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Any radical organizational change can be termed business transformation. Typical transformation projects include mergers and acquisitions, business process outsourcing, and the introduction of shared service centers, enterprise software, and initiatives motivated by sustainability requirements. Unlike business process re-engineering, which closely focuses on business processes, business transformation requires a more holistic approach.
SAP Business Transformation Services (BTS) has created a methodology for successful implementation of transformation projects: the Business Transformation Management Methodology (BTM2), also available as a book.
Comprising four phases: ENVISION, ENGAGE, TRANSFORM, and OPTIMIZE, the methodology integrates discipline-specific technical and methodological expertise from transformation-relevant subject areas. The BTM2 provides real-world guidance and support for transformation projects by bringing together the disciplines of Strategy, Value, Risk, IT Transformation, Program, Project, Change, Process, and Competency Management.
While Strategy, Value, and Risk Management set the course for business transformation, other disciplines enable the transformation process. The discipline of Meta Management incorporates topics such as culture, values, and standards. It orchestrates work streams involved in business transformation projects.
The BTM2 has been used and validated in a number of business cases, such as the pilot roll-out of smart metering technology at a major energy provider. For more information on BTM2, please contact BTS.
Every business transformation is different. The success depends on the complex interplay of actors in a multifaceted ecosystem. According to this understanding, the focus of meta management as the fundamental discipline in BTM2 lies in providing a frame that helps to manage the complexity of business transformation.
Meta management is a general discipline for business transformation, which is based on a holistic and integrative management approach. Meta management is business-driven value-oriented, and integrates three pillars, namely: management disciplines, transformation lifecycle and leadership. A business transformation process is only successful if the leaders are aware of their roles and communication and have established a solid culture. These meta management principles are also sketched in this chapter since their implementation constitutes an important basis for the success of the overall BTM2 framework.
In summary, the following (general) guidelines need to be considered to execute a successful business transformation project:
Source: Stiles, P., Uhl, A., Stratil, P. (2012). Meta Management. In A. Uhl & L. A. Gollenia (Eds.), Handbook of Business Transformation Management Methodology. Farnham, UK: Gower. p. 13
Strategy Management describes how organizations or organizational units can successfully plan transformation alignments and implementations. A frequent cause of failure is an erroneous or inaccurate planning of a transformation strategy.
This discipline systematically guides through the six major steps of developing a transformation strategy and explains the integration of essential aspects such as transformation need, transformation readiness, stakeholder management, options for action and the integration of a transformation plan. Strategy management primarily addresses the envision phase of the transformation lifecycle, where a strategy is developed. Strategy development refers to the selection of appropriate team members, collection of data, analysis of transformation needs and readiness, design of a business vision and a business model, and the definition of an integrated transformation plan.
Source: Uhl, A., Houlder, D., Schmid, D., von der Horst, M. (2012). Strategy Management. In A. Uhl & L. A. Gollenia (Eds.), Handbook of Business Transformation Management Methodology. Farnham, UK: Gower. p. 31
Value Management manages the value of an investment throughout the entire lifecycle of a solution. VM ensures and supports the alignment between IT & business processes and company strategies. VM should be seen as a pragmatic approach to drive value adoption in business & IT investments.
View on Value Management
Value Management describes an approach and a set of tools and techniques that organizations can use: a) to identify the potential business value of a transformation, b) to decide whether the investment is both worthwhile and achievable, and then c) to manage the elements of value through to successful delivery. The value management approach outlined is based on proven techniques for identifying, planning, managing and evaluating the benefits of a business transformation. It depends on the engagement of stakeholders in the preparation of the business case and benefits plan to create the knowledge and commitment required to realize the benefits.
Stiles, P., Uhl, A., Stratil, P. (2012). Meta Management. In A. Uhl & L. A. Gollenia (Eds.), Handbook of Business Transformation Management Methodology. Farnham, UK: Gower, p. 57
Risk management provides fundamental guidance to the planning, development and effective execution of a business transformation. Hence, it is essential that business transformation managers seek to manage those risks that relate to the process of transforming an organization towards a desired future state and those risks that relate more to the possibility that this desired state becomes either obsolete or sub-optimal.
In other words, effective risk management is needed to minimize the unpredictability associated with transformation related initiatives. Moreover, successful business transformation requires that sufficient attention be directed towards managing different categories of risks at both the strategic and operational levels. Organizations need to go beyond simply addressing risks that are inherent to an individual business transformation since, in isolation, such aggregation provides only limited guidance to those seeking to understand and manage the complex interdependencies that surround strategic risks. Such risks have been found to represent some of the largest threats to successful business transformation. Consequently, effectively managing strategic risks supports successful business transformation.
Risk management within BTM2 involves the following steps:
Source: Furneaux, B., Janasz, T., Schild, T., Klimmek, R. (2012). Risk Management. In A. Uhl & L. A. Gollenia (Eds.), Handbook of Business Transformation Management Methodology. Farnham, UK: Gower. p. 85
Business process management (BPM) has evolved as one of the most important management capabilities today. Also in BTM2 it plays an essential role as an enabling factor for successful business transformations. Where does this importance come from? The answer is fairly simple: Since processes essentially are what organizations do, transforming organizations essentially means changing an organization processes. Therefore, the body of knowledge on contemporary business process management can contribute a lot to BTM2.
The specific focus of BPM within BTM2 essentially lies on the design of new processes implementing new business practices. In particular, BPM within BTM2 addresses the following steps (referring to the transformation lifecycle) for business transformation success:
Source: vom Brocke, J., Petry, M., Gonser, T. (2012). Business Process Management. In A. Uhl & L. A. Gollenia (Eds.), Handbook of Business Transformation Management Methodology. Farnham, UK: Gower. p. 109
Transformational Information Technology (IT) management has different objectives. First of all, it evaluates the impact of current IT processes, IT competencies and IT systems on business transformation and vice versa. Additionally, transformational IT management defines IT-related success criteria for business transformation. Transformational IT management safeguards the design, implementation, roll-out and deployment of business transformation. It enables operations, maintenance and support of transformation deliverables. Last, but not least, transformational IT management also covers operations (continuous improvement).
Transformational IT management within BTM2 addresses the following steps (referring to the transformation lifecycle) for business transformation success:
Source: Winter, R., Gubler, P., Wortmann, F., Elting, A., Schultheis, W. (2012) Transformational IT Management. In A. Uhl & L. A. Gollenia (Eds.), Handbook of Business Transformation Management Methodology. Farnham, UK: Gower. p. 145
People and their abilities and motivations are one of the main wild cards in business transformations. Business transformation often involves a change of, or introduction of new elements to, the corporate culture which may lead to a misinterpretation of corporate signals and values, and a shift in power structures, both of which may entail serious constraints to the success of a business transformation unless adequately managed.
Addressing and managing these human elements through organizational change management therefore forms an integral part of every business transformation. Specifically, change management deals with the people who have to change their ways of working because of a business transformation. It deals with their expectations, their needs, their abilities, their motivations, their concerns and their resistances. In general, we believe that organizational change management efforts should involve specific interactions, interventions and coaching, as well as broad and personal communication with the aim of aligning executives, involving management, and engaging employees.
Organizational change management within BTM2 addresses the following steps (referring to the BTM2 transformation life-cycle) for business transformation success:
Source: Kohnke, O., Reiche, S., Balla, E. (2012). Organizational Change Management. In A. Uhl & L. A. Gollenia (Eds.), Handbook of Business Transformation Management Methodology. Farnham, UK: Gower. p. 169
Business transformation requires a longer-term and often major change in the competences of team members and the management. For example, when transforming an HR department from an administration-oriented unit to one providing strategic consulting, not only the competences for transformation, for example, in the area of leadership, must be trained. Numerous team members previously working primarily in administrative roles must first be prepared and suitably trained with regard to their new strategic consulting competences.
Competence and training management provide qualification and enablement of selected key groups with respect to (1) the competences required for business transformation and (2) the strategic core competences vital for future success of the company.
Competence and training management within BTM2 addresses the following phases (referring to the BTM2 transformation lifecycle) for business transformation success:
Source: Pimmer, C., Haefliger, J., Blumer, F. (2012). Competence and Training Management. In A. Uhl & L. A. Gollenia (Eds.), Handbook of Business Transformation Management Methodology. Farnham, UK: Gower. p. 199
Program management serves as an overall vehicle for the transformation effort. It aims to support the implementation of the decided strategy in order to achieve the expected benefits in business transformations. A program is defined as a group of related projects managed in a coordinated way to obtain benefits and control unrealized when they are managed individually.
A project, on the other hand, is a temporary endeavor undertaken to create a unique product, service or result. Projects tend to have definite start and finish points, with the aim of delivering a predetermined output, giving them relatively clear development paths from initiation to delivery. Programs, on the contrary, exist to create value by enriching the management of projects in isolation. Programs typically have a more strategic vision of the desired end goal, but no clearly defined path to get there. Therefore, program management is expected to deal with the uncertainty surrounding the achievement of the vision, whereas projects work best where the outputs can be well defined. As project management is embedded within program management, this chapter will predominantly focus on program management, with project management being discussed as a tangential topic.
Program and project management mainly address the engage phase, with some also playing a role in the transform phase for business transformation success:
Source: Rosemann, M., Recker, J., Safrudin, N., Marketsmueller, R. (2012). Program and Project Management. In A. Uhl & L. A. Gollenia (Eds.), Handbook of Business Transformation Management Methodology. Farnham, UK: Gower. p. 217