The Palgrave Handbook of Managing Continuous Business Transformation

Business transformation is a long and complex process. It is an attempt to answer the greatest challenge that any business leader faces today: How to stay competitive amid a wide variety of internal and external triggers? And while the term is frequently used by management consultants and strategy writers, there is considerable confusion on what business transformation is all about. This chapter sorts through the chaos of opinion and hype; it examines the myriad usage of the term in practitioner and academic writings. In order to allow for a meaningful discussion toward the common goal of making organizations more competitive in the current dynamic marketspace, the various types of business transformation approaches are defined in a two-dimensional framework, which evolves around the key issues of the nature and scope of strategic change. Within this framework, continuous business transformation is understood as an approach to reach a new state through incremental steps in an evolutionary way rather than through a revolution. It occurs within the organization’s existing paradigm, and because it never stops, it helps the organization to accelerate, build momentum, and deliver impact. However, for a successful execution, it has to be underpinned by a winning strategy and an organizational structure. The employees go through a trajectory of their own; the Four Rooms of Change model is used to help provide existential insights into what is happening in an organization as it experiences strategic change.

Continuous change is driven by a complex interaction of various forces, among them the endogenous evolution of industries. The entry and exit patterns of firms, the emergence of new technologies, and the application of competitive strategies create a complex picture with multilayered dynamics of change. In order to develop successful strategies coping with this type of change, it is necessary to fully analyze and understand the evolution of industries. This chapter seeks to provide a broad and solid academic perspective on industrial dynamics in the sense of industry life cycles—both in empirical and in theoretical terms. It puts a particular focus on research following the footsteps of Steven Klepper; two of his most seminal papers are examined in detail, and five related theories explaining a shakeout during the course of an industry’s evolution are discussed. The chapter then presents a new line of reasoning taking into account that certain industries emerge through a combination of distinct know-how components from other industries and as a mixture of products and services. Such industries are particularly attractive for specific groups of market entrants, especially diversifying firms.

Assessing traditional industry analysis in the light of today’s business reality, we provide insights into an alternative framework for strategy formulation and implementation in a digitalized world. The main purpose of this literature review and conceptual chapter is to discuss current challenges for strategic management and to illustrate a novel approach of strategic renewal and their practical implementation in a world lost in transformation. This chapter highlights the relevance of a new approach toward strategy formulation in the face of a changing competitive landscape and provides guidelines for its practical implication. Our findings offer the grounds for practical implications such as that companies ought to strive to manage the challenges of changing business environments via new approaches toward innovation processes. To promote strategic renewal, managers should think in terms of competitive arenas and pipelines of transient advantage. Instead of trying to procure stability in shifting environments by all means, firms should aim to grow with the flow of digital transformation.

Today’s world is shaped by the impact of exponential technologies. To harvest their huge potential and to not be disrupted by their immense power, today’s entrepreneurs and business leaders have to gain a solid understanding of exponentials and how to design organizations around them. Building this knowledge and management capacity in an applicable and very structured manner is the key focus and the key value of this paper. To best fulfill its purpose, it is structured in four main section: first, it explains the nature of exponential technologies. Using this understanding as a foundation, six general phases of exponential development are described in the second part; knowledge of these phases is crucial for detecting new trends and developments as early as possible. In the third section, these more general findings are enriched by a short overview about today’s exponential technologies and their future potential. Based on this theoretical (but also practical and current) foundation, clear guidance is given in the fourth section on setting up optimal structures and processes, which enable organizations to turn the potential of exponentials into company value.

Digitalization has opposing effects on labor markets. Although the overall pie might grow bigger, severe structural changes and therefore challenges for society at large will definitely occur. For this reason, we want to address the following questions: How will digitalization change the division of work? Which jobs are at stake? And will demography be a factor in this regard? In economic textbooks, we normally assume that new technology drives growth and therefore has also a net positive impact on employment. For the past, this was certainly true, as the replacement of the typewriter by personal computers still required a person behind a desk, which now however could offer more and better services. This relationship between technology and the labor market might be about to change in our digitalization era. Already today, some news are written by the computer itself—without human fingers typing. The new feature of this technological change is therefore that not only muscle but also brain work will be replaced by robots—given it is not only technological feasible but also cost-efficient. In addition to the general change by digitalization of work processes, it could be the case that societies have to react differently to this ongoing process given their demographic transition and their education system. Research suggests that the conflict will not only evolve between capital and labor but also between young and old workers, as rationing will disproportionately affect the young. Perplexedly, it might even be the case that rapid aging countries like Japan or Germany will have less problems regarding the labor market.

Frequent change is the new normal in today’s market environment—being both an opportunity and a threat to companies and individuals alike. This chapter addresses the challenge of responding to change in a structured way and offers the reader guidance toward achieving successful, outcome-driven transformation. It starts with a review of well-documented economic cycles and the transformation pressures they inevitably exert. Relying on Kondratieff cycle theory, we demonstrate the necessity of a paradigm shift corresponding with the current fifth cycle. The disruption—resulting primarily from the emergence of new technologies—requires a structured model, one which allows for confident navigation through a fast-moving environment. Our dynamic model consists of five transformation levers, working together within an integrated framework covering three dimensions: people, process, and technology. It offers an opportunity to benefit from booming markets as well as provides a protective shield in times of deflation and recession. After a thorough explanation of all levers, we look at the human aspect of the transformation examining capabilities required at CXO and transformation leadership level. This is enriched by a case study describing employee involvement stimulation, achieved through a targeted gamification approach developed by one of the authors and implemented in the multinational corporate environment on five continents.

This chapter sheds light on the understanding and the proposed impact factors of new banking imperatives. It demonstrates that traditional banks located in developed countries should show increased interest in partnering with institutions from developing markets. Banks in India versus Germany operate in very different environments. However, to some extent, they face the same challenges of global banking transformation. By comparing India and Germany, mutual interrelations are analyzed according to a set of proposed impact factors. Through providing an in-depth view on the impact of future success factors in banking, we contribute to the discussion about the transformational forces for banking institutions and point to potential opportunities. We identified opportunities in each other’s home market to support growth. Further, we point to the fact that sharing best practices, for example, with regulation could improve each other’s efficiency. Moreover, we see indications for further consolidation by foreign players in India.

This chapter assesses the impact of macro environmental factors, including deregulation, increased competition, technological changes and changing consumer needs on the evolving nature of customer centricity and the need for firms to embrace it. Developed through a review of literature and study of industry examples and trends, this chapter traces how business focus has shifted from production to customer, and identifies ways in which businesses can enhance customer centricity by leveraging new technologies. Customer centricity is fast emerging as a norm across industries, and firms are adopting customer centricity to enhance competitiveness. This chapter lays a strong emphasis on embracing customer centricity, based on fundamental reasons as well as industry examples.

Client centricity is frequently spoken and written about, but not often experienced. As a customer, do you feel organizations can serve you better? Do you find it increasingly necessary to complain in order to get better service? If you believe that the behaviors of organizations toward clients need to change fundamentally, then you are not alone. This chapter sheds light on what client centricity really is. Organizations frequently get it wrong, and assume what they believe is true. The authors highlight the urgency to discuss client centricity, the necessity for organizations to be client centric, and the challenges in unleashing its potential. Rethinking client centricity is essential to reinvent business models. Client centricity is delusive. In a state of delusion, even the best of strategies combined with genuine efforts may yield negative results. An effective approach is to provoke readers to think, unlearn, and re-learn. The authors facilitate readers to become aware of the delusion and help by providing examples to re-learn by building on fundamentals. While organizations believe they are client centric, only very few customers feel so. This chapter provokes the thinking of an organizational change agent, and is recommended reading for anyone involved in organizational transformation. When the transformation toward client centricity gains momentum across industries, it would lead to societal changes. Focusing on client centricity will trigger an organization to continuously reinvent itself. The authors attempt to present client centricity in a simple way with personal and industry examples.

Product line selection has been a complex problem for marketers. From consumer product group companies to airlines industry, marketers have had to make decisions considering a range of market- and firm-specific factors leading to product line profitability or market share or revenue. While a large product mix in terms of breadth (number of product lines offered), length (vertical differentiation in the line through features), and depth (horizontal differentiation, i.e. color, flavor, pack size) offers the firm various advantages, they may not be sustainable in the long run. Hence, marketers need to have a robust decision model in a dynamic business environment characterized by uncertainty and lack of information while making product line selection decisions. This chapter examines the interplay of multiple conflicting decision objectives and bounded rationality of the decision maker. It recommends a methodology for marketers to arrive at a satisficing product line selection strategy, which is both satisfying and sufficing the constraints and desired objectives. From a theoretical perspective, the proposed model considers a set of intra-firm, inter-firm, and multi-market competition variables. Given the marketer’s bounded rationality and hence the inability to define the goals of the decision objectives precisely, there is a need for firms to transform product line selection strategy for sustained profitability. The methodology suggested in this chapter is multi-objective mixed-integer fuzzy-goal programming. The proposed methodology is a significant departure and transforms the traditional product line selection decision models. However, empirical validation of the model is beyond the scope of this chapter.

While the concept of Industry 4.0 has gained enormous interest within the business community, the organizational change required for its successful deployment is still in its infancy. Based on project experience at Villeroy & Boch’s production, we aim to answer the following question: How should a comprehensive approach be designed and what elements should such an approach encompass to overcome the traditional perception that change is not an episodic element but a continuum? What elements does such a comprehensive approach have to cover in order to ensure its guiding relevance within a continuous change environment? Industry 4.0 is not only about technology. It also addresses the DNA of a company leading to a continuous and in-depth change of the business backbone. When a company starts dealing with Industry 4.0, it is about moving out of their traditional industry silos, encouraging innovative thinking which leads to new business capabilities. This is where the need to manage the transformation becomes most significant; unfortunately, this is also where traditional change management methodologies come to its boundaries. Therefore, we need to find concepts and approaches that support this transformation creating the ability to validate potential solutions and opportunities and to encourage innovative thinking to allow the company gaining value on their individual path forward in adopting Industry 4.0. We propose a blended change management approach, adding elements of Design Thinking. The key assumption is that Design Thinking does not only support innovative processes, but helps a corporate culture to continuously allow the required transformation as it is a key cornerstone on our way to make Industry 4.0 successful.

In recent years, digital transformation has been heralded as a strategic concept for companies of all sectors. The Internet of Things could be seen as representing the most tangible form of digital transformation because it refers to the digitalization of end products and services geared toward customers. The insertion of an ever-increasing amount of software into physical products and the associated integration of intelligence into machines and systems has led to the gradual conversion of production-oriented added value into service-oriented added value. In the medium term—provided it is implemented systematically—Industry 4.0 will have a far more profound influence on corporate business models and processes than the aspect primarily associated with digital transformation up to now, namely the customer experience/customer relation factor. The increasing “intelligence” in manufacturing plants, the consistent incorporation of local intelligence such as sensors and embedded software into the production process and logistics chain and the resulting information management opportunities facilitate different decision-making paths and reactions that will bring massive changes to the entire process of work in manufacturing companies and to the direct environment of individual workers. Furthermore, the fact that the manufactured products also increasingly contain local intelligence and communication technology completes the cycle leading to another altered form of customer experience. Today, even after delivery to the customer, manufactured goods maintain contact with the manufacturer. This promises enormous added value potential for the manufacturing industry. But this development also bears a great responsibility for corporate management to successfully manage this process of change.

Although many industries are becoming more and more global, the national background of firms still matters. Especially latecomers from emerging markets, such as China, face considerable competitive disadvantages due to negative country-of-origin effects. These can be observed particularly in countries with strong local competitors. The aim of this study is to explore the perceptions of Chinese cars by European consumers. More specifically, we analyze the impact of country-of-origin effects on product evaluations and purchase intentions of German and French consumers. Based on the literature on country-of-origin effects and product evaluations, we develop five research hypotheses and test them in a sample of 347 consumers in France and Germany. The study reveals that Chinese cars are evaluated significantly worse than German cars in terms of quality and performance and appearance and attractiveness. These negative country-of-origin effects are moderated by socio-demographic, psychographic, and product-related factors.

Developers of IT-based services should be aware of potential conflicts arising from involving customers in co-development projects. This is a first step toward securing continuous development processes. The analysis in this chapter is based on extensive use of literature, including empirical research on the topic. The topic is developed from the perspective of the service supplier, and four contextual conditions are analyzed: (1) Stage specific or continuous, unspecific integration; (2) Customer abilities; (3) Intensity of involvement and its enhancement; (4) Number of customers involved. With a limited number of competing customers involved in the co-development, three types of conflicts might arise. As not all conflicts can be foreseen, building trust can contribute to reduce disruptions of the development processes. The exposition and the findings should be of interest and help decision makers on co-development projects as well as those involved in running the projects.

With the discovery of the Stuxnet worm in June 2010 came the first documented cyber-attack on critical infrastructure that resulted in mass physical damage. This attack spurred governments and private industry owners of Critical Infrastructure to inspect their cybersecurity practices with the hopes of improving their protection methodologies. While this introspective approach has helped owners and operators of critical infrastructure realize the startling deficiency of security in this area, it has also spawned many attempts to remediate these problems that do not solve the underlying causes of the existing gaps in protection. In this chapter, three “post-Stuxnet” cyber-attacks against critical infrastructure sectors in three different countries are investigated—the USA, Germany, and Turkey. This analysis details the vectors of attack in each incident, the resulting impact, and measures that have been taken by both the public and private sectors in each country to bolster the security posture of their infrastructure after the incident. The result indicates common issues among all three incidents, namely faults in the design of the underlying control systems used and a dichotomy between the actions taken by corresponding governments and private industry. In order to address these faults, there needs to be scalable and risk-based processes to improve supporting processes of cybersecurity in critical infrastructure—namely information sharing, accountability, and risk assessment. This research provides insights into the effects of recent destructive cyber-attacks and the divide between governments and private industry, as well as lapses in security programs that prevents the effective defense of critical infrastructure.

MOOCs are one of the most prominent topics to emerge in higher education in the past few years. Institutions that have launched successful MOOC initiatives have much to learn from each other, just as universities interested in evaluating the viability of a MOOC initiative at their institution may find lessons from others valuable for their decision-making process. This chapter explores the history and implications of MOOCs from the perspective of an institution that maintains active partnerships with multiple MOOC providers, producing numerous MOOCs every year. We outline a number of challenges, opportunities, and issues facing the adoption of MOOCs at an institution of higher education and provide recommendations for consideration. The chapter specifically addresses how MOOCs have transformed and can continue to transform the landscape of higher education, and how institutions of higher education can respond with agility to a rapidly changing landscape of tools and approaches. Based on the institutional experiences of the Technische Universität München (TUM) in developing and supporting a MOOC initiative, supported where relevant by current scholarship, we provide commentary and analysis on current public perception of MOOCs as well as a hypothesis, based on the Gartner Hype Cycle, about the future trajectory of MOOCs.

Small and medium enterprises (SMEs) are the backbone of economy for many countries. With a business climate currently being transformed by digital technologies, an economy driven by SMEs can be an ideal catalyst to make the most of the potential of digital technologies. One of the main challenges that the leaders of SMEs face today is how business and information technology can be aligned in an optimal manner in their organizations to fully leverage the potential of digital technologies, where e-leadership plays an essential role. This chapter provides an insight into how e-leadership drives the successful alignment between business and IT by drawing organizational semiotics and business-IT alignment theory. This chapter provides a broad perspective on how SMEs can leverage technological potentials to maximize business competitiveness and growth. Furthermore empirical evidences from SMEs across Europe gathered on the basis of the theoretical model will also provide an insight on how SME decision makers perform effective e-leadership in driving effective business and IT alignment toward sustained competitiveness.

Digitalization is having an increasing impact on companies everywhere, and none more so than those in the travel industry. For example, according to travel industry experts, it is directly affecting hotels and other tourist accommodation that need to attract guests. The rise of digitalization raises many questions for the travel industry. This chapter focuses on the impact of digitalization on a ski resort and asks the following questions: what are the effects of digitalization on a skiing destination? How would such a destination cope with digitalization? And what would the ideal strategy look like? In a tourist center, every accommodation proprietor would very probably like to keep up with the changes in digitalization, as part of their marketing response. They can pursue this aim individually or with others. Objectively it would make more sense and give everyone more chance of success if they worked together under a single roof, that of the Destination Management Organization (DMO). The DMO would be the driver of the change process itself. The following case study demonstrates that a DMO has to think of a different marketing process compared with what it has had in previous decades, when it is faced with its industry’s digitalization. Considering the changes that will have to be made within such organizations to cope with the trends in digitalization over the next few years, there are numerous challenges for destinations and accommodation properties alike.

The subject of change has never been more relevant than today, as almost every organization has to undergo radical transitions to be able to continuously change and adapt to the dynamic economic conditions. Although the ability to change continuously has been primarily associated with private corporations, it is also relevant for public organizations because this type of organizations is moving from a public administration to a market-oriented logic. Based on an institutional theory framework, this study investigates how a shift from a public-administration logic to a market-oriented logic can be accomplished to enable the organizations to change continuously. Evidence from a German federal agency shows that a radical change is a possibility to establish the abilities of continuous change because it can be associated with shifts in power structures in the organizational field to overcome inert interdependencies between contextual intra-organizational dynamics. Accordingly, our results show that not only political authorities directly can intervene in a federal agency’s business activities but also can an institutional entrepreneur engage in activities to influence contextual dynamics and mobilize external allies for her/his change project. Therefore, our results unravel how change agents and a radical change project that affected organizational members’ value commitments can contribute to the institutionalization of a new template, that is, the template of continuous change.

The context of globalization and the growing pressures toward sustainable development are nowadays forcing firms to deal with a paradoxical situation: while undeniable engines and major beneficiaries of globalization, businesses are also sources for significant negative externalities that impact on the dynamics of the global system. In these circumstances, the sustainable business should not only represent a major strategic challenge but must also become an effective strategic solution. This is the transformational shift we are advocating for in this chapter, by the instrumentality of a strategic model that integrates holistic marketing into the stakeholder management approach. Based on an interdisciplinary, multilevel, and integrative approach, we have developed a model by following a logical path: identifying the problem (the paradox of business), defining the general solution (the sustainable business), finding the proper implementation tool (the stakeholder management), and recommending the main instrument for operationalizing it (the holistic marketing). This model, if properly internalized and implemented by businesses, can lead to a radical change in the very essence of firms in terms of their business models’ foundations, while (re)positioning them within the global architecture as good corporate citizens. Therefore, a win–win situation for businesses and society will occur, based on the positive economic, social, and environmental impacts this kind of approach will bring.

Corporate divestitures have increasingly gained legitimacy as a strategic option that can also maximize a firm’s equity value. However, their sources of value creation are still not clear to academics and practitioners. This study is based on a comprehensive review of recent conceptual and empirical journal articles widely recognized in the field; it presents the drivers, paths, and performance consequences of corporate divestitures. Corporate divestitures are not always an indicator of past managerial mistakes to deal with poorly performing operations. Divestitures are also a means of strategic reorientation and resource reallocation for value creation when a particular subsidiary operation is no longer fit with the company. This value creation is largely derived from increased corporate focus and more efficient internal governance. Firms may divest operations in one location in response to better investment opportunities in terms of lower production costs and new market in other locations. Asset relatedness and strategic choices at the time of entry influence subsequent exit options in terms of closure, spin-offs, and sell-offs. Performance of divestitures depends not only on these exit modes but also on interdependencies between divested and remaining operations, bargaining advantages, and divestiture implementation and structuring during and after the due diligence. This study demonstrates that the drivers, paths, and performance of corporate divestitures are interdependent. Managers have to consider firm- and industry-level factors across geographic markets and timing of implementation to maximize value creation from divestitures.

Given the current impacted state of the BMW Group, as well as its perpetual job growth, new working forms need to be implemented in order for the company to maintain its status as a leading competitor in the automotive industry. By implementing a flexible working environment, organizations are able to accommodate continuous job growth, while maintaining sufficient building space efficiency and reducing building costs. A new workplace concept will inevitably result in the emergence of new challenges regarding satisfaction with the working environment, as well as impose significant change that can be perceived as threatening to some individuals. Therefore, the following study examines the effects that mobility and flexibility in the workplace have on perceived employee satisfaction and well-being. Research was conducted on a targeted group of employees over a two-year time period at the BMW Group in Munich, Germany. Employee responses pertaining to perceptions of mobility work and desk sharing were analyzed via questionnaire analyses in order to determine the effects on satisfaction with the working environment at the BMW Group in a specified non-territorial working environment. Structural equation modeling and content analyses via open-ended responses were conducted in order to determine the effect that the independent variables, mobile work, and desk sharing have on working environment satisfaction and employee well-being. Results indicate that mobile work significantly predicts working environment satisfaction, and levels of satisfaction with the working environment increased over time. Furthermore, open-ended responses suggest that mobile work has a significantly positive influence on employee satisfaction. Desk sharing has a significant impact on hygiene levels and concentration abilities in the flexible working environment, influencing employee well-being. This study provides concrete evidence for the need to solve capacity issues in terms of job growth, as well as maintain a high level of employee satisfaction and well-being in today’s fast-paced society.

This chapter explores how the role of leaders needs to change, given the profound impact that digital technology has, and is continuing to have, on organisations. It is based on a longitudinal review of the experiences gained by the authors in advising and supporting organisations across a range of industries to become more ‘digital’. It concludes that many organizations have yet to recognise the fundamental shift in the primary role of leaders—together with the process of leadership—that is required if they are to become truly digitally enabled enterprises. It suggests five leadership principles for the digital age.