Digital organisations that have already adapted to the Brave New World have significant competitive advantages over those that have not yet embraced change. They have developed new organisational designs that have 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, but their level of readiness to put it into place is very low. Just 15% of organisations in the Deloitte report felt they were effectively equipped to bring about success in the digital environment. What new organisational designs can these organisations 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 organisation has to evolve at least as rapidly as the technology. A certain level of agility is needed to provide the organisation with the ability to change direction quickly and decisively as needed, with large, more cumbersome organisations finding ways to mimic the approaches of small start-ups to be able to compete.
Flat Digital Organisational Structures
Digital organisational structures are typically flat and able to adapt quickly to change. They are not set in stone, and can morph iteratively to meet the needs of the organisation. 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 been 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 who can be empowered to make decisions within a broad but defined sphere of authority are likely to be most successful in this environment. Not all types of decisions will be suited to this way of working, and organisations 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 organisational designs will only work if there is a corresponding and well-aligned organisational culture that permits the structure to work as designed. Culture is typically described as “the way we do things around here”. In new organisational designs, the way that people do things in the organisation will typically need to change if the organisation is to continue being effective under a new design.
Cultural change within organisations is not easy, but it is necessary to ensure the culture will support the new organisational design for digital transformation. Leadership will need to all be bought into the change and then they must define the expected behaviours, values and attitudes that will be considered appropriate. For these to be followed, the leaders will have to explain why the change is important for organisational 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 times 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, as well as seizing opportunities as they arise, will be the traits of the most effective employees in organisations that are either undergoing digital transformation or are already transformed.
As we have seen, employees will be expected to change the way they work to help the organisation to succeed in a digital environment. They will need to quickly grasp what the expected behaviors are, and embrace organisational change — which may be occurring very frequently.
Four Types of Organisational Design for the Digital Age
With all of the issues of transforming to digital in mind, Deloitte developed four models of organisational design that companies can consider when finding ways to adapt to digital and the rapidly increasing speed of change. Organisations can be seen moving between the different models, as they also represent steps towards a digital organisation. The different models are Tactical, Centralization, Champion and Business as Usual. Each is considered in turn.
Tactical — the Tactical Model is one where digital technology is adopted within the functions of the organisation 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, and 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 — the Centralization Model operates through setting up a central digital unit which 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. This is believed to be somewhat of a transient approach as the organisation moves to become increasingly digital in nature. Over time, the digital unit should be dispersed with its responsibilities to the relevant parts of the organisation.
Champion — the Champion Model is one where is there is a digital strategy, and this has been well communicated throughout the organisation. There is not a central digital team, but rather, knowledge is shared throughout the organisation, and the emphasis is on improving performance in the digital environment. Everyone understands what is meant by “being digital” in this type of organisation, and specific strengths like data analytics and innovation are important to success.
Business as Usual — the Business as Usual Model occurs when digital is no longer something unusual or out of the ordinary to be working on, and rather, digital is part of the daily operations of the organisation. 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 organisations 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 may take up roles in the new organisational 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 organisation 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, but the most effective organisational designs will be those that deploy both people and machines effectively to benefit from the distinct capabilities and advantages that each has over the other.
New organisational 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. Organisational change will be required to drive new ways of working within these designs, 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. People may be replaced by machines in some cases, but will still bring value in new roles in the organisational design which may not even exist currently.
Originally published at https://www.linkedin.com.