The 4 aspects of becoming a digital organization

In this article, four essential aspects of transforming your company into a digital organization will be outlined. Robin Weninger, the professor of our Global MBA in Digital Business, will take a look at what it takes to become a digital organization. You will get an insight into what management, leadership, and execution mean in today’s digital times and how external parties may influence your business.

The ongoing digitalization that is taking place in today’s time has a huge impact on our lives and the business world. In order to survive in the digital age, companies must initiate digital initiatives. Therefore, digital leaders have to embrace a digital mindset first since they are the ones who have to lead these changes. From there, the way to turning a company into a digital organization is not that far anymore. What you need to do is building and enabling digital across the entire company.

In this regard, four different aspects can be distinguished, three of them lying within your company’s own responsibility and one being influenced from the outside:

becoming a digital organization

Alignment

The management part of the digital organisation

The alignment of a digital organization is done by a digital strategy and corresponding processes. It is the everyday management of a business.

Strategy

It is hard to become successful as an organization without establishing a proper strategy. How should people know what is right and wrong if they do not know the way? It is, therefore, crucial to plan a strategy that outlines and shows the bigger picture. Even though strategic management includes expert knowledge and analysis, the key to a good strategy lies in the way organizations translate their strategy into a common language. Summing it up in easy words helps people to understand what they should do and why their contribution matters — the basic need of a digital organization.

Perry Hewitt, Chief Digital Officer at the Harvard University, summarizes that need in one sentence: “There needs to be a sense of where you are trying to go with this and how you will get there — as well as a vision of what fundamental change you want to make and how digital transformation can help deliver it.“ (Source)

Processes

After having built a digital strategy, you need to ensure that you enable your organization to act digital. This is done by analyzing the points of intersection within your value chain creating the most value for the business. Identify your company’s possibilities for digitalization, prioritize and optimize them and spread from there. You will never be a digital organization if you have digital processes that are not of any value. Furthermore, you will neither be a digital organization if you just digitalize any process. Digitalising a bad process will only result in a bad digital process. Get the foundations right from the beginning.

Identity

The leadership part of the Digital Organization

Leading a digital organization requires a strong culture and motivated people with a digital mindset. Thus, creating the right identity is crucial.

Culture

Designing a strong company culture is difficult but possible. Culture is something unique and differs from organization to organization. Even within an organization, culture is not homogeneous. Different sub-cultures within teams, departments, or projects have their own rules and dynamics. A good start is to embrace the pillars of the “Digital Mindset” and combine them with the individual culture. Just make sure that the elements within your culture do not disagree with each other.

Google is a good example when it comes to developing and continuously working on digital corporate culture. In an interview, Jon Kaplan, Google’s vice president of US sales and operations, stated: „As you think about the businesses that we are in and how the company has changed over the last 10 or 15 years, it’s totally different today than when we started. So we have to have leaders, we have to have employees, and we have to have technology that is all very agile for where the industry is going.“

Google’s culture puts a strong focus on agility, innovation and forward-thinking as well as autonomy and teamwork. Kaplan describes it as a test-and-learn culture, meaning that they are experimenting a lot and do not blame anyone for failure but rather regard it as a learning opportunity. In order to measure how Google is changing over time, an internal survey called „Googlegeist“ is conducted at the beginning of each year. Based on the analysis of their employees’ feedback, the organization aims at improving the digital culture continuously.

To learn more from Jon Kaplan check out the interview conducted by Barr Seitz from McKinsey Digital and Marketing & Sales Practice in June 2015.

People

People make culture and that is why digital organizations have to grow their people (as you already know from the digital mindset). Embracing people to be part of the digital evolution can decide on whether your organization succeeds or not. Your people are the ones coming up with ideas and solutions. Hence, you will never enable a digital mindset if your organization does not focus on people. And without this, you will most probably struggle to digitalize.

To encourage your workforce to participate actively in transforming your company into a digital organization, it will be valuable to establish an effective incentive system. Rewarding employees for committing themselves to digital initiatives and bringing in new ideas is likely to reduce their reluctance to change.

A large German technology retailer has, for example, allocated all online sales to the store that was nearest to the location from where the customer has made his online purchase. Like this, salespeople were encouraged to engage more in online sales to improve their performance which increased the share of online sales on the company’s total sales.

This example has been taken from the report „Building a digital culture: How to meet the challenge of multichannel digitization“ written by Ashley Harshak, Benedikt Schmaus and Diana Dimitrova and published by Booz & Company in 2013.

Operations

The execution part of the Digital Organisation

And finally, the last aspect that lies within your own area of responsibility is to implement digital within your organization. Your organization should be willing to do the right things and enable these with suitable technology and appropriate resource allocation.

Action

„Execution really shapes whether your company takes off or not.“ — Pete Cashmore

Without action, nothing will happen. Just talking about digital does not get a company anywhere. A digital organization proactively takes actions to drive the evolution of its business model. Steadiness and consecutiveness are the keys to long-term success. Furthermore, having the ability to change will help to do the right things. Instead of trying to eat the whole beast of digitalization at once, split it up and start with a small chunk.

Technology

Digital without the right technology is difficult. Setting up data analytics without having a data lake or ELT processes does not work. The results will neither be of any value nor will they aid with the evolution of your business. You have to make sure the right technology is in place to unfold the full potential of your digital organization.

Using digital technologies to improve communication within your company as well as to external parties is another crucial aspect of digitalization. Companies are enabled to share and exchange data and knowledge across the globe, replacing the IQ — an individual’s know-how — by the weQ — the combined intelligence of several parties.

Besides allowing for better collaboration, leaders can also use digital tools such as social networks to provide feedback to their employees in real-time. A survey conducted by Microsoft and TNS Infratest shows that 84% of the 1,000 interviewed German employees desire more constant feedback. Only 20% of the respondents stated that they receive faster feedback than before their company started to apply digital tools. These results demonstrate the need for establishing an effective technological infrastructure.
You can read more about the findings of the study please here. 

Resource allocation

Transforming your company into a digital organization does not require acquiring completely new resources but rather reallocating existing resources appropriately. Manpower and budget must be allotted in a way that existing structures are leveraged and a holistic digitalization takes place along the entire value chain. Here, it is especially crucial to avoid wasting money, time, and manpower by duplication of work. In many cases, this represents one of the major problems that companies face on their way to digital.

Politics

The external influencers of the Digital Organization

Establishing digital alignment, identity and operations is your own duty. However, your organization also relies on support by politics regarding the transition towards a digital economy in order to digitalize.

E-Government

Digital technologies can facilitate information, communication, and transaction processes. Governments should, thus, introduce such tools to improve the implementation of these processes — not only within public institutions but also between them and the business world. To ensure secure and appropriate usage of new technologies, politics must introduce certain regulations and guidelines everyone needs to comply with.

Education

Governments must engage in improving the digital competencies of current employees and the future workforce. Especially prospective graduates’ need to be trained as digital affinity will become more and more important in all industries. This results from the digitalization of many professions leading to a transformation of job profiles.

According to the annual report of the Stifterverband and McKinsey in the realm of the Hochschul-Bildungs-Report 2020, universities moan about the insufficient technological infrastructure which makes it difficult to prepare students appropriately for their future in the digital business world. Thus, politics should invest in better digital equipment at universities. Furthermore, governments need to play a major role in education initiatives.

Conclusion

Leading an organization in the digital era requires embracing a digital mindset. But on your road to digital success having a digital mindset will not be efficient as long as your organization and workforce are not enabled and willing to participate in digital initiatives. Four aspects must be considered when transforming your company into a digital organization.

First of all, a company’s activities must be aligned which requires a digital strategy and processes that are designed according to this strategy. These tasks must be fulfilled at the management level.

Secondly, digital leaders must create a strong identity, meaning they must build a strong company culture and put a strong focus on their workforce. Without getting everyone committed, organizations cannot unfold their full digital potential.

Thirdly, the execution of the digital strategy must be made possible through the right technology. Further, careful considerations must be made regarding the allocation of human resources, budgets and time.

Lastly, politics have a huge influence on digital companies. Governments are the ones in charge of establishing the right tools to facilitate a digital economy as well as fostering the development of digital skills.

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AUTHOR:

Robin Weninger
Professor of the Global MBA in Digital Business
Managing Director at GILT

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