What’s the Difference Between Digital Transformation, Business Model Transformation, and Operating Model Transformation?
The terms Digital Transformation, Business Model Transformation, and Operating Model Transformation are often used interchangeably, but in reality they each represent distinct yet interconnected concepts that are pivotal drivers of change in growing organizations.
Each one plays a crucial role in reshaping the way businesses operate, deliver value, and achieve their strategic goals. But more often than not, it’s impossible to activate one without the other.
In this article, I’ll define each term, shed light on how they collectively contribute to the modernization and success of transforming organizations, and reveal why it's rare – even impossible – to take on any one of these without the others.
What is Business Model Transformation?
In essence, Business Model Transformation is a reconfiguration of the fundamental ways in which a company creates, delivers, and captures value.
The way we like to talk about it at Tuckpoint is in regard to how a company makes money and stays competitive in the marketplace.
It usually involves a strategic shift from traditional business practices to innovative and disruptive methods that better align with evolving market demands, emerging technologies, and changing customer behaviors.
More often than not, taking on a Business Model Transformation will necessitate a Digital Transformation because the newly-defined revenue streams usually entail expanding into digital offerings, given the nature of our global digital world.
What is Digital Transformation?
Digital Transformation is the process of integrating digital technologies into various aspects of a business, which leads to fundamental changes in how the business operates and delivers value to its customers.
It asks us to figure out how technology can and should be leveraged by all corners of the organization. It goes beyond rolling out a digital product or creating a website, challenging organizations to use digital tools, technologies, and strategies to enhance and streamline operations, improve customer experiences, and innovate in new ways.
But as much as we talk about technology when we refer to Digital Transformation, the reality is that the work is as much about people and business processes as it is about the platforms and capabilities companies are adopting.
To successfully transform, a cultural shift is required. Which brings us to the next term.
What is Operating Model Transformation?
Operating Model Transformation refers to a strategic reconfiguration of how an organization's processes, structures, and resources are aligned to achieve its business objectives.
It asks organizations to make significant changes to its core operating model, streamlining workflows, breaking down silos, adopting new technologies, implementing new frameworks, and redefining roles and responsibilities within the organization.
This aspect of transformation deals heavily with people and requires teams to utilize new ways of working. It’s practically impossible to take on Digital or Business Model Transformation without also taking on Operating Model Transformation because humans are the key to unlocking sustained change.
Why You Can’t Have One Without the Other
Did you know that 70% of companies say they’re undergoing digital transformation, yet most stall out before hitting their future state?
At Tuckpoint, we can usually attribute the loss of momentum to a failure to address Operating Model or Business Model Transformation at the same time. In 2023, it’s nearly impossible to take on just one type of transformation without another.
Let’s say your organization is undergoing Business Model Transformation. You’ll probably also need to take on Digital Transformation to create relevant offerings and, as a result, will have to tackle Operating Model Transformation to establish new ways of working in support of those digital experiences.
Or, let’s say the organization is taking on a Digital Transformation. A Business Model Transformation may not always be necessary, but an Operating Model Transformation will be critical to your success because old “linear” organization structures, initiative funding models, and siloed teams can’t scale to support the kinds of customer-centric digital experiences companies are investing in.
While each of these terms has a distinct role in transformation, it’s critical to understand that biting off one likely means you’ll actually need to tackle all three.
For related reading, check out these articles:
Operating Model Transformation Is the New Digital Transformation
3 “Aha” Moments About Digital Transformation That Will Save You a Lot of Time and Heartache
Is Culture Blocking Your Transformation? Here Are 3 Evaluation Criteria to Find Out
Talent Management for Digital Transformation Part I: Defining Your Strategy