What are the Types of Business Transformation

Transformation has become a big business buzzword. Technological developments create a need for digital transformation. Climate change creates a need for green transformation. Shocks, such as Covid-19 or the war in Ukraine, create a need for crisis transformation.

Business transformations vary in terms of content, pace, and place of initiation — and it’s rare that companies are only undergoing one at a time. Doing business today means navigating a complex landscape of interconnected and interdependent issues, each having multiple stakeholders and agendas. Hence, organizations need to understand the various types of transformations, and know how to manage each.

Based on our work on business transformations, we’ve developed a typology that helps clarify four types of business transformation based on two dimensions: 1) Is the transformation driven by internal organizational needs or external forces? and 2) What is the pace of the transformation?

Slow-Motion Transformation

This is when organizational leaders introduce a new vision with a long timeline for implementation. Cultural changes and corporate turnarounds are typical slow-motion transformations.

A recent example of a high-profile, slow-motion transformation can be seen in the digital transformation efforts taking place at Maersk Line, the Danish container-shipping firm. These ongoing efforts to provide more visibility and transparency in customer supply chains require technical, organizational, and cultural change. And despite the significant investment, which started in 2016, there is still an ongoing dialogue about the company’s strategic positioning and corporate identity: While digitization enthusiasts proclaim that Maersk Line is now increasingly a tech company, other high-ranking executives argue that it’s first and foremost a container-shipping company.

The managerial challenge with slow-motion transformations is to keep focused on the direction and target of the change. This requires a long-term view and patience, as well as a spirit of continuous learning and improvement throughout the transformation process.

Sprinted Transformation

These initiatives are also introduced in response to internal needs, but they are characterized by an urgent challenge to the status quo. Examples of a sprinted transformation include a sudden corporate restructuring or the introduction of a new strategic initiative. These are sometimes enacted in response to management fads or new corporate buzzwords, but when the right initiatives are set in motion, it can be a very efficient and effective way to change.

An example of a recent sprinted transformation is Facebook’s evolution into Meta. When Mark Zuckerberg announced in October 2021 that his company was all in on the metaverse, it sparked a sweeping and unprecedented transformation for the 68,000-person social networking company. All of a sudden, Facebook and Instagram engineers were being told to forget their job goals for 2022, and instead to apply for new positions in the burgeoning augmented reality and virtual reality teams. This sprinted transformation was sudden and swift, creating uncertainty and stress among former Facebook and Instagram employees. Yet, it could also be argued that Facebook needed to sprint toward becoming Meta in order to gain a first-mover advantage.

The managerial challenge in a sprinted transformation is to build a powerful narrative to create the needed energy and motivation for change. Without a motivated workforce, it will be impossible to follow through on the desired direction.

Negotiated Transformation

These initiatives are typically undertaken in response to external demands, such as regulatory efforts, where the firm can’t change, but rather only influence, the contents of the transformation. They are characterized by a slow pace and extensive stakeholder management efforts.

Take the European Union’s General Data Protection Regulation (GDPR), for example. These requirements were passed in 2016 and applied to all businesses operating in the EU; however, they didn’t go into effect for several years. While the legislation has arguably had some unclear aspects that have been up for further clarification and interpretation along the way, firms were forced to transform many of their operating procedures accordingly.

The managerial tasks in a negotiated transformation are to engage in the debates, to exercise influence, and to skillfully prepare the organization for transformation. A common mistake is to move too quickly — which may result in a need for subsequent efforts when the true scope is finally known.

Hijacked Transformation

These initiatives are characterized by sudden, disruptive changes brought about by outside forces. As such, external parties essentially hijack the company’s agenda, forcing a transformation to align with the new reality.

An example of hijacked transformation can be seen as a result of Russia’s invasion of Ukraine. In a matter of days, many companies had to leave or end their Russian operations to avoid sanctions, boycotts, or political repercussions. Hijacked transformations can also occur when new disruptive competitors enter an industry and change the rules of the game, such as how streaming companies (e.g., Netflix, HBO, Amazon Prime, and Disney+) have threatened conventional flow TV, cinemas, and the movie industry, essentially hijacking their transformation agendas in the years to come.

The managerial challenge with hijacked transformations is to move quickly and not invest extensive efforts in debating the trigger. Failure to accept the external demand and the set timeframe will have detrimental effects on businesses.