Digital Transformation appears to be on everyone’s agenda, however, as we will demonstrate: most transformations are actually change-initiatives.
What’s the difference between Change and Transformation?
Change fixes the past. Transformation creates the future. Transformation always involves change but not all change is transformational. ~Rob Llewellyn, CXO Transform.
CHANGE – WChange is about doing the same thing differently ─ often by replacing something (a typewriter by a wordprocessor).
If you’ve decide to adopt a new CRM system, hoping to fix or improve the way customer data is stored and retrieved, you do so without changing the (customer creation) process itself. You may stil improve productivity, performance, and profitability, however, these initiatives are not transformational.
Change starts with an assessment of the current situation. This allows you to determine how you can make things better, faster, cheaper, or more robust than before. Success is gauged by efficiencies and economies that are realized at the end of the Change-initiative ─ benchmarked against the situation before the change.
TRANSFORM – Transformation, on the other hand, starts with a vision of the future and how to create it. Transformation also takes into account how things are done today but only to understand how to get from where we are to where we want to be.
An example of a successful transformation-initiative is when Netflix decided to redesign its video delivery processes ─ from a mailorder service to a streaming media service. It took a lot of resilience to make such a bold move (the stock dived 80%) but it literrally changed the future. Blockbuster, a robust competitor, lacked the resilience to follow and went bankrupt.
How does this relate to robustness and resilience?
ROBUSTNESS – Robustness, and Change go hand-in-hand. Both aim to fix or improve the present, making the operation more profitable and more resistant to disruption. However, robustness is not a long term strategy ─ eventually, your defenses will give way.
A company needed to expand its assortment with product B, as requested by customers. However, their systems were optimized for product A. It took a lot of time and effort to keep product and customer data for the two products distinct. As a consequence, productivity took a hit, but customers were happy with the option to buy both products. Further expansion of the assortment, given the limitations of the system and the manpower needed to devise a work-a-round, would not be feasable.
RESILIENCE – Resilience, on the other hand, relates to Transformation. Resilience means that you focus on investments that provide you with an ability to create the future. The above example of Netflix wasn’t simply a defense against Blockbuster competition: the company took a leap of faith, created a vision of a future, and followed through, discontinuing the revenue stream of Blockbuster.
Three Levels to Consider
We perceive three levels of responsiveness:
- Service Model – Doing the same thing better, faster, cheaper – from a customer viewpoint. This is what we refer to as Change (reactive) or Innovation (proactive): Start selling online.
- Operating Model – Changing core aspects of the operating line: Netflix’s transformation from a DVD mail-orders supplier to streaming media supplier.
- Business Model ─ Changing the business model: Amazon’s shift from an e-commerce giant (Network-Centric) to a traditional retailer (Product-Centric, Whole Foods).
What are our options?
The Business Model Compass™ is our interpretation of the choices a company has to face disruption, as well as what it could do if revenue streams are undisrupted: