Defining the Operating Model for a Digital Enterprise

A few weeks ago at the IOM Summit in Cologne, I gave a talk entitled ‘Defining the Operating Model for the Digital Enterprise’ that outlined what I think are the two key foundations of a digitally transformed enterprise:

  1. An operating system that coordinates work more effectively than bureaucratic management
  2. An operating model that engages the organisation in ongoing business improvement

At the summit, most participants worked with social collaboration tools or platforms in their firms, but also a majority reported that they were involved in their organisations’ digital transformation efforts.

Social and digital technology have given us wonderful new possibilities for how we organise and orchestrate work inside the enterprise. But typically, where it is focused only on simple sharing use cases, rather than being the place where work gets done, adoption tends to reach a plateau. The technology is necessary but not sufficient.

Towards a new operating system for the digital enterprise

Even with the best social and digital tech, if an organisation’s operating system remains a vertically-oriented hierarchical system that governs not only employee roles and status, but also communication and the coordination of work, then meaningful change is hard to achieve. All the great new theories and models of the organisation, such as linked circle structures in Holacracy, or autonomous business units in Haier, or the agile tribes, guilds and chapters of Spotify, depend on reducing hierarchy to a minimum viable level and finding new and better ways to coordinate the work of employees.

Also, in my experience, where formal communication flows up and down a hierarchy in closed channels such as email, this produces the kind of toxic and manipulative corporate culture that is one reason why more and more talented people no longer wish to waste their time in large firms. I contrast this to the more collegiate and helpful communication patterns that we see in open, group-based channels such as Slack.

Without a viable replacement for the coordination functions of the hierarchy, we cannot hope to operate new, networked models at enterprise scale because they will always hit a wall of process, procedures or politics, and they will find that vertically-integrated central services such as HR, IT and procurement can block their work. My colleague Christine Overby conducted some research over the summer with executives on the topic of barriers to digital transformation, and we will be releasing the report on this next week. But typically, we see the following barriers in large firm initiatives:

  • leadership culture & hierarchy
  • central departments & bureaucracy
  • top-down approach to change
  • digital skills & employee culture
  • poor / centralised tech
  • competing owners of topics
  • focus on tech, not the org & people

The real killers are the top three in that list, because they form the calcified spine of the old operating system that is currently holding so many firms back.

The new operating system, in my view, is lateral rather than vertical, and it is already proven in early adopting high tech firms: the platform. I have written previously about how I think organisations are learning from software (layers, service-orientation, agile methods, etc) and becoming more software-like. This model promises to transform the way we consider internal support functions and services by focusing them on creating, maintaining and improving individual micro-services that form part of the core operating platform for the organisation. On top of this platform, other teams can use service design thinking to create customer journeys for customer-facing functions that build on these micro-services to create higher level service recipes for running the organisation and delivering value for customers.

From a management perspective, embedding rules, processes and workflows in the platform itself is both simpler and more reliable than using manual control methods to enforce them. From a technology perspective, the organisation can start to create an integrated, internal user experience layer that brings together what is now largely a collection of point solutions and off-the-shelf software. From an employee perspective, I think of this shift as cutting the puppet strings that control them from above and instead embodying processes and workflows in a supporting platform that becomes a stage on which to shine – still guided by stage directions, but with more freedom to perform.

However, this model of a new organisational operating system is not a magic solution in itself. We also need to think about how we operate – how we run the system and adapt the way it works to meet the changing needs and emerging challenges of an increasingly volatile, uncertain, complex and ambiguous world.

Bringing the system to life: an operating model for continuous improvement

We might not be able to predict the future in the way companies were traditionally able to do with scenario planning and horizon scanning, but one thing we know for sure is that the key missing attribute of large organisations today is adaptability. They are too optimised for a single purpose business model and aligned to the past, not the future. So how can we introduce an evolutionary dynamic that lets them flex, respond and change, and perhaps develop the kind of resilience that Nassim Nicholas Taleb describes in his book Anti-fragile?

This is where we can use an Enterprise Social Network (ESN), internal collaboration system or social intranet as a human sensor network to help guide improvements to the organisation and its functions over time. The approach we have described as the Quantified Organisation begins by asking people at all levels to consider the key capabilities the organisation should possess in order to fulfil its strategic goals and respond to emerging threats and opportunities in its markets. At the leadership level, these capabilities are typically quite big and strategic; at the departmental level they are often quite tactical; and, at the level of individual teams, they might consist mostly of simple tweaks, better management techniques or solutions to bureaucratic pain points. We use the ESN to gather these capability targets as agile user stories for the organisation, and then we decide how to measure their progress using a combination of available data (e.g. Social Network Analysis) and by asking our human sensor network, who might also contribute some ideas about what we can do to create a particular target capability.

This simple framework provides a way to bring together all the various transformation actions underway and planned in the organisation, and to view them through a common lens of capability development. In a typical large organisation with lots of different digital initiatives in different areas of the business, this mapping exercise alone can provide great value. We recommend teams at every level of the organisation dedicate a little bit of time each week or each month to improvement sprints that help them move towards these define capability goals, and then to measure their impact, reflect and re-prioritise for the next one. This simple DOT loop (Do > Observe > Think) is a powerful but simple way to guide agile transformation and ensure it continues to align with recognised organisational improvement needs.

Platform thinking starts with internal networks

This provides an important strategic role for your ESN – using it as a human sensor network to help guide digital transformation – and reduces the risk that otherwise accompanies even the best intentioned top-down change programme. But how can the custodians of our ESNs and collaboration platforms get started? One idea is for community managers and communicators to begin gathering and sharing stories of improvement from across the organisation, to highlight existing good practice and improvements. Another is to use the ESN to recruit and energise a network of change agents – people across the business who are committed to new and better ways of working. This network can play a very important role in promoting and guiding digital transformation.

Many of the developments enterprises expect to see in the near future require a common business platform for data and information sharing. Artificial Intelligence (AI), greater use of analytics and the development of a mixed human/machine environment through the use of Internet of Things (IoT) technologies are all very hard to achieve without the lateral connections and common data that a platform can provide.

In most organisations, the social collaboration layer is the best starting point for building out some of the other platform layers, so this is where the conversation should begin about the kind of operating system and operating model the digital enterprise will need. Surely there is no more strategic use case than this for an Enterprise Social Network.

Slides from the session at this link: Defining the Operating Model for the Digital Enterprise
Image by anonymous09210716


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