Organizational changes to consider in pursuing digital transformation

As digitalization continues to drive significant change across industries, more and more companies recognize the need to transform for the future. In my previous blog, we discussed the three key areas that a digital transformation strategy should cover—organization, business model and technology. In this blog, we’ll delve deeper into the first area—organization. What organizational changes are required to prepare for and succeed at digital transformation?

Large organizations face an inherent challenge

Organizations grow as they capture market share and expand their reach and value propositions. As they increase in size, they benefit from economies of scale, as well as a greater ability to attract more customers, build assets and maximize investments. However, growing larger can have its downsides, including increased complexity, as well as less innovation and risk taking. In addition, ingrained cultural norms make cultural change difficult.

For large organizations, transformational change can be a major challenge. Cultural change typically takes six months per layer of the organization, and—for most organizations—it requires a three to four year program. This amount of time can be problematic in today’s fast moving digital world, where customers expect instant, real-time responses and whose needs are constantly evolving.

Becoming smaller, agile and customer focused

In today’s knowledge age, with evolving customer demands, highly competitive markets and economic uncertainty, organizations need to adapt quickly and intelligently. Small disruptive businesses built around digital-centric business and operating models are able to move quickly to seize value as new opportunities emerge. As these small and focused organizations grow, they can scale quickly and inexpensively, leveraging shared platforms and services that are paid for based on utilization and aligned with their revenue growth.

What can large organizations do to respond to these pressures and become a truly digital business? Leading organizations are moving toward clusters of smaller, autonomous business units that are more agile in responding to market changes and where decision-making takes place closer to the customer. These organizations are focused on putting the customer first, simplifying their operations and modernizing their technology solutions. They’re investing in change that enables them to operate as a small, agile and customer-focused organization, while still maintaining the competitive advantages they enjoy as a large organization.

Embracing collaboration and a curious mind-set

In recent years, the supply chain discipline has led the march in moving from a supplier mentality to a partner mentality where organizations share, collaborate and innovate with outside partners to improve overall performance. Traditional value chains are disintegrating as we move to a more networked, collaborative and shared economy. Establishing your place in this kind of ecosystem has become a critical strategic move.

Leading organizations also are investing in creating a culture that values a curious mind-set. Such a mind-set drives innovation and is prepared for change as the market dictates. It’s both informed by and driven by the customer and also focuses on keeping employees motivated and engaged. These organizations are treating employees like customers, so that employees, in turn, are motivated to provide an excellent customer experience. (Read related blog on “A new model for driving innovation.”)

Strategy and roadmap

Like any journey, digital transformation requires a strategy and roadmap. Organizational change should be a part of any digital strategy and roadmap. Digital transformation is more than just about technology; it requires enterprise-wide organizational shifts, with support from top management and concentrated efforts to ensure adoption.

If you want to learn more and continue the conversation, I would welcome the opportunity to talk to you about our ideas. Feel free to contact me.