The Dos and Don’ts of Business Transformation
This article appeared originally on SAP.info on October 12, 2012
How does a business like Apple narrowly escape bankruptcy to become the world’s most valuable company, while a market leader like Kodak fails? At the SAP Business Transformation Summit in Budapest, I found out.
As fast as a Budapest cabbie weaves through traffic: that’s the pace of change in the business world today. At the SAP Business Transformation Summit held in Hungary’s capital city on October 11th and 12th, thought leaders from academia and business, as well as SAP customers, met to discuss how companies can keep pace with progress through business transformation.
“There are two reasons to change,” said Lars Gollenia, head of Business Transformation Services, SAP Germany, in his opening address. “One – because there’s so much pressure in the market and from competitors that you have to change. And two – because you want to change in order to avoid that pressure.” Factors like the massive amount of data being created, the number of mobile devices in the world, and the continued growth of social networks, are just some of the trends instigating change in the business today. Many companies are looking for ways to take advantage of these trends, and that, according to Gollenia, is where the digital enterprise comes in.
Why Kodak failed
The digital enterprise, the focus of this year’s Summit, is one that is customer-centric, reacts quickly to markets, has a high speed of transactions and services, and carries out highly automated decision-making. In short, it is a company that transforms to stay competitive in a rapidly-changing market. How does a company become a digital enterprise? Easier said than done. Take Kodak, for example. The camera and film manufacturer dominated the industry for decades. It was even the first company to develop the technology and hold the patent for digital cameras. It should have come out on top when consumers switched from analog to digital picture-taking. But in February 2012, Kodak went bankrupt. That’s because business transformation requires more than just technology.
SAP has a special line of services, Business Transformation Services (BTS), to help customers in its Value Partnership program undergo business transformation. Many of the innovative transformation methodologies come from the international community of academics and business experts who make up the research arm of the organization, the Business Transformation Academy. The yearly Summit brings their latest insights and findings directly to the customer. Experienced customers also present their success stories to their peers.
How Steve Jobs transformed Apple
Transformation is hard. That was the point Tomas Sedlacek, Chief Macroeconomic Strategist at Czechloslavok Bank and author of the book, “Economics of Good and Evil”, was trying to make when he quoted Jean-Claude Juncker, prime minister of Luxembourg and president of the Euro Group: “We all know what to do, but we do not know how to get re-elected after we do it.” The same is basically true for business transformation. The need for change is often quite clear. But some companies aren’t willing to make the necessary sacrifices to act on it – like breaking old habits and moving into unknown territory. Politicians who don’t act, may or may not survive another election. Businesses only have to look at Kodak to see the repercussions of their complacency.
Freddie Geier, former CEO of Apple Germany, offered an alternative. As a member of Steve Jobs’ inner circle, Geier saw first-hand how one person can introduce and see through a business transformation. When Jobs came back to Apple in 1996, the company was near bankruptcy. He made the key decision to transition the company from supplying computers for professional use to focusing more on the consumer sector. Within two years, Apple was profitable once more, and its consumer-focused products set the industry standard today. According to Geier, the company’s success comes down to one man. “Steve had the ability to see around the corner. He had an unparalleled understanding of how people interact – or should interact – with technology.” Of course, not every company can bank on having a single, visionary leader to guide them into the future.
Other companies learn from experience. Like Cisco Systems, which developed a “transformation recipe” based on almost 20 years of adapting to change. “You could describe the history of the company as a series of positively survived transformations,” said Michael von der Horst, managing director of the internet solutions group. From the dot-com crash to expansion in the emerging markets, Cisco has always approached change with a relentless forward-looking approach. “No denial, no nostalgia” is the first step in the transformation recipe. The next six points:
⁃ reduce cost structure to compete
⁃ explain software and services capabilityies
⁃ build go-to-market capabilities
⁃ up skill people
⁃ evolve the culture
von der Horst had one more tip for his peers at the Business Transformation Summit. And it seemed to resonate with its simplicity: change before being changed.
More information on:
SAP Value Partnership Services
SAP Business Transformation Services