I was delighted to take part in the Social Business Arena within the huge CeBIT fair today in Hannover, speaking about the need for better ways to manage and measure digital transformation (see slides below).
- Digital Transformation needs to focus on creating the organisational capabilities required to compete in a VUCA future, and we should measure its success by what it enables the organisation to achieve.
- To do this, we need a better way to envisage and manage change in the organisation that is much more grounded, and more effective, than existing top-down efforts.
- Big data + human sensor networks give us a way to involve everybody in organisational transformation, and to measure its results in close to real-time
Digital transformation impacts on various aspects of a company’s operations, typically starting at the edges with better ways to engage customers and partners and then moving deeper inside to influence products, services and business models. But none of these new digital, connected approaches can succeed without creating the right organisational structures to support them. Most obviously, this affects the way we think of enterprise IT, its role and its architectures; but it also has huge implications for how we create more agile, responsive teams, structures and practices within the business.
>You may also be interested to read our research report on The Barriers to Digital Transformation which includes our latest thinking on organisational structures and agile attributes.
The link between what we make and how we make it is clear. The typical cascading hierarchy model has persisted for so long because our products and services had long lifecycles and little customisation, which meant that organisations could be optimised to repeat them over and over again without much variation. But now, products and services are changing all the time, which means structures and processes over-optimised for the past are more dangerous than useful.
Social platforms and tools are obviously helpful in weaving lateral connections and communities in counter-point to the top-down flow of power within strict hierarchies, but without organisational transformation there is a real limit to what they can achieve. Increasingly, organisation reaching a plateau of social tool adoption, partly because of these limits. The next stage is about adapting the way we work to take advantage of the new capabilities social and digital technology make possible.
One problem, however, is the way organisations think about ‘change’. Change tends to come from the top, based on analysis of problems or pain points, and often driven by external consultants. The resulting big-bang change projects often fail and rarely sustain. Also, they assume that it is possible to predict specific future scenarios and align new structures towards them, but of course the world is increasingly volatile and resists precise prediction. Instead, we need to prepare for change becoming a constant factor in how the business is run, and we need to to create the adaptability and flexibility to cope with it.
Social tools, in promoting the idea of working out loud, give us greater ambient awareness within the workplace. But they also give us two very powerful transformation tools: a human sensor network of that can tell us what is working and what is not, and an increasingly rich set of data about networks, behaviour and how work gets done. Typically, analysts assume that big data in the enterprise will be used to measure and monitor individual performance with increasingly more detail – an approach the Economist recently dubbed the Quantified Serf. But what if we also use this data to let people hold up a mirror to the performance of the organisational structure itself, tracking organisational health measures to determine if these structures are helping or hindering value creation? That is what we refer to as the Quantified Organisation.
This approach to agile transformation gives companies a better way to create structures and practices that are fit for purpose, but it also involves the workforce and, crucially, allows for different approaches and goals in different parts of the organisation. What works for agile teams close to the customer may not work for running a production line, and the structures salespeople find useful are not always the same as how engineering would like to be organised.
So, there may be no perfect target operating model for companies to prepare for, but we can derive a set of capabilities required to cope with changing market dynamics and then measure the progress of our digital transformation actions towards achieving them, informed by the data and feedback of our human sensor network. This suggests the need for an iterative, sense and respond approach that we might think of as agile transformation: define user stories that express required capabilities, prioritise transformation actions according to what helps us achieve them, and continually review and respond based on results. Instead of occasional big-bang top-down change projects, organisational transformation should become a regular feature of management at every level, using the people-power of human sensor networks and data to measure outcomes.
Digital transformation needs clear goals and a way to measure success. Simply changing things because we believe doing so will lead to some unspecified future benefit is not good enough, but nor does it make sense to manage and measure transformation according to strict, short-term ROI metrics. Instead we need to know what the purpose of the organisation is, and what capabilities it requires to fulfil that purpose, given what we know about changing market dynamics, and use these to guide digital transformation efforts. To do this, we need to equip managers and team leaders with the tools and techniques to make agile transformation part of their everyday management, so that change really can become routine.
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