If you want the best price possible in the sale of your business, then you need to transform it to prove it can thrive without you. This transformation is focused on empowering the leadership team, that is staying in the business, to demonstrate they can grow the business regardless of your involvement. I know we've been successful in transforming a company when the owners tell me they need to write new job descriptions for themselves because the team has everything under control and things are better than ever. At that point I know the company is set up and ready for a great exit, because strategic buyers are looking to capitalize on untapped growth potential. They like buying at the base of the growth curve (lowest price for the highest potential return), so that is where you need to transform the business.
In preparing for an exit, business transformation is an umbrella term for making fundamental changes in how a business or organization runs that are required to enable it to grow going forward. They are bold, seismic shifts that organizations make to accelerate change and growth beyond typical incremental advancements. The scope is broad and strategic, such as switching leadership, organizational structures, scaling, new business areas or operating models and ultimately cultural change. These transformations help organizations compete more effectively, become more efficient, resilient and better positioned for sustained growth in the foreseeable future. Growth in practice simply means unlocking the potential of employees to enable to company to achieve its greatest potential.
Business transformations are typically large, multi-year initiatives requiring wholesale changes to fundamental aspects of the company. These transformations used to take many years, but now, the urgency of market changes and the use of proven agile transformation processes have accelerated the timelines. Many are completing them in quarters versus years. Given the size, scope, and time-frame of the undertaking, it must be driven from the top - be it the CEO, or the Board, and executed by the senior leadership team to position the company for sustained success and growth for the foreseeable future.
What are the 5 Types of Business Transformation?
With an all-encompassing scope, business transformation can be many things. There are plenty of ways to break it down, but business transformation activities typically fall into one (or more) of these five categories:
1. Management transformation—As companies strive for growth in competitive marketplaces, top-down bureaucratic hierarchies aren’t always the best for facilitating rapid decision-making and reacting to new developments. Transforming the management structure for agility and empowerment may be part of the solution (getting rid of the middlemen, etc.), but empowering individuals to make decisions themselves or quickly reach a consensus is far more critical. This requires socialization and access to information, establishing clear communication channels, and overall transparency in organizational roles and responsibilities.
2. Organizational transformation— Restructuring the organizational design, or altering resource allocation is key to many transformations. A company’s most precious resource—its people—are no exception—base organizational transformation by assessing how to staff various departments and the structure of those departments themselves. Looking at in-house skills and experience, how the staff is deployed, and the various reporting structures allow companies to identify opportunities. These opportunities could point to either streamline or build-out to better achieve growth and success. Other objectives may include breaking down silos, flattening the organization, and right-sizing the headcount.
3. Cultural transformation—Cultural transformation is, is simply creating new patterns of behaviour that better serve the business to grow and flourish. Changing the culture is an exercise in behavioural discipline and being consistent in regard to recognizing and rewarding desired behaviours and eliminating un-desirable behaviours. A strong vision, building on core values that are non-negotiable, and using it to guide all decisions and actions at every level in every area of the business is the key to transformational success. Making behavioural accountability everyone’s responsibility is key to accelerating transformation.
4. Business process transformation—This transformation focuses on the “how” of getting things done and includes an agile transformation process. It typically involves lots of optimization and automation of repetitive processes to focus on higher-value projects. This generally is an ongoing effort, starting with the most strategic and material business changes and cascading them from top to bottom and back up again in the organization. The end goal is to have the right people doing the right things in the right ways to drive operational excellence and provide the capacity for growth.
5. Information/data/digital transformation—Focusing these transformations on using technology to unlock additional value in terms of strategic decision making, quality, productivity, timeliness, capacity and new opportunities. It may come in aggregating and sharing data in new, more efficient ways (such as a digital CRM system or online ordering). It also includes leveraging technology and data to offer ultimately new products and services, both by using the technology to more rapidly design, build, and distribute them and use digital assets as part of the new offerings themselves.
Any established organization interested in maximizing performance, increasing efficiency, growing and thriving in the future, needs to embrace growth transformation. As we like to say, change is hard, but not changing is fatal!
If you'd like to learn more about how to accelerate your growth transformation to sell your business for more, contact us.