Part 10: Untangling the complexity of Digital Transformation

The idea of this 10-part series was to untangle the complexity and the many facets of the Digital Transformation challenges large organizations face today as the topic has moved to the top of the agenda of virtually every large corporation.

In this final instalment, I’d like to revisit and highlight some of the key arguments we made, and outline some perspectives for future work.

The role of digital technology in the overall value creation of any business has become so prominent, that we witness a radical reshaping and dissolution of traditional industry boundaries as virtually every business is becoming a technology company.

No matter if it is food, travel, entertainment, construction, automotive, agriculture or any other sector – they all are more and more dominated by the digital paradigm.

As a result, companies must deal with ever-new waves of disruptive technologies that impact every aspect of their organization as well as their business ecosystem.

Cloud Computing, Social Media, Augmented Reality, Virtual Reality, Blockchain, Artificial Intelligence, Big Data, the Internet of Things – all of these and more have hit businesses over the last decade, and each of them requires a certain level of technical acumen, organizational capabilities, and skill sets to design and implement new solutions.

At the same time, as it is impossible to build all these capabilities inside one organization, companies are forced into collaborative architectures with powerful digital giants that emerged over the last two decades. In this process, we witness the emergence of a new paradigm of organization: networked units of cross-industry value creation that require novel ways of digital business ecosystem strategy and leadership.

In their totality, Digital Transformation Challenges constitute a system of highly interdependent variables that all feed on each other

It comes with little surprise that such a ubiquitous phenomenon, that uproots the world as we knew it, is challenging corporate leaders to the core.

Managing ambidexterity; creating agile strategies, structures, and mindsets; organizing for customer centricity and co-creation; leveraging big data; dealing with massive skill gaps and talent shortage; assuring ubiquitous digital acumen; innovating products and services; shortening strategic response times; upgrading legacy systems; staying on top of new developments; creating a culture that embraces change; empowering the periphery – the list of issues companies need to address concurrently could go on and on. It is mind-boggling and overwhelming.

The good news is that we found a good basic understanding of these digital transformation challenges as discrete issues. However, trying to map them as an integrated whole creates astonishing complexity. In their totality, they constitute a system of highly interdependent variables that all feed on each other.

Untangling them is a challenge in itself, and we hope that our analysis helps to structure the arena. Addressing them all at the same time might over-strain any company’s ability to deal with change, but their interdependence also means that emphatic efforts to get one element right will have reverberations throughout the system.

In its very essence, it’s a multi-disciplinary and multi-functional challenge that cannot be addressed from one angle alone.

When it comes to who should deal with this exponentially mounting challenge, many intuitively look first to the domain of the CIO as the traditional home of technological know-how.

However, while the new demands are significantly reshaping the role of the IT function, our conversations with senior leaders made it very clear that no function remains untouched. Digital transformation impacts the entire operating model of an organization.

It redefines the roles and the identity of strategy, marketing, sales, HR, R&D, communication and more, and it reconfigures the established collaboration patterns among the key stakeholders of the internal and external enterprise system.

As such, digital transformation is in its very essence a multidisciplinary and multi-functional challenge that cannot be addressed from one angle alone. As Tom Linckens, Executive Vice President and Chief Information Officer of the German media giant Bertelsmann put it:

“This is not any longer only a task for technology nerds and for technology departments – it’s a challenge and a task for everybody.”

The transformation and collaboration imperatives the various functions face leads to an increasing fuzziness of functional boundaries, which in return creates an identity challenge for each of them.

Gaining a deeper understanding of the reconfiguration requirements of each functional role and the resulting dynamics of their interplay is an exciting avenue for further investigations.

After all, redefining and reconfiguring the traditional functional organization is a core task when it comes to reinventing the operating model of the firm.

Equally important seems to us to gain more insights into the changing role of corporate governance in light of the ascent of value creation networks that transcend the traditional boundaries of an organization – a topic which we have started to explore in a new recent CFFO research project.

Coda

The sweet spot for transformation is a focus on issues of culture and mindset, driven and supported by a collaborative strategic dialogue across traditional functions and hierarchies

At the end of each interview, we asked our sample of leaders what they believed to be the most important lever to drive digital transformation. No matter which functional area they represented – there was a consensus that the most promising avenue to cut through the digital knot is not a technical one; the sweet spot for transformation is a focus on issues of culture and mindset, driven and supported by a collaborative strategic dialogue across traditional functions and hierarchies.

Addressing this sweet spot with courage and discipline will unleash a joint process of ongoing strategic and organizational change – which in itself will quickly become a showcase of how to compete for the digital future.

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We hope you enjoyed this series on Digital Transformation Challenges in Large and Complex Organizations, which is based on a qualitative study conducted by the Center for the Future of Organization at the Drucker School of Management at Claremont Graduate University.

If you would like to get immediate access to the entire analysis of our findings, you may download an electronic copy of the report at no cost here, or get it as a physical booklet here. In return, we’d love to learn about your perspective – feel free to comment and/or share your experience with the subject. Thank you!

Other articles in this series

• Digital Transformation Challenges – Part 1: Introduction and Overview
• Part 2: Is Digital Transformation really so special?
• Part 3: The three buckets of digital transformation initiatives
• Part 4: The agility challenge
• Part 5: Agility in practice: the swarm organisation @Daimler
• Part 6: The ambidexterity challenge
• Part 7: The Connectivity Challenge and the Art of Dealing with Boundaries
• Part 8: Organizing for Transformation – the Governance Challenge
• Part 9: The People Challenge

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