A Theory of Enterprise Transformation
Abstract:
The information technology revolution has driven the pace of competition and rapid globalization.
Consequently, enterprises increasingly need to consider and pursue fundamental change—transformation—to maintain or gain competitive advantage.
This need raises important research issues concerning how transformation is best understood and pursued.
This paper outlines a theory of enterprise transformation to guide research on these issues.
The theory focuses on why and how transformation happens, as well as ways in which transformation is addressed and pursued in terms of work processes and the architecture of these processes.
A variety of industry and corporate vignettes is used to illustrate the theory.
A portfolio of research initiatives are discussed in terms of how they can advance the proposed theory, while also enhancing practices of enterprise transformation.
Introduction:
Enterprise transformation concerns change, not just routine change but fundamental change that substantially alters an organization’s relationships with one or more key constituencies, e.g., customers, employees, suppliers, and investors.
Transformation can involve new value propositions in terms of products and services, how these offerings are delivered and supported, and/or how the enterprise is organized to provide these offerings.
Transformation can also involve old value propositions provided in fundamentally new ways.
Transformation can be contrasted with business process improvement.
Adoption of the principles of Total Quality Management [Deming, 1986] has resulted in many enterprises focusing on their business processes and devising means to continually improve these processes.
The adoption of TQM may be transformative for an enterprise.
However, as judged by the definition of transformation provided here, the ongoing use of TQM subsequent to implementation is not transformative.
The whole point of TQM is to make continual change a routine undertaking.
Business Process Reengineering [Hammer and Champy, 1993] can be much more transformative.
Adoption of BPR has led to much fundamental redesign of business processes.
This rethinking followed the guidance “don’t automate; obliterate.”
In this way, both the adoption and implementation of BPR tends to be transformative, although success is, by no means, guaranteed.
One can then apply the principles of TQM to continually improve the reengineered business processes.
Rather than routine, transformation tends to be discontinuous, perhaps even abrupt.
Change does not occur cont inual ly, yielding slow and steady improvements.
Instead, substantial changes occur intermittently, hopefully yielding significantly increased returns to the enterprise.
Transformation and routine change converge when, as with BPR and TQM, the transformation involves fundamental new ways of pursuing routine change.
This paper outlines a theory of enterprise transformation.
The theory focuses on why and how transformation happens, as well as ways in which transformation is addressed and pursued in terms of work processes and the architecture of these processes.
As later discussion elaborates, the theory argues for the following definition:
Enterprise transformation is driven by experienced and/or anticipated value deficiencies that result in significantly redesigned and/or new work processes as determined by management’s decision making abilities, limitations, and inclinations, all in the context of the social networks of management in particular and the enterprise in general.
A variety of industry and corporate vignettes are used to illustrate the elements of this theory and definition.
A portfolio of research initiatives are discussed in terms of how they can advance the proposed theory, while also enhancing practices of enterprise transformation.
Conclusion:
This paper has outlined an initial formulation of an overarching theory of enterprise transformation.
This theory is very much a work in progress.
A wide range of colleagues from numerous disciplines has offered comments and suggestions on the evolving theory, providing rich evidence of the diversity of perspectives that different disciplines bring to this broad problem area.
Indeed, it can reasonably be argued that there are few problems so central to our society and economy as the problem of how complex systems address fundamental changes.