A framework for understanding the nature of enterprise transformation is shown below – it also appears on the cover of Enterprise Transformation: Understanding and Enabling Fundamental Change (Wiley, 2006). The goal or ends pursued via transformation tends to significantly differentiate initiatives. The approach or means adopted for transformation pursuits relates to both the goals pursued and the nature and competencies of the enterprise. The ends and means, as well as extent of integration of the enterprise, influence the scope of transformation.
The ends of transformation can range from greater cost efficiencies, to enhanced market perceptions, to new product and service offerings, to fundamental changes of markets. The means can range from upgrading people’s skills, to redesigning business practices, to significant infusions of technology, to fundamental changes of strategy. The scope of transformation can range from work activities, to business functions, to overall organizations, to the enterprise as a whole.
I have found this framework to provide a useful categorization of a broad range of case studies of enterprise transformation. Considering transformation of markets, Amazon leveraged IT to redefine book buying, while Wal-Mart leveraged IT to redefine the retail industry. Illustrations of transformation of offerings include CNN redefining news delivery, Motorola moving from battery eliminators to radios to cell phones, UPS transforming from solely package delivery to being a provider of integrated supply chain management services, and IBM moving from an emphasis on selling computer products to providing integrated technology services. Examples of transformation of perceptions include Dell repositioning computer buying and Starbucks repositioning coffee buying. The many instances of transforming business operations include Lockheed Martin merging three aircraft companies and Newell resuscitating numerous home products companies.
The costs and risks of transformation increase as the endeavor moves farther from the center. Initiatives focused on the center (in green) will typically involve well-known and mature methods and tools from industrial engineering and operations management. In contrast, initiatives towards the perimeter (in red) will often require substantial changes of products, services, channels, etc., as well as associated large investments.
It is important to note that successful transformations in the outer band of this framework are likely to require significant investments in the inner bands also. In general, any level of transformation requires consideration of all subordinate levels. Thus, for example, successfully changing the market’s perceptions of an enterprise’s offerings is likely to also require enhanced operational excellence to underpin the new image being sought. As another illustration, significant changes of strategies often require new processes for decision making, e.g., for R&D investments.