Change. What a wonderful but intimidating word with all its underlying implications. All of us who have faced a new circumstance know that going outside our comfort zone is never easy. Certainly not in personal life, but even changing behavior collectively in an organization is a resource-consuming process. Still transformation in business settings is expected and even required, otherwise companies risk becoming obsolete. Yet, although most companies are trying to keep up with the increasingly turbulent business landscape, many are struggling to find the tools for business transformation to meet changing societal, environmental, and financial expectations.
So, it is not surprising that transformation is a key issue on the agenda of both researchers and practitioners. It certainly keeps me intrigued. Transformation is challenging because it happens on so many dimensions, not just in the context of business. Typically, transformation is seen as the consequence of technology advancements.
“But although new technologies are often major factors, they have never transformed an industry on their own. What does achieve such a transformation is a business model that can link a new technology to an emerging market need.” This notion by Kavadias, Ladas and Loch (2016:91) is consistent with my research focused on three different trajectories of transformation:
- Digital transformation – Emergence of disruptive technologies that create new practices and allow different solutions to existing problems. Examples here are IoT (Internet of Things) technology, biometrics, and artificial intelligence that enable home and building automation, remote health monitoring, and smart traffic control.
- Customer transformation – Fundamental changes in customers’ roles in markets enabled by increased knowledge sharing and tools to take control of activities performed by companies. A classic example is the development of online banking, but a more contemporary case is the emergence of peer-to-peer sharing economy that enabled the access to and provision of resources between peers.
- Societal transformation – Societal issues that change market conditions. For example, increasing human mobility and immigration change individuals’ and societies’ expectations and behaviour. Like, in Finland, the sheer number of incoming refugees created a need for involving companies in finding solutions for the integration of the refugees into society.
These transformation trajectories have different triggers and consequences, but in essence, businesses are transforming on several levels from the core of the business model to the role of businesses in a society. Societies are in constant change, and with it, the role of organizations is transforming. It becomes increasingly important for companies to look outside their everyday business activity to external issues, in the surrounding environment. Companies are increasingly expected to take action in societal and environmental matters, while preparing for new types of global challenges that could harm the business.
To successfully transform and align according to business reality, companies need deep understanding of their potential role in markets and society and in supporting potential customers. I view this understanding in the context of having the right strategic tools for the current business reality and supporting customers and society in achieving everyday tasks and aspirations. I call these strategic tools transformative service strategies, that is, investments in strategic business transformation based on customer understanding.
Such service-based business transformation relates to the process of changing existing business practices to new service-centered methods that enable agility and receptiveness to rapidly changing market demands. It starts from accepting the primacy of customers in markets. These transformative service strategies have optimally the potential to transform a company or industry, for example the crowd-sourced business models such as AirBnB and Uber. This means integrating service thinking and customer centricity into every area of the business including strategies, operations, technologies and employees. It is imperative to not adopt transformative strategies just for the sake of innovation, but to fundamentally change the company culture and be open to different forms of collaboration and knowledge sharing.
Service-based business transformation was the topic of my recent Master level course Transformative Service Strategies at Hanken Svenska handelshögskolan. Together with my students I identified and analyzed transformative service strategies through a business challenge that I set up together with a case company. These real-life cases in teaching are a fantastic method for connecting students with business reality. The collaboration with the company provided a fruitful platform for teaching business transformation and it also functioned as a bridge between theory and practice.
During the project, students engaged in the process of solving the business challenge, which involved collecting and processing actual data, applying appropriate theories to the problem, and creating and pitching innovative recommendations for the case company. The project was designed to develop collaborative, analytical, creative, and problem-solving skills as well as strategic thinking. It was concluded with a final pitch of student ideas to a panel consisting of company representatives and service innovation experts. In addition to providing diversity in traditional class teaching, this course involved a half-day visit to the company’s headquarter. Altogether, the course gave my students a deep understanding of today’s business reality and challenges of current business models, and thereby also created transformative strategies for tomorrow’s business landscape.
The discussions with my students and company representatives revealed several interesting issues to explore further. For example, it became evident that companies cannot only focus on their own offering because even seemingly unrelated events in the distant business landscape can have huge effects for business success. For example, the sanctions on Russia placed by the West as a consequence for the Ukraine crisis resulted in Russia banning the import of many Western food products. For the Finnish dairy producer Valio with Russia as its primary export market, these political activities had implications for Valio’s business. Currently, many of Valio’s products are made locally in Russia.
The trick is to be curious about the business landscape in a broad sense. So, my journey in business transformation continues; I will continue to explore business transformation from a service and customer perspective. And I invite researchers to join me in this endeavor, and I am also looking for business partners to work on specific challenges on this area.
Professor, CERS Director
Kavadias, S., Ladas, K., & Loch, C. (2016). The transformative business model. Harvard business review, 94(10), 91-98.