What is Business Process Transformation?
Business Process Transformation is optimizing the management processes to adapt to new business goals. These are usually centered around Digital Transformation. The term "business transformation" is relatively new. It first appeared in the fields of information technology and management consulting.
Using BPT, a company can modernize the supply chain, save costs, integrate new technologies as well as automate processes. The business model has to be broken down into smaller processes and each process is then optimized to create more value in future.
But, Business Process Transformation is much more than just optimizing. It involves change in mindset and coming up with a business strategy that can continue to evolve in future. Often, Compliance Regulations and changes in economy drive Business Process Transformation.
Business Process Transformation is an integral step in any type of business change. It can be classified into three broad categories:
- Operational: Optimizing the operations/supply chain to be better, faster and cheaper.
- Core transformation: Changing the way of operating, making processes efficient.
- Strategic: Shifting the focus of the company to a different goal.
The CXOs (CEO, CMO, CTO, COO, etc.), VPs and Board of Directors are the ones in charge of taking business transformation decisions.
When do Companies consider doing Business Process Transformation?
Processes are an integral part of every company’s operations and culture. Sometimes, internal or external changes in the environment creates a demand for a company to transform their Business processes. Often, in order to align with a new business strategy, to ensure innovation and growth and to reduce costs, companies have to go through Business Process Transformation.
Below are the three biggest benefits of Business Transformation.
- Maximizing Efficiency: Automating and streamlining processes along with better data analytics can help make quick decisions.
- Increasing Productivity: By integrating new technologies, a company can maximize their output while minimizing waste.
- Increasing Profitability: By optimizing processes, a company can get better returns on the same capital.
For example, COVID has forced many organizations to rethink their business models and adapt to new conditions. The entertainment industry has been forced to adopt digital means like OTT platforms.
Types of Business Process Transformation
BPT involves a lot more than just replacing current processes with automated ones. These transformations can be divided into four types listed below.
- Organizational Transformation: This involves restructuring the company’s structure and its operations. This transformation shifts focus from the management to the employees.
- Management Transformation: This transformation involves redefining hierarchical structure and internal relations. Too many middlemen slow the decision making, thus slowing growth and making it more difficult for new talent.
- Cultural Transformation: One of the most difficult transformations for a company. It involves changing the mindset of employees as well as management. The implementation of a new corporate culture can only occur after a leadership transformation has taken place and a vision has been formed.
- Digital Transformation: A company has to change its Business model keeping digitalization in mind. The management decided how modern technology can be adopted to improve the product and user experience.
Steps of Business Process Transformation
Like any other business or management decision, Business Process Transformation needs to be carefully planned with clear goals by a confident management. Without these factors, all the effort and time can go in the drain.
Listed below are the steps towards planning your Business Process Transformation.
- Define Goals and metrics of Success: Set achievable goals with as much specificity as possible. Also, set up metrics, they can help you stay on track and gauge the success of the transformation. These can be in terms of cost, time or any quantifiable metrics.
- Bring in Stakeholders: Get all those involved in the transformation for their feedback on what has worked well and what they can expect out of the new one.
- Break down the process into phases: Having Long-term goals instead of short term goals has a binary outcome; total failure or success. Tracking the success also becomes difficult. Thus breaking the process down into smaller phases makes much more sense.
- Capture details and Analyze the processes: Gather all the information in the areas where transformation is required, then try to find root causes for the issues identified.
- Model and Simulate: Design processes which can be used to solve the older issues identified in the previous step. Simulate or test the alternative processes to see how likely they will work in live situations. This will help in understanding the risks involved and help you formulate your strategies better.
- Phased implementation: Rather than implementing all the changes simultaneously, it would be better to release it in a phased manner. This will again help in keeping it manageable and if something goes wrong, you can correct it on the go.
Challenges in Business Process Transformation
While doing the transformation, there are many challenges which can arise that must be solved in order to meet the goals. Some of them have been listed below.
- Integration Challenges: This challenge can be a significant one. If a correct platform is not chosen, a company may get very limited in terms of usage.
- Missing Key Objectives: Often, a process is automated and digitized without a noticeable effect on efficiency or return on investments. Making sure success is clearly defined can help resolve this challenge.
- Changing Management Practices: No matter how inefficient old processes may be, people tend to resist any change. You need to use good change management principles to bring everyone along while using BPT.
Which companies have successfully transformed their business processes?
Business Process transformation takes time, resource and dedication and includes a high risk. If everything is planned and executed properly, any company can successfully implement BPT.
Here are some examples which have transformed their business processes in the past.
- Orion: At first, they developed a tool to manage their fleet system. This tool helped delivery drivers create optimal routes using past data. This has helped them save more than 100 millions miles or $50 million.
- Spotify: The music streaming service, Spotify, in 2012 decided to change its hierarchical structure. They adopted horizontal structure, which encourages experimentation, efficiency and accountability. People with different skill sets are grouped together to collaborate and deliver a great product, which has helped Spotify beat its competitors.
- Nike: Nike changed its in-store processes to blend digital experience. Now, using the Nike app, customers can scan the clothes, try and buy with minimal efforts.
- Walmart: In 2013, Walmart decided to automate their warehouses and use AI, so they announced digital transformation in partnership with Microsoft Azure.