The topic of Systems Transformation seems to be arising more frequently lately. How do you know if it is time to consider a systems transformation?
Let’s start by defining a systems transformation. In essence, a systems transformation is an upgrade to the way you perform business – inclusive of your people (allocation of resources, skillsets, etc.), processes, systems and information flows/ collaboration partners.
Although there is never a bad time in terms of elevating your business performance, the investment and disruption might not be ‘worth it’. In other words, does the return on investment make it the ‘right’ time?
Here are questions to ponder in answering that question:
- What are your growth plans? – If you are performing well and growth is slow, you are unlikely to require a systems transformation. However, if you expect solid levels of growth, you’ll need one. There are two reasons: 1) Even if you are providing an exceptional customer experience currently, to maintain that with growth is a different ballgame. 2) As you grow, if you don’t want to add people to support each new level of growth, you’ll need to devise systems to grow in a scalable, profitable way.
- Will your margin levels sustain your business needs? – Of course, no one would complain about increasing margin. However, the key question is what has to be done to achieve the result? Take a look at whether your profitability and margin levels are sufficient to satisfy stock price expectations, investor needs, reinvestment plans, business valuation goals etc. We have run across “cash cow” businesses that yield enough profit for the owner’s lifestyle and objectives. There might not be a reason to invest in an upgrade. After all, there is risk and disruption with every activity of this magnitude.
- What are your customers’ expectations? – No matter your growth and profitability, if your customers’ expectations are changing or increasing (as they often are in today’s Amazonian environment), the key question is whether you’ll be able to meet them with your current setup. We see that it can go either way – depends on the industry, your customers, the marketplace etc.
- What are your employees expectations and capabilities? – Will your employees stick with you if everything remains status quo. This can completely depend on your employees. We have run across people who prefer “what works” and are quite happy not to upset the apple cart. On the other hand, we have also seen many job seekers look for new opportunities because the executives weren’t interested in growth – the company’s or the employee’s. It is important to think through what will happen. If you choose the status quo and your employees don’t align, it might force you into a different strategy, and you’ll be worse off for not thinking proactively.
On another note, if you don’t have employees capable of leading a systems transformation, you will need to shore up your team. Certainly you can supplement with short-term resources to fill in gaps and consultants to advise on skills not required over the long-term but you might also need to fill in gaps within your team. Don’t overlook this critical component but also don’t let it deter you from making the leap.
- Do you have the funds? This is the one that deters most executives. It is quite tempting to hold off until later when it seems like it is a ‘better time’. However, are you defining better time as one when you feel better or one as defined by the questions above? As my consulting mentor says, there is always money. It is a matter of priority. Recently, we ran into a client that has never borrowed money. It can be a smart and prudent strategy if it supports your business objectives. However, the CEO was questioning whether he should continue this strategy. If it is the ‘right time’ for an upgrade and it will provide a return on investment over the long-term, he should absolutely borrow to fund the near-term investment to gain the value down-the-line.
Of course, that doesn’t mean you should dig a hole the size of the Grand Canyon to fund your systems transformation. We have seen many executives accidentally throw money out the window when it wasn’t the best timing or get carried away and spend ‘too much’. In these cases, you might never recover from your upgrade! Gain advice from experts with an eye to return on investment. Keep in mind that taking prudent risk will be required!