Digital organizations that have already adapted to the Brave New World have significant competitive advantages. They have developed new organizational designs that allowed them to transform and experiment while maintaining the lifeblood of their companies. A study by Deloitte in 2016 identified that 74% of companies do have a digital strategy already. However, their level of readiness to put it into place is very low. Just 15% of organizations in the Deloitte report feels that they were effectively equipped to bring about success in the digital environment. What new organizational designs can these organizations implement for digital transformation?
Agility for the Digital Age
There is one common description that applies to most successful companies that have transformed for digital, and that is: agile. Agility drives success because businesses need to be able to respond quickly and definitively to new opportunities in the digital environment. This is because the speed of change has increased, and both opportunities and threats arise quicker than ever before. Technology is evolving extremely rapidly. And to take advantage of this, the organization has to evolve at least as rapidly as the technology. It needs a certain level of agility to provide the organization with the ability to change direction quickly and decisively, with large, more cumbersome organizations finding ways to mimic the approaches of small start-ups to be able to compete.
Flat Digital Organisational Structures
Digital organizational structures are typically flat and able to adapt quickly to change. They are not set in stone. And, they can morph iteratively to meet the needs of the organization. The traditional hierarchical chain of command does not gel very well with the needs of the digital enterprise. This is because it is slow in terms of being able to make decisions. By the time the decision to be made has escalated up to the level of authority that can authorize it and passed back down to those who need to implement it, the moment has passed in the digital world, and the business has moved on — with the opportunity missed.
This means that flat structures with staff that are capable and proficient and can be empowered to make decisions within a broad but defined sphere of authority are likely to be most successful. Not all types of decisions will suit to this way of working. Organizations will need to find ways to quickly identify the decisions that should be made quickly and with agility, rather than those that might require a consensus.
The Role of Culture in the New Organisational Design
New organizational designs will only work if there is a corresponding and well-aligned organizational culture that permits the structure to work. “The way we do things around here” is how they describe culture. In new organizational designs, the way people do things in the organization will need to change if the organization is to continue being effective.
Cultural change within organizations is not easy. But, it is necessary to ensure the culture will support the new organizational design for digital transformation. Leadership will need be bought into the change. They must define the expected behaviours, values and attitudes that is considered appropriate. For these to be followed, the leaders will have to explain why the change is important for organizational survival and competitive advantage. They will also need to model the desired behaviours and way things should be done consistently. So that these become the accepted new ways of working.
The Implications of New Organisational Designs for Employees in the Digital World
The time of employees working in the same job for a number of years have passed for many occupations and job roles. Employees will find that the same jobs may not even exist for several years, and they will need to gain new skills and operate differently over time to succeed. For many employees this is advantageous. In my experience, it means that employees can learn new skills and they are not likely to stagnate in any role. By the time they might feel as if they are doing so, the job will most likely have changed. Learning quickly and working on gaining new skills, and seizing opportunities as they arise, will be the traits of the most effective employees in organizations that are either undergoing digital transformation or are already transformed.
As we have seen, we should expect employees to change the way they work to help the organization to succeed in a digital environment. They will need to quickly grasp what the expected behaviors are, and embrace organizational change. This change may be occurring very frequently.
Four Types of Organizational Design for the Digital Age
With all of the issues of transforming to digital in mind, Deloitte developed four models of organizational design. Companies can consider these models when finding ways to adapt to digital and the rapidly increasing speed of change. Organizations is moving between the different models, as they also represent steps towards a digital organization. The different models are Tactical, Centralization, Champion and Business as Usual.
Tactical — one where digital technology adopts within the functions of the organization to deliver existing business imperatives. This may mean adopting digital marketing or using digital technology to bring about change. While all of these initiatives may bring about benefits and value, they do not look at the bigger picture of the whole business. With this, the possible benefits of a joined-up approach may be missed. This model is very common when there is a desire to be digital but without having put in place an overarching strategy to achieve this.
Centralization — this operates through setting up a central digital unit . It ensures that digital strategy is delivered through coherent initiatives across the business units. It does provide opportunities for identifying threats or possibilities in the market. In belief, this is somewhat of a transient approach as the organization moves to become increasingly digital in nature. Over time, the digital unit should be dispersed with its responsibilities to the relevant parts of the organization.
Champion — one where is there is a digital strategy. This has been well-communicated throughout the organization. There is not a central digital team. Rather, everyone shares knowledge throughout the organization, and the emphasis is on improving performance in the digital environment. In this type of organization, everyone understands what “being digital” means. And that specific strengths like data analytics and innovation are important to success.
Business as Usual — occurs when digital is no longer something unusual or out of the ordinary to be working on. Rather, digital is part of the daily operations of the organization. Such businesses are responsive to change, flexible and adaptive, scanning the business environment and adapting accordingly. There is no centralized digital team. This is the optimal level of digital transformation that organizations would benefit from aiming towards.
People or Machines?
One question I often get asked when discussing digital transformation is whether people will or should be replaced by machines. Organisations want to know what is best for the most effective move to the digital age. In reality most digital transformation will require both people and technology to succeed and new organisational designs will include both. Over time, the roles that people do may change as a result of advancing technology in machine learning. In these cases it is unlikely that people will become obsolete, but rather that the roles they do will change.
For example, robotics programmed with machine learning and artificial intelligence. They may take up roles in the new organizational designs where they carry out automated repetitive tasks, continuously improving in these activities through their learning capabilities. This makes sense, as manual processes are likely to introduce more errors. On the other hand, people might become responsible for checking and validating the work of machines. They may undertake new roles in the organization design where they tackle difficult problems that are hard to program a machine to process. From a cost perspective, it does make sense to embrace machine learning for digital transformation. However, the most effective organizational designs will be those that deploy both people and machines effectively. This is to benefit from the distinct capabilities and advantages that each has over the other.
Summary
New organizational designs for digital transformation are likely to differ significantly from the past. They will be more agile and flexible, which will usually mean flatter and more empowered. It will require organizational change to drive new ways of working within these designs. This is to ensure that the culture most optimally supports the company in operating effectively. Leadership will need to drive this change and display the desired behaviors to ensure adaptation. Yes, it is possible for machines to replace people in some cases. But it will still bring value in new roles in the organizational design which may not even exist currently.
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