.
What transformation and innovation do have in common is strategy. Strategy typically starts with the deceptively simple question: Why are we doing this? While the answer seems like it should come from an obvious place, such as needing to modernize, the truth is a lot of companies have different and multiple reasons for transforming and innovating. An innovation strategy could be, for example, deciding how to build a business that is future resilient and meeting the needs of consumers globally.
Process and organization matter in both areas but people are at the crux of transformation. However groundbreaking or innovative an idea is, without the right people and teams in place to deliver on those new ideas, organizations cannot move forward. And the best way for people to feel empowered is through leadership. Hatrick points out that good managers tend to guide and lead, as well as observe and adjust in the process, to help support the ideas.
The Phases of Business Transformation
Every business transformation is an iterative process that goes through constantly evaluated phases or cycles. These phases, courtesy of ResearchGate, include:
- Envision: Create a case for change, a sense of urgency and a strategy or vision.
- Engage: Empower people to act on the vision and plan the effort.
- Transform: This is the process of change. Change could occur in behavior, processes, technology, culture and values.
- Finally, Optimize: This phase is said to internalize, institutionalize and optimize the transformation, creating stability for the organization.
Another way of looking at these steps is through the lens of planning, implementation, acceleration, and measurement.
In its research report on business transformation, McKinsey recommends an “all in” approach to business transformation. Rather than just focusing on productivity, and making things faster or cheaper, McKinsey sees the pace of advancing technology increasing the pace of business transformation. “Changing what your company is and does, requires understanding where the value is shifting in your industry (and in others), spotting opportunities in the inflection points, and taking purposeful actions to seize them.” A challenging task, to be sure, but McKinsey notes, “The good news is that our research demonstrates it’s entirely possible for organizations to ramp up their bottom-line performance even as they secure game-changing portfolio wins that redefine what a company is and does.”
Be A Transformer
The process of business transformation, and the innovation associated with it, has many layers. It’s a process that could take many years or occur in leaps and bounds in a short timeframe. Success and failure of the process could take time to determine. Yet, some basic truths remain. A query on ChatGPT regarding the process of business transformation yielded some interesting tips:
- Identify the need for transformation: The first step in business transformation is to identify a need or opportunity for change. This could be driven by external factors such as changes in customer demands, competitive pressures, technological advances, or internal factors such as cost reduction initiatives, reorganization of departments, and process improvement efforts.
- Assess current state: Once the need for change has been identified, it is important to assess the current state of operations and processes within the organization in order to understand what needs to be improved upon and how best to do so. This would involve analyzing existing data sources (such as financial statements) and conducting interviews with stakeholders across different departments or functions of the organization.
- Develop vision and strategy: After understanding where your organization currently stands, it’s time to create a vision for where you want it to go and develop a strategy on how this can be achieved through business transformation initiatives. Here you should consider short-term goals that will have an immediate impact on results as well as long-term objectives that will help ensure sustained success over time.
- Design a roadmap and implementation plan: With your desired future state defined and strategies outlined on how you are going get there, now comes designing a roadmap outlining all activities required including timelines, resources needed, along with an implementation plan addressing key considerations such as budgeting , training requirements and so on.
- Execute and monitor progress: The next step is executing these plans while monitoring progress against targets set at each stage; and making sure any issues encountered are addressed quickly without compromising quality standards throughout the process.
- Evaluate outcomes and adjust accordingly: Finally, once all plans have been executed it’s important to evaluate outcomes relative against desired objectives; adjusting strategies accordingly if necessary based upon feedback received from both customers and employees during this period of transition.
Adapt & Adjust to Innovate and Transform Your Business
There certainly seem to be more similarities than differences between innovation and business transformation. One wonders, regarding this interrelated theme, if executives are faced with choosing between the two functions. But rather, it’s ideally a partnership that goes hand in hand, with innovations often driving the transformation and vice versa. The process must be viewed as one of constant evaluation, adaptation and adjustment.
