Business Transformation Best Practices Explained

Robert Amberg:

This is Strategy that Works, where we discuss practical solutions to companies’ most complex challenges. I’m your host, Robert Amberg, chief marketing officer at Jabian Consulting. Let’s dive in.

Hey everyone, welcome to the podcast. Today, we’re talking about business transformation, which on the surface can sound like an overwhelming effort, but it doesn’t have to mean worldwide scale change. To help us understand it better, we’re speaking today with Gokhan Guley, a director in Jabian Consulting’s Charlotte office. Gokhan, welcome to the podcast. Thanks for being here.

Gokhan Guley:

Thanks for having me.

Robert Amberg:

You bet. So let’s dive right in, let’s start with the basics here. What do we mean when we say business transformation?

Gokhan Guley:

Well, that’s a great question. So business transformation, if we look at the dictionary, it’s about changing form, function, and nature. So transformation’s about fundamental change. It’s not about incremental improvement, it is really getting your business on a totally different track, running it differently. So kind of from one way of looking at it, it is a big thing.

Robert Amberg:

Big stuff.

Gokhan Guley:

It is big stuff, yeah.

Robert Amberg:

Okay. And what kind of companies generally look at transformation?

Gokhan Guley:

I’m not sure if there’s a kind of company that’s not looking at it. So when we look at the research over last five years, 85% of companies have undergone some kind of transformation, and 52% of them are going through transformation at any given time. So everybody’s talking about it, thinking about it, and doing it. So from that end, I don’t think there’s a kind of company that needs to, but there are circumstances that actually rise that leads companies to think deeply around transformation.

Robert Amberg:

Like what?

Gokhan Guley:

Like … technology ones, for one. At least over the last 10 years, when we look at how technology has moved, that has created so many pressures on companies to change the way they do business. One of the things that we follow is kind of, if you are familiar the hype cycle?

Robert Amberg:

Right.

Gokhan Guley:

That Gartner runs, they’ve been running it since 1980s. They used to run one a year. These days, they publish 80 a year.

Robert Amberg:

80 a year?

Gokhan Guley:

80. 80 hype cycles per industry per business area. They-

Robert Amberg:

From one to 80.

Gokhan Guley:

Exactly. And what that is, is they’re tracking technologies that are coming down the pike, and kind of the life cycle. Or they track these over five life cycles, something becomes available, people start thinking about it, and then talking about it, then there’s so much hype, it’s going to be the greatest thing since sliced bread, and then all of a sudden they disappear from the everyday talk, right? And then all of a sudden, years later, they show up at our doorstep as part of a product. So that’s kind of the hype cycle. Now, what we did is we looked back in 2010. What was going on, right? 3D printing was at the top of hype cycle.

Robert Amberg:

Right, 3D printing, sure.

Gokhan Guley:

3D printing was. 4G wireless was there, and a few other things that … cloud computing was there. And nine years later, eight years later, they’re looking at it right now. 3D printing, we don’t hear about it too much, but it’s everywhere. Companies are using it, it has changed industries. One of the examples that we found is the hearing aid industry, right? About 2012, 98% of all manufacturing moved from manual manufacturing to 3D printing over a 12 month period. So that’s a huge change that 3D printing kind of over a few years impact a whole entire industry. If you didn’t switch, transform over just a year, you went out of business.

So that kind of change is coming a lot more often, and a lot deeper impacting with great impact on companies’ effectiveness and operations. So transformation is a lot of factors coming into play, technology being one of them. We know a lot more about human psychology, right? We’ve done a lot more work on processes over the last 30 years. So all those things kind of are coming together to really create a lot of pressures for companies to do things differently.

Robert Amberg:

So it’s a competitive advantage.

Gokhan Guley:

It is a competitive advantage, and the way we look at it is actually being able to continually transform is becoming the competitive advantage, because things are coming in waves. I said 4G wireless was the up and coming thing in 2010. Now we’re talking about 5G. My phone is showing 5G today, I’m not sure if it’s really doing it, but we’ve moved on. So 4G became, in eight years, became expected. Likewise, these days we are looking at 2018 hype cycle. There’s the IOT is there, there’s blockchain. There are a lot of technologies that are being talked about a lot these days. I bet we are going to stop hearing about them, and then they are going to start becoming just expected features of operations in next few years. So why now? That’s the kind of … because a lot of things are coming together. We are at such a place in our maturity of the business, a lot of things are coming together to create a huge need for companies to look at. And one of the thoughts is if you’re not disrupting yourself, somebody will come and disrupt you tomorrow, so you need to always think about this thing. So it’s a very exciting area. It is a lot of stuff going on, so very passionate.

Robert Amberg:

Sure, sure. So I’ll throw you a curve ball question. So let’s say you missed the transformation bus. You fall behind, you don’t transform in time. Is there any hope for return to greatness, or is it one and done?

Gokhan Guley:

Well I’m not sure if there’s a one and done, but if you think about companies like Sears and Toys “R” Us and the Blockbuster, right, those are the companies who really didn’t take it seriously, right? So it can be one and done. But the responsibility to manage is on leadership is how to get there, because there are ways to see things coming, there are ways to take action on it, but if you wait until everything is clear, then you have missed the bus. Netflix can come and disrupt the industry, and then Blockbuster goes out of business. Amazon changes the way we do retail, and then sears and Toys “R” Us can’t survive anymore. So definitely you need to be on the watch-out for those disruptors coming out of nowhere. An online bookstore pretty much redid an entire industry, being Amazon. So from that end, we need to be watchful. We need to really kind of scan what’s happening, not just in our industry but across the … and outside of our industry for the most part. That’s where the disruptors are coming from. And build our capabilities internally to be able to respond to those changes.

Robert Amberg:

And so maybe touch on that a little more. So if you’re listening to this and you’re thinking, “This is a Netflix thing, this is an Amazon thing, this isn’t my ABC company type issue,” but really what you’re thinking about is it can be anyone’s issues, and the best way to prepare is to really keep those capabilities or get those capabilities in line, so that when that happens you can not just react, but having the capabilities to be able to innovate is more important than sitting around and thinking, “We’re going to move from selling books to changing the entire retail landscape.”

Gokhan Guley:

So, correct. Absolutely. So Netflix, Amazon, those are kind of tech companies, right? It’s easy to dismiss them. It’s not going to happen in my backyard. But if you think about it, transformation is not just disrupting. It’s changing how you look at your own business as well. One of the examples in our research comes from very mature industry, textiles, right? One of the companies that we kind of looked into, VF Corporation, it’s a textile manufacturer, footwear manufacturer from North Carolina. And in early 2000s, they were doing a great job of cutting costs, but that was the only way they could survive, right? And they kind of said, “We can’t go like this, we can’t just keep our valuation up by just cutting cost.” So they kind of changed their mindset. Textile business doesn’t change that much, but you can change the way you look at it. So they changed their management bench, they kind of changed from cost-cutting mindset to a value creation mindset.

They really did some changes in there, and then they sold some business, pulled certain business to kind of get in the new high-margin market segment. So they transformed themselves. It wasn’t a disruptor that kind of caused them to do that, but they weren’t satisfied. They wanted to grow and expand. And in doing that, in 12 years following their transformation, they tripled their revenue, quadrupled their share price, so it is doable. You don’t need to wait for an outside cause, a reason to do something. You can decide to reinvent yourself, and actually be better at what you’re doing.

Robert Amberg:

So talk a little bit about the capabilities that go into that.

Gokhan Guley:

So capabilities … so one thing that we always talk about is the technology, right? Everyone talks about digital transformation, things are coming up and we really need to do stuff digitally. But what we believe is, in the core of transformation, it’s the human factor, right? The culture, the mindset. Those are the things that actually make or break any change effort, let alone a transformation. Kind of we know the strategy, or culture eats strategy for breakfast, I quote that beauty moment from yester era. Just like that. Culture is most important thing in an organization. So when we talk about capability to transform, it has to have its roots in transforming the people. Technology, the processes, and everything else that we think about when we talk about transformation, they are only the enablers.

Robert Amberg:

Sure. People have to buy into it and have to really understand why and where they’re going.

Gokhan Guley:

Absolutely.

Robert Amberg:

Which goes back to the leadership and a management issue, then.

Gokhan Guley:

It does, yeah. Absolutely. One of the things that the leadership needs to do is, why do we need transform, or why don’t we transform, maybe that’s the better question to ask, right? The why is the most important place to start, and as soon as you have that, you need to figure out how to get people onboard, and that’s the leadership, the core leadership job, right? Kind of getting masses moved, mobilized, around a new cause. And in many companies that we see, the comfort zone kind of prevents people from doing things that are not hard or that are not kind of new. So that kind of gets companies stuck in an old world, and then they cannot respond as fast to disruptions from inside or outside. So identify the why is a critical step, and then getting people to understand that why, and moving them out of their comfort zone a little bit to really work in this environment that we are in.

Robert Amberg:

Excellent. I used to work with a client who would tell me every quarter, she asked herself, “If I was my competitor, how would I beat us?” And it really got that mindset of, what products would I develop, what technologies would I, what services would I use to beat us? And it really tried to keep her thinking about a similar line. If you’re constantly thinking about how you would beat yourself, then it helps you think two steps ahead.

Gokhan Guley:

That’s a great way to start, and then beyond that, going beyond that, we’ve got to figure out, how would Amazon disrupt me? Because right now, kind of what happens is disruptions doesn’t come from within your industry. If you just think about your industry, how would my competitor out-compete me, then you kind of, you miss the boat, because Amazon is coming out and they’re trying to disrupt the healthcare industry, they already disrupted retail, so you’ve got to think those Amazons or other companies out there that you don’t even know about. Tesla can come and disrupt the automotive industry. They are not an automotive company.

Robert Amberg:

Right, they’re a battery company.

Gokhan Guley:

Whatever they are, it’s still a technology company, right? So we’ve got to think beyond our industry, beyond our competitors, and how would someone just in a garage access the cloud and all the computing power they can, and a nimble operation, what can they do to disrupt me? That is the kind of place we are at right now.

Robert Amberg:

Every company needs a chief panic officer thinking about how are we going to be disrupted.

Gokhan Guley:

That’s a great idea. So one of the things at the command, the CEOs, leadership, is yup, keep one part of your brain focused on your customers, you’ve got to serve them the best you can, but don’t forget to take some moon shots. You’ve got to, kind of half of your effort needs to be looking out five, 10, 20 years out and see, what do I need to do today to survive in 10 years? How am I going to find my next customer, how am I going to serve my next customer? So as leaders, they need to think, yep, today is important, manage it, but also you need to figure out what you’re doing in the future. And that mindset setting in the company from leadership down starts transforming your organization. That’s where you changing from thinking and processes to do that.

Robert Amberg:

So what are some success stories that you’ve heard, other than Netflix? What are some good successes?

Gokhan Guley:

So, so many of them out there as well as failures, right? We hear about failures a lot more than the success stories. But looking back in time, it’s not just like five, 10 years, but looking back in time, some companies have really developed those capabilities to adapt and transform, evolve as we call it. Nokia is a great example, right? They started in 1865 as a Finnish paper mill, that’s 150-some years ago, right? 54 years.

Robert Amberg:

Nokia started as a paper mill?

Gokhan Guley:

Paper mill.

Robert Amberg:

Interesting.

Gokhan Guley:

And in 2000, they were the fifth most valuable brand because they were producing cellphones, right? So they came from there to becoming a cellphone manufacturer, and then over the last five, 10 years, they are in infrastructure, telecommunications infrastructure. And they are number two provider in 2018. So all of a sudden, they somehow developed that capability to transform themselves from a paper mill, to a cable manufacturer, cellphone, and now telecommunication infrastructure. So that is the kind of capability that companies need to develop so that they can find the next opportunity and become number one, number two in very short order. So that requires a lot of internal thinking, mindset, cultural changes, and then the capability to put in technology and processes around that to enable it. So that’s kind of a very interesting example out there, but there are so many others too. Kind of people, the companies, changing what they were doing because market conditions forced them to.

Robert Amberg:

And do you find that the most successful companies are the ones that started as a reaction to, “We’re getting some pressure from a disruptor,” or are they the ones that, your previous example about the company that said, “You know what, we’re just going to proactively improve, because we know we can do this better.” And which ones do you find tend to be more successful?

Gokhan Guley:

Well, success actually depends on a lot of things. The reasons aren’t necessarily, but one of the things that, when you have the conviction and know your why, there’s a lot more kind of … the passion, and the drive that goes into that transformation. So I think one of the success factors is knowing your why. I start with the why.

Robert Amberg:

Yeah, why are you in business in the first place.

Gokhan Guley:

In the business in the first, absolutely. So that’s the first, and then why do you need to change, right? We know that change is part of life. Change is the only constant in the world, right? Business has been dealing with change for decades, so it’s nothing new there. What’s new is things are changing so fast these days. The purpose of business hasn’t changed. We are still trying to make money selling service or products to a customer base. What has changed is now the quality expected, the speed expected, and who is expecting is changing so much faster. So we need to always be chasing that. And in doing that, knowing your, “Why do I need to change, because my customers are expecting something different. My customers are expecting lower prices, lower costs.” Whatever it is, figuring that out and driving your organization in that direction is number one success factor, right?

And then we talk about all the enablers, and one of the hypotheses that we are going with is, just like no two companies are the same, no two transformations can be the same, okay? So one size doesn’t fit all companies. So to your question, who can be more successful, well, the ones that have developed a capability to transform, but also the ones that can fit their capabilities to the kind of journey that they want to pursue, okay? Because Netflix that we talked about, they are disruptors. They had to follow a very different kind of journey than anybody else.

The Ubers of the world, right? When they were really setting this new model out there, they operated pretty unconventionally, and you can not manage that kind of company with the best of best practice, make sure an organization is structured disruptive company. So you need something different for that kind of disruptive journey. But then of course, Uber becomes a public company, now they need different capabilities. They cannot just sit, “We’ve been successful, we’ve done it so far and we’ll go forward with this success.” No. Now they need different capabilities. They need to start putting some structure in place so they can manage the company the way it is today. So maybe a long answer to your question. Start with the why, and then figure out what you need for the kind of journey that you’re going to pursue to transform yourself.

Robert Amberg:

And so if I’m company executive A, and I’m going to start this process and I’m going to say, “Okay, I think proactively, we need to transform. We can be doing better,” it is a people issue, I need to think about my change management strategy, I need to think about my business processes, I need to think about operationally strategic initiatives. Do I need to look at, what as a company is our … do we do really well? So we might be a manufacturer, but we understand logistics really well, or we understand production really well. And so what can we do that is tangentially outside of our core business, but has something to do with our core capability of logistics or production? Is that a good place to start, or is that …

Gokhan Guley:

So that’s a great place to start. Knowing yourself is the first thing you can do, right? What’s your value drivers in your organization? So you said logistics, manufacturing. Every company has a competitive edge, some value driver. So you need to know that. You cannot throw it away, right? Even if you’re transforming, you’ve got to run two businesses at the same time. One, maintain what you have. You cannot get rid of the value drivers and the money makers. And then start finding new ways, kind of, run two businesses almost at the same time. One to grow a whole new business maybe, while you’re maintaining the other one. But you’ve got to come from the value, because transformation, technology, those are great. User experience is great. But customers are still looking for value, okay? Just because it’s a cool screen is not going to sell your product on your cool eCommerce platform. Your product needs to be of value as well.

So you definitely need to know yourself, your value drivers, and then figure out what your customers are looking, today and in the future, because if you kind of … it takes time to double up or transform, right? You cannot just start with today’s customer review. You’ve got to look into the future a bit. And then you’ve got to manage the change. Change starts within. The leaders need to first change themselves, their mindset, their culture, so that they can lead this organization into this next phase. And then it starts kind of from that core leaders, then it starts to kind of … a wave, impact the organization. Then of course comes the process, technology, all of those things are important to kind of enable, but that is not the starting point. The starting is point is really getting the mindset, the culture, the leadership, knowing your why, and then communicating and mobilizing your people. They will find the best way forward, all those technologies are enablers to make it happen. But starting from the why is the most important thing.

Robert Amberg:

Starting with the why, and then once you start, kind of circling back to what you first said, the most successful ones are the ones that inject into their culture the constant transformation. We’re always transforming, we’re always thinking about not just succeeding at our current business, but how can we improve, how can we stay one step ahead. And if you have a culture that embraces that mentality, you’re going to have a competitive advantage.

Gokhan Guley:

Absolutely, yes. And if you couple that with technologies and other processes in place to enable the people to use that mindset, then you are a winner. Just like in, again going back, the Nokia example. Doesn’t matter what industry, right? They were number one mobile phone manufacturer at some point. They just got out of it in 2014. But now, the business they are in, they are again number three in the world. So technologies changed, processes changed, products changed for them, but their success didn’t change. There’s something in the core that made it happen.

Robert Amberg:

Well Gokhan, thank you so much for being here. We’ve been talking business transformation. Gokhan Guley, director, Jabian Consulting. Thank you so much for your time.

Gokhan Guley:

Thank you.