What is the difference?

Business turnaround and transformation are very different (but similar) strategies and it is critical to differentiate between the two. Through their lifecycle, a business will need to undergo some level of turnaround or transformation. This could be for several reasons, including changing market dynamics, shifting economic circumstances, or consumer appetite for the product or service being delivered.

A business turnaround involves a company that is underperforming and not achieving its strategic objectives, usually manifesting itself as experiencing periods of poor financial performance. A turnaround management strategy is reactive and often necessary to return a business back to a healthy balance sheet and financial stability. A transformation, on the other hand, is a pro-active or pre-emptive call for change. Business transformation is a reinvention and a business must essentially change its operating model.

What is a business turnaround?

Business turnaround is a complex change management process to recover a business financially and operationally.

A company calls for a turnaround after experiencing a period of poor financial performance. A business undergoing a turnaround is not necessarily one that is on the brink of liquidation. It is one that, if it does not change, will be soon.

A successful turnaround is derived through a comprehensive evaluation of the operational and financial systems and restructuring them to allow the business to perform optimally.

The purpose of a company going to these lengths and developing a turnaround management plan would be to restore credibility and trust with stakeholders, i.e. shareholders, employees, creditors, and customers.

At Callsara, our turnaround management strategy works in three stages:

  1. Review – investigating the entire business, including financial, operational, sales, and people metrics to prioritise areas of focus
  2. Reposition – developing a strategy to promote business recovery which will focus on stabilisation of the areas identified in the review process. This stage also involves rapidly fixing areas of high importance to “stop the bleeding”.
  3. Renewal – implementing strategies to allow the on-going success of the business. This is where the root cause of problems is identified and managed to ensure that the business can thrive moving forward.

To summarise, if a business wishes to implement a turnaround to restore financial health, the earlier they address the lack of successful financial and operational performance and develop a strategy, the greater the chance of survival.

There are common signs that indicate that a turnaround is required.

What is a business transformation?

Business transformation is a proactive approach to staying ahead of the curve and shifting market dynamics. Essentially, a transformation is pre-emptive shift of a company’s DNA to reposition themselves in the market to ensure future prosperity and financial stability.

It is not change management, it is much bigger. It’s a journey. Transformational change is the proactive steps that a business takes to totally change its vision, business plan and operating structure.

Transformation is divided into three types, including:

  1. Operational transformation- – involves reflecting on business processes and how to make them more efficient and effective
  2. Operational model transformation – thinking outside the box or looking at new ways of doing things
  3. Lasting strategic transformation – altering the DNA of a business.

Why transformation?

Business transformation is either a result of business owners anticipating change in the market and shifting to accommodate and capitalise, or it is generated by the company’s desire to go in a different direction.

There are many reasons a company will undertake a transformation. These include:

  • A changing business environment
  • Keeping innovation at the forefront of the business, providing themselves with a competitive advantage
  • Operational changes to meet shift in consumer or client demand
  • Anticipating unexpected changes or competition in the market
  • Redirecting the business towards a new strategic goal

In conclusion

Business Transformations and Turnarounds, although different, both require focus and the experience of specialists that understand the underlying business problems to put strategies in place to produce results, short and long term.

A business turnaround needs to be quick and requires a clear focus on producing immediate results. A turnaround is crucial to survival and needs to be prioritised by the directors and senior management of the business.

A transformation on the other hand focusses on a comprehensive (managed) change. It is owned by the directors and management of a company, by acknowledging that in order to ensure long term success, longer term and lasting changes need to be made.

No matter what is required to ensure business survival, Turnaround or Transformation, it is imperative to seek specialist advice or bring in an expert as early as possible to develop, implement and drive the appropriate plan of action. Assigning a specialist enables management and staff to focus on looking after retaining customers and resuming business as usual.

Contact Us

If your business struggling and you can’t focus or address this, talk to us. Callsara’s Consultants have extensive hands on experience in developing and successful execution of Turnaround and Transformation management strategies. Contact us today to discuss.

Callsara Consulting Group