In our recent business transformation survey, an overwhelming 80% of senior executives said that their organisation is currently undergoing a business transformation of some nature.
The vast majority of these transformation programmes were being driven by a need to become more efficient (58%) or to reduce costs (43%).
But what is the nature of these transformations?
Cash savings vs business growth
ERP and systems implementations, cost out initiatives, global standardisation of processes and creating shared service centres were the top types of business transformation programmes.
These findings indicate that a majority of business transformation programmes prioritise cash savings and cash generation, over business growth.
Whilst growing EBITDA numbers by cutting cost through transformation is an excellent opportunity for companies, they must also consider growing the business through new strategies and a sales focus.
It’s good to get money out, but that money has to be reinvested. The lifecycle of a sales turnaround means that it normally takes nine months for a reinvigorated salesforce to start seeing the benefit.
The first thing to get right is to make sure your salesforce is fully engaged and driving the best and most efficient possible activity to generate sales. This will then in turn bring more money into the business, which will cover up the gap of the investment you’re making in new systems, technology, and in building new processes with shared services.
If we’re talking strict transformation, it’s most likely being driven by a cost out initiative. How can we operate better? What new technology is coming in that we can capitalise on? For example, off-premise solutions offer a cheaper and less risky way of hosting all of your processes.
Though if your company is fundamentally underperforming, but the business is operating successfully in the current platform, saving money may just be a case of tightening things up a bit.
However, if you’re in a turnaround situation where your company is not performing, then you want to examine why you’re not generating sales and how you can reduce the cost of operating. What is your break even point? How can you bring this down?
There’s a fundamental difference in the approach between a company-wide turnaround situation and a back office transformation.
If your company is suddenly one day not performing, you’ve got to transform it. But how? You’ve got an external challenge to determine what your company is to your customers. And an internal challenge of how you can deliver that service for the least amount of money. If you can get both of these right, you’re going to be as profitable as you possibly can be.
It comes down to identifying what you want your business to be and where you want it to be in 3 years time. What does that target operating model look like? You also need to assess what systems you need to allow you to achieve that.
These are the classic questions; what is the future state of our business? What is the target operating model? And what systems are best available for us to use to deliver it?
In our Business Transformation Survey 2018 we looked at how buying has matured, how transformation teams are structured today, who the major sponsors and organisers are, and how businesses are engaging their employees in transformation. To download your copy of the report, click the link below.