Business Transformations: Relevance recognized, but potential not exploited

Business transformations are processes in which the way a business unit or an entire company conducts its business is significantly changed. These changes usually include several elements and concern, for example, a company's offering, their processes, necessary competencies or qualifications of employees. These changes are critical to the future success of the business. Primary triggers for such business transformations are technological change, changes in customer needs and intensification of competition, as shown by the Business Transformation Survey 2022 of the Lucerne University of Applied Sciences and Arts. As part of the study, 338 questionnaires were analyzed. The study covers a comparable cross-section of industries in Switzerland and different company sizes. 38 percent of the participants come from companies with more than 1,000 employees, 36 percent from companies with 10 to 249 employees.

Changes happen slowly

The summary of the results shows that Swiss companies consider business transformations to be an important field of activity. The companies surveyed gave the relevance of business transformations for future success an average rating of 5.5 (1=not at all important, 6=very important). However, respondents are not yet satisfied with progress (average satisfaction score of 3.9). "The potential for improvement is particularly clear in the speed of business transformations," says Jan Schlüchter, study author and co-program director of CAS Business Transformation Management at the Lucerne University of Applied Sciences and Arts. Almost 64 percent of all respondents feel that the transformation project is too slow, and for unsuccessful transformations, the figure is even over 88 percent. Decisive differences between successful and unsuccessful business transformations are also made up by the work of management and executives as well as a high level of fault tolerance (see Figure 1).

Three success factors for business transformations

The research team derived ten recommendations for action from the results, three of which are essential. "Leaders have a special role to play in successful business transformations. All leaders, above all the business and divisional management, should be personally and authentically committed to the transformation project," says Jan Schlüchter. The second thing to do before starting a business transformation is to ensure that a positive culture of making mistakes and learning exists in the company or division. Third, speed is the best strategy throughout the transformation, be it in developing, deciding or implementing new business models or strategies. "If in doubt, it is better to set a tighter pace; readjustment is still possible," specifies Schlüchter. As part of the study, the study authors developed detailed recommendations for holistic design and orchestration of transformation processes. "These results strengthen us in our work," says André Riedel, Head of Community of Practice Business Transformation at the Swiss Society for Organization and Development SGO, which supported the study.

Business Transformation Champions: Only one in ten companies is one of them

In the study, participants from the companies assessed various aspects of their own business transformation in addition to a general assessment. From this assessment, the research team determined a Business Transformation Maturity Score (BTMS). This covers the degree of preparation, the actual transformation process and the skills required for this. The results of the study show that only nine percent of the participating companies fall into the group of champions (with a BTMS of 4.8 out of 6 on average and satisfaction with transformation progress of 4.7 out of 6 on average). Forty-seven percent fall into the novice group (with a BTMS of 2.9 on average and a satisfaction average of 3.2). "These results illustrate the potential of such transformations that still needs to be realized, even among the champion group," Schlüchter said (see Figure 2). To be sure, he said, some industries are slightly more advanced (e.g., financial and insurance service providers with a BTMS of about 3.8 versus public administration with a score of about 3.2). "Overall, however, there is still a great need for action in the management of business transformations, and this applies to all sectors of the economy, as the distance between the current maturity scores and the maximum value shows," adds the HSLU expert. This is underscored by the fact that so far only 33 percent of respondents perceive an improvement in their company's market position as a result of the transformation.

Source and further information: Lucerne University