The Point: As a Leader, you know the challenges of operating a business firsthand. With a “We can do it!” attitude, you may be operating your business the best that you can. But are you in need of a business transformation? From our experience at Tip of the Spear Ventures, most leaders don’t recognize the early indicators of business transformation (Denial?) and often focus on the wrong problems/initiatives. So, in this post we’ll explore if you/your organization is in need of a business transformation as well as provide strategies and execution tips… Enjoy!
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The Case for Business Transformation
Over the past few years, at Tip of the Spear Ventures we’ve seen a disturbing case for business transformation. Namely, sales growth has been somewhat stalled (1-2% top line revenue growth) and earnings before interest/taxes (EBIT) have increased at relatively the same rates. Worse yet, most strategic planning departments forecast that these figures will change little in the coming months/years. Changes in customer preferences, eCommerce capabilities, and the cloud of continued economic uncertainty places pressure on most business leaders.
There are typically two types of business transformation moments that leaders now face. The first is that of cash flow or generation (Either we don’t have enough cash on hand to fund the operation — production, payroll, etc. — or we’re simply not achieving a high enough level of sales to generate sufficient net profit). The second, and far more difficult for a leader to detect, consists of a set of business transformation issues that may not threaten the business but pose fundamental issues to current business model sustainability.
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How Do You Identify Business Transformation Opportunities?
What does a good real-world business transformation consist of? How can a leader tell whether they’re in need of a business transformation? To answer these questions, we recommend a strategic and tactical approach to business transformation.
Strategically, leaders should be vigilant about their performance in four dimensions of business transformation excellence. These four dimensions are strategy, execution, cash flow and people. A leader’s material underperformance in any one of these dimensions could be very problematic. However, if they don’t have a compelling value proposition that customers will choose them over others, they won’t last.
Tactically, we suggest some criteria for evaluation. At the forefront is year-over-year growth (YOY). If YOY has been negligible or negative for at least 4 consecutive months, and/or is 10% or more below industry peers (competitors), a case for business transformation exists.
How Do You Transform the Business – A Three Stage | Seven Step Approach
The experiences of leaders that have successfully conducted business transformation, either since or during the global financial crisis of 2008 | global pandemic crisis of 2020, have shown that a three stage | seven step approach to business transformation can lead to success.
STAGE #1 – SEE
STEP #1 – ACKNOWLEDGE
We explore disruptions within and outside our clients’ ecosystems. This inspires imagination with new customer requirements, new ways to work, and new forms and value. This process leads to a customer-centric, technology-enabled business model and operational model.
STEP #2 – ARCHITECT
We help you achieve your business transformation goals by creating business models and/or operating models that are both value-creating and strategically sound.
STEP #3 – SELECT
We support the selection of the best business transformation options, program leadership and the best path forward by incorporating leadership alignment, financial readiness, and financial wherewithal.
STAGE #2 – DO
STEP #4 – PILOT
We validate that there is value in building capabilities, service delivery models and organizational structures. We test them against customer/stakeholder expectations, talent/abilities, mindset, organizational fault lines and competitor responses. Finally, we specify the amount of change needed to adopt the new operating system.
STEP #5 – DEFINE
We incorporate lessons learned from pilots and design prototypes to modify business transformation value expectations and business or operating model elements. Then we define the business transformation launch roadmap, integrated change program, and build the business transformation program.
STAGE #3 – DELIVER
STEP #6 – SCALE
We prepare leaders to initiate larger scale change. We also support implementation and program execution of organizational change programs. And we quantified progress on key launch metrics and value outcomes metrics.
STEP #7 – ADAPT
We track the value of the transformation and offer adaptations to business or operating model elements to meet ongoing disruptions, competitor moves, and analytic insights.
Times are indeed tough for retailers. But being in a distressed situation isn’t cause for despair. If retail leaders face the facts early, identify and address the root causes of their financial distress, take costs out quickly, and ensure disciplined execution, they can deliver—and rapidly move beyond—a turnaround.