What is Business Transformation?
Business transformation is the process of restructuring an organization’s business model to unlock new value and drive growth. Every organization has to evolve as technology advances, markets shift, and customer preferences change. Business transformation restructures an organization's technology, operations, and customer experiences at enterprise scale to better meet changing requirements. It radically reinvents how work gets done within the organization.
What drives business transformation?
A company's leadership may initiate business transformations for several reasons. They may react to external forces, such as the entry of new competitors into the market, changes in customer behavior, or advancements in industry technology. They might also react to broader economic conditions, such as major changes in the supply chain.
However, regardless of the reason, all companies undertaking a business transformation do so with the hope of becoming more agile and better prepared to compete in the future.
Here are the most common drivers of business transformation:
Technological changes
The emergence of new digital technologies on the market is a disruptive force that often prompts businesses to reassess the processes, skill sets, and technological systems they want in place. Cloud computing and generative artificial intelligence (GAI) are two notable recent examples of digital technologies that triggered sudden, widespread changes in how businesses operate.
Structural changes
Shifts within an organization occur during events such as mergers, acquisitions, leadership changes, or the holding of an Initial Public Offering (IPO). They may require adjustments to corporate culture or operations to remain competitive in response to market trends, triggering business transformation.
Regulatory changes
Changes in laws and regulations are another common external force impacting corporate operations. For example, new industry rules, tax policies, environmental standards, trade restrictions, or new labor laws.
Shifting business goals
Companies often change their goals in response to shifting customer expectations or social changes. For example, environmental sustainability commitments, such as net-zero pledges, often require significant changes in material sourcing, energy use, and broader business operations. DEI initiatives have also recently driven organizations to make changes in hiring, culture, and leadership development.
What are the benefits of business transformation?
An organization may implement business transformation when its leadership recognizes the need to become more adaptable to internal and external changes. They may have several objectives, including improved performance, increased customer satisfaction, or sustainable long-term growth.
The main advantages of business and digital transformation journeys include:
Improved operating efficiency
In a business transformation, companies often first look to new tools, business practices, and updated workflows to streamline operations. Business transformation optimizes resource allocation, reduces waste, or lowers costs.
Stronger customer experience
A company conducting a digital business transformation may also want to meet customer expectations better. They may be looking to utilize new workflows and customer-facing technology to provide more personalized experiences and reduce service time.
Business agility
Emerging technologies continually increase the speed of business, and many companies seek greater agility from modern business transformation, or an increased ability to respond to future changes effectively. In a sense, this could be a business transformation that enables better and more frequent transformations in the future.
More innovation and business growth
A company can undertake a business transformation to encourage greater creativity and experimentation. It may be beneficial to give employees the freedom to try new ideas and explore new revenue streams that will help the company grow.
What are the different types of business transformation?
The three primary areas you can transform in a business are its use of technology, its organizational structure, and its company culture.
Digital transformation
Digital transformations look to modernize the technology an organization uses, typically by moving from legacy, on-premises services to cloud-based ones. Many companies find success by approaching digital transformation as a two-phase process:
IT modernization
In this phase, business transformation focuses on updating legacy infrastructure and associated business processes as part of a digital transformation. Your focus in this stage is helping your organization reduce costs and improve scalability.
Application modernization
Application modernization typically follows an IT modernization phase. Here, organizations use their new cloud-native services to build smarter, more flexible applications.
Organizational transformation
An organizational transformation involves reshaping how you structure your company, how teams collaborate, and how decisions are made. The goal of this type of transformation is to create a workforce that is more responsive to change.
Common changes can include:
- Restructuring departments or direct reporting lines
- Adopting new business models, such as hybrid working
- Updating roles and responsibilities
- Implementing a talent development program
Cultural transformation
A cultural transformation focuses on changing the underlying values and behaviors of your workforce. Creating this kind of structured change is important when an organization wants to align its operations with new transformation strategies, such as environmental sustainability or diversity, equity, and inclusion (DEI).
For instance, a financial services firm looking to gain an edge through cultural change may launch initiatives to shift from a risk-averse culture to one that encourages experimentation and risk-taking.
What makes different types of business transformation successful?
Business transformation projects are often complex and require organizations to align many different resources. While many factors can contribute to the success or failure of a business transformation process, five common key factors are:
- Leadership
- Employees
- Vendors and third parties
- Data and analytics
- IT infrastructure
Leadership
Business transformation is often a top-down process that begins with executive leadership. They need to make strategic decisions about which resources need to be changed or replaced. They must also communicate the organization's plans to employees and other stakeholders to keep them aligned.
Beyond setting direction, your leadership should also model the behaviors they expect from the rest of the organization during and after a digital transformation. That could include:
- Being open to change
- Encouraging experimentation
- Supporting teams through uncertainty.
Successful digital transformation requires ongoing commitment from your entire organization, starting with strong leadership.
Employees
Employees can play a vital role in shaping and implementing a digital transformation strategy. Advocates of change in your workforce can help keep teams working together towards the transformation initiative. Try to involve key employees who are well-suited to be advocates early in the process. Make them early adopters of new technology or processes you want to test out.
Vendors and third parties
It can be difficult for change to emerge entirely from within, which is why it is also essential to involve key vendors and third-party agencies in an organization's digital transformation. For example, supply chain vendors, cloud service providers, and other partners. Communicate regularly with them to keep them aligned with your transformation initiative.
Data and analytics
A digital transformation should start with understanding your existing data analytics capabilities. Companies well-equipped with analytics tools can act more quickly and respond to challenges in a transformation process with greater precision.
Your analytics capabilities are determined by the quality of your structured and unstructured data sources in conjunction with how you manage your applications. It is worth considering that cloud-native architecture enhances operational efficiency and provides easier support for modern DevOps business models.
The quality of your data governance also impacts analytics capabilities. Strong data governance can support more consistent and secure service deployments across various environments. You are more likely to maintain infrastructure that meets high standards for privacy and regulatory compliance.
IT infrastructure
The last factor important in business process transformation is your available IT infrastructure. Unifying management across all of your platforms can simplify digital transformation processes. Consider your needs for managing on-premises, cloud, and hybrid resources.
Application Programming Interfaces (APIs) are a standard tool for connecting these disparate systems. They allow your internal systems to link with external partners and services. You will want reliable visibility into all connected development, production, and partner systems.
How can AWS support your business transformation?
Adopting the AWS Cloud can provide your business with sustainable technical advantages. Supplementing your team with specialized skills and experience can help you achieve business transformation results faster and at scale.
The AWS Professional Services organization is a global team of experts that can help you realize your desired business outcomes when using the AWS Cloud. They work together with your team and your chosen member of the AWS Partner Network (APN) to execute your enterprise cloud computing initiatives.
Migrate and Modernize on AWS provides a comprehensive suite of migration tools, guidance, services, and programs to help customers modernize their applications and data throughout their business transformation journey. For example,
- AWS Optimization and Licensing Assessment (AWS OLA) helps you discover the best cloud migration and cost reduction paths.
- AWS Application Migration Service simplifies, expedites, and reduces the cost of migrating and modernizing applications.
- Experience-based Acceleration (EBA) allows you to accelerate your cloud journey with hands-on, agile, and immersive engagements that support outcome-focused transformations.
Get started with business transformation on AWS by creating a free account today.