Insights

‘Transformation’ – an overused buzzword?


26 July 2016

What’s in a word? The word itself has the potential to trigger debate. My question is how do you define ‘business transformation’? What metrics do you use to measure it? Old school management expresses that you can’t manage what you can’t measure. This is a fundamental principle that is often neglected. Perhaps this is one of the reasons why change projects fail. How about ‘turnaround’? The dictionary says that ‘turnaround’ is an abrupt or unexpected change, especially one that results in a more favourable situation. Turnaround has the potential to inspire thoughts of action, urgency and results. Turnaround should not be viewed as just a word, but rather an organisational mind-set as it expresses a sense of urgency i.e. things are not right and we need to change. There are turnaround metrics that can measure progress in relation to strategy, capital and people. Businesses that are able to adapt to the changing moods of ‘Mr. Market’ will ultimately have a competitive advantage.

Mr. Market

Mr. Market is an allegory created by Benjamin Graham. Imagine two owners of a business, along with an external partner Mr. Market. Mr. Market describes the industry sector, customers and economic factors that can influence the health of the business. As markets tend to fluctuate, Mr. Market is a manic-depressive, with his estimate of business value going from very optimistic to wildly pessimistic. A resilient business is one that can adapt to change and navigate through the highs and lows of the business lifecycle. Large-scale transformation programs are popular, however, the success rate of transformation endeavors is low. Is there another way businesses can adapt to Mr. Market’s mood swings?

Another Way

In our experience working with mid-market companies, there are aspects of a business that might be working well, and it makes sense to identify what is working in order to leverage strengths for attacking strategies. Data analytics provides a useful tool to identify factors for the development of a more effective business model often related to financial, operations and people. There is a risk that these opportunities are missed in a large-scale transformation program. Turnaround should focus on measuring and monitoring results. Why continue with a major initiative if it’s not working? Small is beautiful – at least smaller projects are easier to measure, manage and execute. With the use of data analytics, it is possible to identify the root causes of problems and develop tailored solutions. In fact, no business can survive without analysing data.

Our View

Analysing a company’s data in relation to its lifecycle, financials, operations and people factors provides a more holistic view of what is really going on. With these insights, the root causes of problems can be identified and solutions can be developed that lead to tangible bottom-line results. With the support of a Business Turnaround Office (BTO), Business Executives can align a portfolio of small projects with an eye toward future direction. Empowering internal stakeholders to take ownership of these projects can improve collaboration, communication and knowledge sharing. This approach can also increase awareness of the value/benefit of change initiatives. Business Executives should recognise and reward internal champions for driving business strategy. It’s possible to motivate people using data if they can see how their contribution has led to a positive outcome. Data can set you free.

External BTO

The main objective of a business turnaround is to remove a company from immediate danger and to focus on activities that restore or increase business value. An external Business Turnaround Office (BTO) can assist with setting up internal project teams to drive change organically and expose data that is required to develop sustainable solutions. A BTO can bring new insights to make the challenging decisions required to restructure a business based on facts. The top 5 advantages of working with an external BTO are:

  1. They have significant turnaround experience along with proven techniques
  2. They have no emotional ‘baggage’ associated with any of the company’s previous business decisions
  3. They are not part of the organisation’s hierarchy and are therefore able to challenge the company’s management more freely
  4. They can bridge the gap between strategy execution and business change
  5. They have a network that can assist with raising capital, financing arrangements, information technology, human resources and legal matters.

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My philosophy is that there is always a way to solve a crisis, as long as you’re engaged early enough.

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I believe that clear strategies and organisational alignment are fundamental for long-term business viability.