Business transformation drivers
The need to revitalise businesses
To survive and prosper, businesses need to respond to an ever-changing competitive landscape.
Even the most successful businesses face the question of how to respond company-wide to diverse marketplace events - be it competitors' moves, change in demand, new technology, BBEEE legislation or the wish to grow.
The solution lies in business transformation.
However, troubled businesses already lag behind due to past inaction.
As management consultants we specialise in the remedial business transformation and turnaround of such underperforming and financial distressed companies.
Responding to marketplace events
Successful companies remain so because they timeously and successfully adapt to the ever changing competitive landscape:
- Changes in industry trends of a political, economic, social, technological, legal and environmental nature - see PESTLE framework for industry drivers in the box on the right.
- Changes in the Porter competitive forces as a result of changes in industry drivers - intensity of rivalry amongst competitors, buying power of suppliers and customers, and threat of substitution and new entry.
Political drivers
Broad-based black economic empowerment (BBBEE) has been the most important industry driving force in South Africa in the past decade, profoundly affecting ownership, board composition, employment and procurement practices of businesses.
Prompted by may state-owned enterprises running at a loss, and lack of service delivery at national, provincial and government level, government is actively pursuing improvement in financial performance and service delivery.
This has led to turnaround and business transformation programmes for example South African Post Office - successful turnaround by Maanda Manyetse, Transnet - turnaround under way by Maria Ramos, SAA – turnaround under way by Khaya Ngqula, Denel – turnaround started by Victor Moshe, now under way by Shaun Liebenberg, SARS – business transformation under way by Pravin Govender initiatives at local government level to place municipalities on a sound financial footing and improve their service delivery, etc.
A constraint is the anti-transformation stance of many labour unions, as experienced with the recent Transnet strike.
Economic drivers
Global economic business transformation drivers
Global trends in industry drivers include the globalisation of competition – forcing businesses to transform in order to remain competitive, tighter integration of the value chain – distinction between vendor and customer more blurred, and mergers and acquisitions – for long not just a financial exercise anymore but requiring business transformation.
South African economic business transformation drivers
Locally, South Africa is benefiting from positive economic growth and low interest rates.
The stronger Rand placed pressure on export prices, but led to decreased costs of imports.
Globalisation is forcing South African businesses to increase their competitiveness, productivity and increase their levels of customer services, the latter also prompted by the increase in tourism.
ASGISA (Accelerated and Shared Growth Initiative for South Africa) is a government initiative aimed at stimulating the economy and addressing unemployment through infrastructural investment and development.
Social drivers
In South Africa businesses sales and marketing policies are changing to cater for increased disposable income of black South Africans.
Technological drivers
Global technological business transformation drivers
The digital economy is driving advances in IT systems, value chain management, communication, etc.
Virtualisation is driving Business Process Outsourcing (BPO).
Business Transformation Outsourcing (BTO) is promoted by Accenture, IBM, etc. and enhances outsourcing of business processes to include the transformation thereof.
Risk management is finding increased acceptance e.g. representing one point of Transnet's 5-point turnaround plan.
Advances in strategic planning (Balanced Scorecard, strategy maps, etc.) is a strong driver of business transformation.
Lastly, increased acceptance of and advances in change management methodology is making business transformation more successful.
Legal drivers
In South Africa, BBEEE as a political driver has been entrenched in legislation.
Environmental drivers
Globally, but especially in developed countries, environmental concerns are shaping business policies.
Corporate Renewal Solutions transforms companies to ensure their continued growth and prosperity by formulating and implementing appropriately integrated strategic, organisational and operational responses to such marketplace events.
Resolving underperformance
Decline and underperformance are the results of not having responded to marketplace events timeously.
Financially, it manifests itself in declining sales, market share and profitability, and increased costs.
For more information, see recognising the need for a turnaround and financial symptoms of failure.
Corporate Renewal Solutions transforms underperforming companies on company-wide basis to enable them to achieve and surpass industry performance standards.
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PESTLE industry drivers framework
Political:
- Taxation
- Privatisation
- Deregulation
- International trade regulations
- Government stability
Economic:
- Interest rate changes
- Exchange rate changes
- Inflation rate changes
- Money supply
- Credit control
- Financial markets
- Competitors' pricing
- Globalisation
Social:
- Mobility
- Income distribution
- Population demographics
- Attitude towards work and leisure
- Standard of education and skills
- Working conditions
Technological:
- New material, product and process technology
- IT developments
- Government technology funding
- Speed of technology transfer
Legal:
- BBBEE
- Labour law
- Health and safety regulations
- Monopoly regulation
Environment:
- Pollution
- Planning permissions
- Waste disposal
- Noise controls
- Environmental pressure groups