A Handbook of Business Transformation Management Methodology

Axel Uhl, Lars Alexander Gollenia, Axel Uhl, Lars Alexander Gollenia

• Publisher: Routledge
• Year: 2016
• ISBN:
  9781317170433
• Edition: 1
• Topic: Business
• Subtopic: Strategia di business
• Index: Business

This book provides an integrative Business Transformation Management Methodology, the BTM², with an emphasis on the balance between the rational aspects of transformation and the often underestimated emotional readiness of employees to absorb and accept transformation initiatives.

Comprising four phases - Envision, Engage, Transform, and Optimize - the methodology integrates expertise from areas such as strategy, risk, and project management. Covering the formal and informal structures and roles needed for a successful transformation, the authors cover a wide range of theory to help understand the phenomenon of transformation.

A '360-degree' view on what business transformation means and how to manage it successfully, this handbook is suitable for business executives dealing with organizational change. A range of illustrative case studies ensure this is also a valuable resource for academics interested in change and transformation management.

CHAPTER 1
Introduction

AXEL UHL (SAP AG)

1.1 Overview

The ability to manage business transformation is vital for companies to stay competitive. Business transformation implies fundamental and complex organizational changes, not only within companies but also across the entire value chain. This can also radically change the relationship between a company and its wider economic and social environment. Typical examples of business transformations are outsourcing business processes, business model changes, mergers and acquisitions, or cross-functional and (inter- or intra-) organizational restructuring actions (Uhl and Pimmer, 2011).

Sustainable and successful companies react quickly to changing business environments and provide innovation in terms of client offerings and organizational structures. Furthermore, the ability to predict future demands and trends, or even to create new markets, relies on the capability to execute and implement a business transformation.

Only a minority of companies managed to transform themselves successfully. Various problems occur during the transformation process, including lack of top-level management support, poor implementation and execution of the transformation process, lack of skills and competences, resistance against changes, or conflicts of interests.

The transformation process is complex and time-consuming, and is influenced not only by all major core disciplines of an organization but also by its environment, such as customers, competitors, government and regulators, as well as investors. In other words, transformation always occurs within an entire ecosystem. In order to execute a successful transformation process, the management of a meta-routine is crucial.

BTM2 provides a holistic and integrative perspective on the organization and the entire complexity of its ecosystem. It does not reinvent the individual management disciplines but rather provides a framework that integrates individual ones. The basis of the framework are the Meta Management disciplines, which provide the foundations for the success of other management disciplines including Strategy Management, Value Management, Process Management, Risk Management, Transformational IT Management, Competence and Training Management, and Program Management. Each individual discipline is well developed, including a large body of knowledge supporting them, and targets a specific group of professional people. Although, each group is very valuable for the organization, there exists a strong tendency for separation and a lack of integration between different departments. Many sources refer to this fragmentation of the organization as a major reason for failure during the transformation process and for the increased risk of resistance.

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BTM2 MOTIVATION:

1. Lack of a holistic, integrative, and scientifically proven business transformation management methodology (Lahrmann et al., 2011).

2. Low success rate of business transformation projects (less than 40 percent) (Isern et al., 2009).

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This book presents BTM2 as a new approach to business transformation management and provides a holistic and integrative methodology to address the difficulties in all kinds of transformation projects. Under the leadership of the Business Transformation Academy (BTA), an interdisciplinary team comprising 30 thought leaders from psychology, information technology, strategic management, process management and social sciences joined together to create a “360-degree” view of what business transformation means and how business transformation can be successfully executed by organizations. In general, one expert from SAP AG and one expert from SAP customers, as well as an academic expert, collaborated in each chapter.

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OBJECTIVES OF THE BTM2 HANDBOOK:

1. Provide guidance in planning and executing business transformation projects.

2. Provide a holistic, integrative, and generic approach.

3. Address different types of transformation projects.

4. Combine knowledge of all related organizational disciplines.

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In contrast to existing literature, methodologies and procedures, the three distinctive areas of this book are:

1. Providing a comprehensible, adaptable, holistic and integrative approach to business transformation. Although it is commonly agreed that transformation is of strategic relevance, a conceptually robust and practical method to achieve this was missing. BTM2 provides such a holistic and integrative methodology.

2. Emphasizing the balance between rational and emotional aspects of transformation. Many sources refer to business transformation as a technocratic exercise, where the success depends on an accurate diagnosis of need and an appropriate selection of communication means. Failure is justified by poor requirements analysis or insufficient communication. However, the emotional readiness of employees to absorb and accept transformation initiatives cannot be underestimated. This handbook specifically considers the rational and emotional aspects of business transformation.

3. Providing an execution guide. This handbook discusses a wide range of theory and practice to understand the phenomenon of business transformation. However, it is primarily a practical work. Often, managers in business transformation contexts know what to do, and yet they fail to execute. This phenomenon is an enduring feature of organizational life; in this book, highlighting how to close the knowing-doing gap is a major priority.

Within this handbook, we provide new content on key elements of business transformation management and new insights from case studies of recent business transformations, both successful and unsuccessful, which were used to develop and test the methodology. The book is intended for a wide audience: reflective managers, consultants, C-level executives and academics – indeed, everybody who is involved in business transformation.

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BTM2 VALUE PROPOSITION:

1. First integrative and holistic business transformation management methodology.

2. Provides a framework with clear phases, deliverables and corresponding methods.

3. Validated through leading universities and business schools.

4. Intensive research and case studies.

5. “Think tanks” for focus topics.

6. Provides best practice templates and accelerators.

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1.2 Background on Business Transformation Management

Transformation is a common procedure for most, if not all, organizations. On the one hand, exogenous changes such as sustainability, technological innovations, globalization, economic conditions and the changing nature of the workforce have a profound impact on the way organizations execute business (Arthurs and Busenitz, 2006; Eisenhardt and Sull, 2001). On the other hand, endogenous changes such as product innovation, restructuring and new business model adoption also potentially result in large-scale transformation and consequently a disruption in the workplace (Donaldson, 1987; Eisenhardt and Bourgeois, 1988). Organizations require an excellent transformation process in order to sustain competitive advantage.

There exists a great body of literature designed to guide managers and their companies through the change process, and certainly there is an enormous amount of material, both in academic and practitioner literature, which provides solid prescriptions as to how transformations are executed and delivered (see, for example, Bogner and Barr, 2000; D’Aveni, 1994). From the practical point of view, awareness and understanding of the key concepts are well established, but the integration of these concepts and their execution within transformation programs is less well understood. From an academic point of view, theoretical work on transformation has coalesced around a series of frameworks that provide a reassuring abstraction but are largely silent on the practicalities of linking elements in a coherent and effective manner, particularly when this entails dealing with the complexity involved in most transformations.

Yet, despite the plethora of books, cases and how-to manuals, the transformation process remains a body of failure. One reason for failure in the transformation process is that it addresses the future. Therefore, transformation represents an experiment, which, due to different exigencies or unintended consequences, often turns out in different ways than originally anticipated. In addition, transformation always involves people, and so the issues of personality, attitude, capability to change and political behavior emerge, which are, by their nature, very difficult to predict and control. Considering the overall impact, the management of business transformation plays a critical role.

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Business transformation management is the holistic management of extensive, complex changes on which the organization’s future success strongly depends (FHNW, 2012).

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Each transformation process is fragmented, consisting of various elements. However, the connections between these elements are either not developed or articulated, or they become fuzzy as the business transformation progresses, particularly to the people who are on the receiving end (Davenport, 1993; Galbraith, 1982). The problem of unconnected elements results from the assumption that change is linear and a unitary process or routine. Business transformation is not a unitary routine but a meta-routine, representing a set of routines which must be joined together in order to function properly (Feldman and Pentland, 2003). This is rooted in the idea of dynamic capabilities, the set of practices and processes that are required for the organization to recombine and revitalize itself (Teece, 2007; Helfat et al., 2007; Teece et al., 1997). As such, we clearly differentiate between traditional change management efforts and the management of business transformations. Change management focuses on behavioral changes and only considers a small set of clearly defined goals, whereas business transformation management provides a holistic view of the entire organization, considering complex changes to the business.

Nevertheless, the fundamentals of both are based on the same principles (Doz and Thanheiser, 1993). These have been developed over a long period of time and represent a solid conceptual and general knowledge of the entire change process. An important concept with respect to change management is called step models (Jick and Peiperl, 2002). These models identify a number of core activities and recommend an optimal execution route in order to maximize the success of the change process. The core of these models is a classic formulation of three phases: current state, future state and transition state, usually supported by a gap and force-field analysis (Kotter, 1990; Lewin, 1972). Step models are discussed in numerous change management literature and set the path for consultancy interventions in change management. An essential characteristic of the models is a combination of rational elements – for example, diagnosing need, shaping the vision and monitoring progress – and emotional elements – for example, mobilizing commitment, engaging with the vision, and building affinity and identity with the change.

Step models produced a wide variety of course books for managing change, concerning leadership, culture, influencing staff, and embedding change and maintaining momentum.

However, there are two major issues raised by the usage of step models. First, they imply a linear approach to change management, with each step leading to the next. Feedback loops are included generally, in the models, but essentially these are mechanistic approaches to change. Second, there is very little in the models to show the nature of the linkage between each step, so although each individual element of the model is outlined, how the overall change process is handled is less clear. This is problematic, both theoretically and practically. In theoretical terms, how change is managed as a collection of routines remains a missing piece in our understanding with step models, and though there have been calls to approach change from a holistic point of view, such calls have not been taken up in this tradition. In practical terms, how transformation is enacted not just in a piecemeal way but in an additive, synchronized manner has little by way of precedent in the extant literature.

For a meta-routine such as business transformation, the coordination between separate management disciplines is essential. It is vital to address the identified issues if business transformation management is to be effective. The first is that business transformation is a multilevel phenomenon. Behavior at the individual level will affect both group and organizational outcomes in terms of change. Similarly, change imposed from the top of the organization will have direct and indirect effects with levels lower down. Given the complexity of organizations, the interactions between levels will be complex and often non-linear.

1.3 Distinction to Other Frameworks and Methodologies

There are a number of approaches which do seek to take a holistic view; however, the existing approaches do not consider the key requirements to business transformation. In this section, we outline the differences and advantages of BTM2 in comparison to traditional frameworks and methodologies.

ENTERPRISE ARCHITECTURE

Enterprise Architecture (EA) describes an approach to manage the rational efforts such as blueprint development or implementation with the aim to deliver a solution of the highest quality to the customer’s satisfaction. It is an IT-driven framework and focuses on describing the architecture of an enterprise in order to improve the effectiven...