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Delivering outcome based Business Transformation
 

Delivering outcome based Business Transformation

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In this paper we present an empirical framework of business transformation based on our experience of implementing business changes across several organization. The paper covers the PSPD Framework, ...

In this paper we present an empirical framework of business transformation based on our experience of implementing business changes across several organization. The paper covers the PSPD Framework, drivers of integration framework used and some DOs and Don'ts of Organizational Transformation.

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    Delivering outcome based Business Transformation Delivering outcome based Business Transformation Document Transcript

    • Delivering outcome based Business Transformation ...insights from trenches Usha V, Asst Consultant, Strategy & Finance Group
    • IntroductionA Much often quoted example is that of an Eagle which has When companies realize they need to mend their waysto undergo a painful process of rebirth where it has to of collecting, processing and reacting to the enquiries,remove and regrow its Beak, Feathers and Talons. While the transformation agenda unfolds. The majorornithologists may not agree with this, many management objectives of transformation are: a)To attain increasedbooks and CEO use this as a great example of change. But ownership amongst stake-holders, b) Efficient process,for Organizations, this will hold true anytime where they c) Increased Organizational responsiveness, d) Goalhave to let go of the current state and reinvent and redefine congruency across the organization (innovation,themselves in terms of increased Productivity, Better Sales, revenue generation) and e) exit unprofitable/non-Efficient Functioning for which they’ll have to undergo growth business and enshrine high growth business.Multiple, non-standardized set of Changes and be bull-headed against resistance at various stages of the process Increased focus on ownership is to bring back thetill it reaches the desired goal. Changes are a necessity when entrepreneurial zeal into the organization. Employeesefficiencies are low, outcomes paring below expectations not only feel the need to adhere to do what is beingand growth is alluding. told, but think of novel approaches to engage customers, acquire newer skills, develop new teams,Why does this happen?. Why and how do companies reach etc. Efficiency of process, structures is to create lean,this deplorable stage?. The reasons could be many. In the mean and efficient system. Elimination of unwantedfounding years, engagement with the customer is direct, and layers of administration, redundant processes andsenior management is actively involved in several touch ineffective administrative mechanism leads topoints. As the organization grows, an essence of formalization efficiency.sets in, layers of management get added. Visibility ofprocesses, operational insights often tend to get filtered and Organizational responsiveness, both internally andmorphed. externally, has to move from being complacent and reactive to proactive. Increased responsiveness aids inOver period companies commit several blunders including: uncovering the latent demand much before the 1) Many business lines added without considerations of competition wakes up to it, create and position newer economies of scale or economies of scope. services that delight customers and help the company 2) Diffused ownership of business and process leading play the price advantage regime. to ineffective sense and response to opportunities. Complete alignment between the different groups, 3) Redundant and ineffective layers of management, functions and at all levels of organization is required to adding to cost woes and dragging profits. achieve goals, be it of innovation or revenue 4) Mushrooming of Unproductive and commoditized maximization. Groups at loggerheads of performances services/products with no margin growth. or activities run the risk of sending mixed signals to the 5) Jaded and repetitive sales and marketing approaches markets and affecting the revenue flows. Finally, with no clear focus on acquisition and account transformation is also the process of shedding less management. productive business areas or products and replacing 6) Ineffective Performance systems and incentives. them with higher value adding activities. 7) Lack of clear and objective communications both internally and externally
    • There are several models of change management or In our approach we start by identifying the symptoms,transformation in literature. Nadler and Tushman (1989) classify Key areas to target in short term that wouldtransformation framework of Scope-Means-Ends, or Lewin fundamentally alter the business model of the company,(1947) 3-step process or Senge et al., (1999) systematic model focus only on few key aspects of the changes first, allowor Kotter (1996) eight step approach or many other iteration and localized experimentation and increase theapproaches. Our experience of guiding and managing scope with smaller wins at different intervals so that overallbusiness transformation at companies like Progressive motivation for transformation exists all through the life-Infotech, Super Seva or Source Edge indicates no one single cycle.framework aid in completely designing and managing theprocess and means of business transformation. We worked Data and analyses stage consists of collecting data fromwith the frameworks from literature and combined them with multiple sources, in both subjective and objective form, andthe valuable insights of clients and our own judgments to across different functions. Typical financial data we analyzearrive at workable solutions. are Return on assets, Return on equity, Operating Profit margin, Operating Performance and Financial leverage. WeThe business transformation process consists of four stages as also evaluate the changes that can be made in operatingshown in Figure 1. In the first stage, similar to physician performance, financing, or to increase the incomeanalysis framework the emphasis is on collecting the right generating capacity of the business, fundamentally Cost-data to diagnose the current state of the organization. Based Volume-Profit Relationship.on this insight appropriate solutions are configured withparticipation deliberations of key actors at all levels. Process, On the sales side, we capture sales volume, domestic Vsstructures and measures are rolled out and improved further international revenues, their growth in last 3 yrs, no of newbased on implementation feedback. The outcomes are customers acquired in each quarter/year, Marginsmeasured, newer interventions are planned and achieved , Number of sales Partners, Predictable Sales,transformation is extended to cover higher horizons and Country Spread, Market Share by Segment, Sales throughlarger scope. Channels, etc . Data about customers such as Customer Satisfaction, Percent of Repeat business, % of revenue byFigure 1: Stages of business transformation the biggest customers, etc is analyzed. On the HR side, attrition levels, FTE VS PTE, Innovations and awards, etc is captured. To create and configure appropriate solutions, we interpret the data and juxtapose the analysis on two well-known frameworks. First one is the Nadler and Tushman (1989) transformation framework to extrapolate what changes could be brought out in Scope (Enterprise, functional or activity level) – Means (Task, Technology, etc)-Ends (cost, perception, offerings). Second, is the PSPD framework evolved by several companies to manage their sales processThis framework is consistent with Senge et al., (1999) initially, but could be applied to overall businesssystematic model approach of “start small, change steadily, transformation.do not plan for all events and manage challenges as theyunfold”. Let’s enumerate the PSPD framework in detail. P stands for profitability, S for sustainability, P for predictability and D refers to de-risk. Profitability captures the margins, average, high and low, projects and business with low margins and those with higher margins, profitability loss in case of rework, higher discounts to dealers or resellers, etc. Sustainability refers to the ability to service particular segments of business, required investments to keep the relationship going, commoditization and product platforms to choose, etc. Predictability refers to the Qtr on Qtr
    • De-risking refers to mitigation across product segments, Fig 3: Redesigning features for Organizationalcustomer groups, regional markets, market segments transformation(enterprise Vs SMB), etc. First grand solutions that could alterthe very business model of the company, in terms of what Consolidation Re-Align the teams, their work,new products/service, what economic value would be train them accordingly, Re-added/deleted, how revenue would be generated, how many define their roles, Goals,revenue streams and what options for revenue capture, Expectations, Deadlines,delivery and engagement models are enumerated. The Reformations in Salessolutions are evaluated from PSPD and Nadler and Tushman Practices, Sales Script, Up-(1989) frameworks. selling of their products and Services Figure 2: PSPD Framework Elimination Non-Performers, Make Profitability Sustainability Relevant changes in the Org Structure, Redundancy, incomplete processes, Under- EBITA, number of revenue Fixed and variable Utilization of resources. sources, profitability by investments to manage a Outsourcing The Focus should lie on the product line and product business volume, fixed costs activities that give the segments, revenue losses, up of servicing an account company its revenues. Outsource activities like sell and Cross sell of Payroll, Recruitment, Supply products and services, Chain Management, Training, closure of non-profitable auditing, entire accounting function, Tax Management and business, etc. Invoicing, Marketing Communications. Predictability De-risking Creation New relevant positions, Align Practice and Sales Divisions to Robustness of business and Customers, products, diminish the communication gap, Enter new products and economic market, partner revenue markets/Geographies, Re-look cycles, complementary contributions and how to and broaden the scope of business (shoulder & peak), spread them wide Target Customers, Clients, Business Partners, Re-work on sales funnel growth, funnel the Sales Funnel, Maintain a robustness, closure amicable relationship with the management, partner Account Managers of the company with whom the maturity and closures, etc Partnership is built.Initially several solutions are generated and grand solutions Solutions are discussed and vetoed by the transformationare brainstormed using either Delphi or any other system committee and the implementation committee consistingdynamics approach. Teams consisting of both client and of members across functions and at different levels withinconsultant representative are explicitly probed to seek out organizations draw their implementation plans, seekopportunity for efficiency by adopting any of the following investments and other approvals and own roll outs. Processstrategies: consolidation, elimination, outsourcing and changes, and associated measurement tools are trackedcreation. and discussed both at implementation committee level and strategic transformation group level.
    • In our experiences, many finer changes to sales structures, Our business transformation experience has taught us fewpartners and marketing happen in the first few weeks do’s and don’ts which are presented below.corroborating Senge et al., (1999) approach. Do’s Short term:  Create process, product and change owners at all levels - Holding weekly and monthly reviews with the Sales  Top management team has to consistently create the Team, Practice heads, Finance Manager, HR sense of urgency (see Kotter 1996) Manager in the presence of the CEO, CTO.  Keep challenging the assumptions and nay say, ask - Conduct quarterly review of sales Updates, Status of for data the Projects, Marketing activities, etc  Top management must set all teams to “smaller - Remove resource/ practices and hire new resource wins” all across the life-cycle of transformation or start working on new practices  Top Management must trade loyalty-capability right upfront and create a health atmosphere where long- - Eliminate confusions by helping in transparent term loyal, not so well endowed employees continue communication. to blossom in new roles  Communicate the changes to the employees and let Medium term: it percolate to various levels. - Half-Yearly review of sales, customer conversions,  Hold weekly reviews with the practice heads, the sales heads, back-end sales in the presence of the attrition rates, number of new business partners CEO and other decision makers. added etc  Know the status of the Ongoing projects, any Lag in - Guide them by suggesting the new technologies to the delivery time, If the sales are happening, the adopt, business opportunities to look into, and new messages or signals from the Market, customers, markets to tap. Partners. - Enable each of them to become owners of change.  Improvisation is a continuous process and sometimes - Help them Imbibe a sense of urgency and a sense of it is necessary to tweak certain areas after the responsiveness to the environment. implementation has been done.  A need to re-look at the activities from a customers’ perspective and state what the customer would like Long term: to hear and re-define the solutions in a way that - Help them to think futuristically and try to bring in a would address the customers’pain areas. picture of the trends in the market one or two years from now and the kind of technology that will be Some don’ts used and the customers’ demands in future. - Annual review of business performance, product  Do not attempt transformation if the company do and services expansion, business growth, new not want to walk the talk verticals and geographies entered, etc are  Some resources may have be let go, including people. measured. Over period, the scope of the No knee jerk reaction strategies transformation is increased from product groups,  Overanalyze and under act, emphasize on change in quality of actions enterprise to group company level or holding  Never thwart innovation and initiative while company level to complete the transformation transforming process.  While transforming and adding newer business, do not neglect the Business as usual, sustain them
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