Digital maturity is the goal to which most companies should aspire when trying to compete. Thinking about digital transformation you should avoid over analytical approach that is divorced from what most companies are dealing with today and avoid overly shallow hype-driven treatment.
Digital maturing companies are organized differently. That are more likely to rely on cross-functional teams and they push decision making to lower levels of organization. Leadership is also different in digital environment. Basic are the same, just enacted in a different environment.
Knowing digital disruption is happening and doing something about it are entirely different matters. William James noted that the purpose of knowing things is to act in accordance with that knowledge. But that is not always the case. The gap between the 87 percent who said digital disruption will affect their industry and the 44 percent who said their company is doing enough is, in a word, staggering. Jeffrey Pfeffer and Robert I. Sutton described this phenome as knowing-doing gap. They refer to it as a reason why there is so little actual correlation between theory of business and actual practice. They believe that too many managers want to learn how in terms of detailed practices and behaviours and techniques, rather than why in terms of philosophy and general guidance for action.
With so many new technologies like AI, blockchain, social media, mobile technology, possibilities for business are growing and changing all the time. But sometimes due to competency traps (beliefs that the factor of past success will also lead to future success) company don’t use them.
The biggest threats to companies as a result of digital trends are internal issues like lack of agility, complacency and inflexible culture. Companies can say: “We have met the enemy and he is us.”
Digital business is bringing faster pace. And technology is enabling the entrance of new competitors. This is bringing tremendous pressure on culture change to dynamic model. Some of the Silicon Valley companies are playing with idea of “core-periphery” model where company relies on group of core employees, which the company plans to invest in and nurture while tactically leveraging networks of external on-demand talent.
William Gibson is claiming that the future is here, it is just unevenly distributed. Digital disruption is happening, the current state is unevenly distributed across industries. Leaders of digital maturity are from technological, telecommunications and media sector.
Learning and adapting is in the heart of tackling digital disruption and that is why talent is important. And talent is about skills and attitude. With the right attitude people can develop skills they need to work and learn in the fast moving and ambiguous conditions that are at the heart of digital business.
- Technology is changing faster than individuals can adopt it (the adoption gap).
- Individuals adapt more quickly to that change than organizations can (the adaptation gap).
- Organizations adjust more quickly than legal and societal institutions can (the assimilation gap).
Technology development don’t threaten organizations, the threat comes when someone realizes that new technology presents new ways of solving business problems. Individuals now have sometimes easy access to new technologies and are able to gain quicker fluency with new technologies. This is relatively new situation. Ten to fifteen years ago it was business that had quicker access to new technologies.
Many of the most influential management thinkers have argued that firms exist solely because it is easier to do certain things within a company than outside it. With rise of new technologies that can help individuals with transactions and knowledge transfer, threatens the very reason that organizations exist. This is why it is so important to understand organization’s absorptive capacity. It is an ability to identify, assimilate, transform and use external knowledge, research and practice. It depends on absorptive capacities of organization’s individuals’ members and how different parts of company transfer information to one another.
Digital maturity is about balance approach to digital disruption to deal with the changes at hand.
An organization’s culture, people, tasks and structures all occur within a given digital environment, which interacts with these elements; they need to be realigned as this environment changes. Digitally maturing is a flexible process by which the organization can continually adapt to a changing technological environment, realigning its people, culture, tasks and structure in response. Maturity can be defined as the ability to respond to the environment in an appropriate manner. Maturity has five elements relevant to digital environments:
- Maturity is a gradual and continuous process that unfold over time.
- Gradual maturation should not be confused with less significant changes.
- Organizations may not fully know what they will eventually look like when they begin to mature.
- Maturation is a natural process, but it will not happen automatically.
- Maturity is never complete.
Digital meaning should be seen more as an adjective than a noun. It doesn’t have distinct identity of its own, but is changes other nouns. Companies can have digital marketing, strategy, talent, leadership or culture.
Digital maturity can be measured as three categories of companies: early, developing and maturing. Digital maturity is not uniform across the organization. A healthy recognition that your organization falls and will always fall, a little short of the ideal is an important element of maturity. A digitally mature mindset recognizes that digital disruption represents both an opportunity for and a threat to your organization and responds appropriately. Action plan for reaching digital maturity should address what process, talent, technology and operating principles need to change, as well as which ones need to remain constant.
A clear and coherent digital strategy is the single most important determinant of a company’s digital maturity. David Rogers in his The Digital Transformation Playbook argues that digital forces are disrupting five key domains of strategy: customers, competition, data, innovation and value.
Digital strategy is a recursive process of identifying the overall goals of digital business, developing short-term initiatives that get the organization closer to the goal and then rethinking the nature of those goals based on what organization has learned from those short-term initiatives.
The biggest barriers to digital maturity are too many priorities. Estimating tradeoff between established and new business initiatives as exploration and exploitation is very difficult. Charles A. O’Reilly and Michael L. Tushman refers to organizations that effectively balance the needs for exploration and exploitation as “ambidextrous organization”.
Developing digital strategy is a recursive process involving three steps in a repeating loop:
- See differently
- Think differently
- Do differently
Deloitte’s John Hagel advocates using ten-to-twenty-year timeframe for thinking about digital strategy.
Digital strategy is about adapting the organization to a changing environment in a way that leads to a sustainable competitive advantage. The academic concept of affordance can facilitate the proactive view of digital strategy. A key implication of an affordance perspective on digital strategy is that it shifts the focus from the features of the technology to how technology enables new strategic actions for people and organizations to engage. False affordance are actions that do not have any real function. Digital strategies are particularly susceptible to false affordance. Digital strategy isn’t just thinking about new initiatives that still support doing business in the same way. It is about rethinking how you do business. It involves new services, sources of revenue and interacting with employees.
The goals of digital strategy differ by maturity stage. Early stage companies focus mostly on improving customer service and engagement. In addition to these goals, developing companies, however, are most likely to add transforming the business to these strategic goals. The real path toward digital transformation may only begin once companies reach the maturing stage.
We can also talk about hidden affordance that refers to strategic moves enabled by technology that aren’t apparent when you first adopt it. They reveal them-selves as you begin using the technology.
Progressive affordance suggest that certain capabilities must be mastered before subsequent capabilities can be tackled. Companies often move from efficiency/customer experience to improving innovation/decision making to business transformation.
Leaders not only need to create a vision that people can rally around; they also need to create the conditions that enable digital maturity, largely by attracting the best talent and bringing out the best in the talent they attract.
In a digital environment, organizations must shift from a world of “scalable efficiency” to one of “scalable learning”. Hagel sees leadership in the future not about having all the answers, but around being able to frame the right questions. New model of leadership is about creating environment the inspires people to learn faster and moves the group to work together to find the answers.
Genotype of leadership is still the same – providing purpose and facilitating collaboration. But phenotype can change, since those fundamental traits will be expressed differently in a digital environment. Core leadership capabilities that are important today:
- Direction: Providing vision and purpose.
- Business judgment: making decisions in an uncertain context.
- Execution: empowering people to think differently.
- Inspirational leadership: getting people to follow you.
- Innovation: creating the conditions for people to experiment.
- Talent building: supporting continuous self-development.
- Influence: persuading and influencing stakeholders.
- Collaboration: getting people to collaborate across boundaries.
Mistakes that leaders make when it comes to digital leadership are thinking that leadership fundamentally changes in digital environment and second one is that they think that they can do it in the same way. Doing things digitally does not automatically make one effective leader.
Leadership in digital age is not only about technology. Leaders must give employees opportunity to succeed. Employees should be provided with adequate training and they should be provided with time and space to adapt.
Communication tools and platforms are different in digital environment. Trust in digital environment will be based on radical transparency. Moving from a hierarchical command-and-control organization to more agile or more distributed leadership organization is challenging. Two factors that are important technical mastery and leadership.
Providing vision and direction have been long-standing essential components of leadership. But in digital environment, they take on new importance with an emphasis on future change. Understanding technology is also important. A leader who is not digitally literate will not be able to keep abreast of emerging trends and developments to understand how those trends can bring new value to the organization and employees. A leader must be change oriented, open minded, adaptable and innovative. A digital leader’s knowledge “stores” must be continually updated to account for changes in technology. Once leaders have the necessary digital literacy, the transformative forward-looking vision and the change-oriented mindset, they must also be able to deliver and decisively lead the organization into the future.
Capabilities needed from leaders in digital environment:
- Providing vision and purpose
- Creating conditions to experiment
- Empowering people to think differently
- Getting people to collaborate across boundaries
The main change in leadership is creating culture of distributed leadership. Strong digital leaders identify the changes necessary to adapt and they focus relentlessly on them. They see the disruptive trends in advance and make a conscious effort to do something about them.
Companies are looking for people with balance of hard and soft skills. Technical and business skills. Companies need people who can change, grow and be agile to help their organizations do the same. One reason that being change oriented may be so important is that we are seeing an unprecedented rapid skill deterioration. A key facet of developing digital talent is cultivating a growth mindset. Digital talent is less about skills, but more about aptitude and what they will be able to do tomorrow. Millennials are strong on technology, but they have a lot to learn about organizations and business.
Given the changing skill-set landscape and rapid skill deterioration, individuals and organizations both need to build a culture of continuous learning and foster and encourage growth mindset, which are key to continual evolution and adaptation.
John Halamka BIDMC’s CIO strategies for developing skills and capabilities in his people:
- Develop existing personnel
- Establish co-op programs with local colleges
- Learn from collaborative partnerships
- Recruit externally for targeted skills
Learning has to go beyond training. Driving new knowledge creation through practice in the workplace, rather than in the training room. Salesforce has a learning platform called Trailhead, where employees can learn and teach from one another.
Maybe leaders in digital age should consider additional interview questions like: what have you learned lately that makes you a more competent and capable employee in a digitally maturing organization and how you helped someone else to learn something.
Organizations that aspire to digital maturity need to be talent magnets. While attracting, retaining and developing talent are distinct challenges, these challenges are related.
Investing in talent and giving people opportunities to develop address the need to continually grow and learn. Distributed leadership allows for more decision making and ownership without always having to »run it up the chain«. And while meaningful work or purpose is different for everyone, it helps to have a clear and coherent digital strategy that is tied to the overall corporate strategy.
Expand your search for talent beyond your industry. Hire leaders from other industries who can begin to infuse the company with digital mindset. These leaders are often called »anchor hires«, because they attract digitally minded employees who want to work for them. Don’t forget about external relationships. Companies are increasingly turning to platforms for access to on-demand digital talent.
Technology will disrupt work in the future. It is not so much a question whether that will happen, but when. If managers have a good understanding of what disruptions are likely on the horizon, they will be better able to focus on signs or triggering events that indicate when particular changes will happen.
Future of work will probably not be about full-time employment. It will be about lifelong learning. Individuals will need to chart their own career path in ever changing environment. Growth mindset and ongoing learning will help them with that. Tom Davenport and Julia Kirby talk about different ways in which employees can pivot their career path in response to digital disruption:
- Step up
- Step aside
- Step in
- Step narrowly
- Step forward
Dealing with changes will lead to organizations and individuals looking for sweet spot where as Frederick Buechner said world’s deep need and the individual’s deep joy meet. WEF is talking about ikigai spot. It is not technology that strips away meaning; it’s the tacit assumption that the workers themselves are commodities that can be easily replaced.
Managers should spend less time on task oversight and project management and more time on coaching, mentoring and developing their teams.
Culture is important in almost every discussion of digital transformation. It’s about how an organization behaves, what if values, its unspoken but deeply embedded beliefs.
Edgar Schein from MIT describes three levels of organizational culture:
- Artifacts – what we see.
- Espoused values – what they say.
- Underlying assumptions – what they deeply believe in and act on.
Early and developing companies push digital transformation through managerial directive or by technology provision. In contrast, maturing companies tend to pull digital transformation by cultivating conditions that are ripe for transformation to occur.
Digital cultures are like snowflakes, no two are alike. But just as snow-flakes share a common set of distinct characteristics, digital cultures also share common and distinct traits. Digitally mature organizations are:
- Less hierarchical and more distributed in leadership structure.
- More collaborative and cross-functional.
- Encouraging of experimentation and learning.
- More bold and exploratory, with higher tolerance for risk.
- More agile and quick to adapt.
Building digital culture should be intentional. Agile is one element of digital culture. Agile enables organizations to master continuous change. It permits firms to flourish in a world that is increasingly volatile, uncertain, complex and ambiguous. Some principles that agile is based on are: collaboration and communication among key factors and process of developing the product. Agile teams don’t develop a grand plan for digital transformation; rather take on small action at the time, assess its effect and do it again. Strategic agility is ability to adapt to a changing market environment that occurs as the result of new or evolving technological developments.
Traditional hierarchical structures are not adapted to handle quick changes, cross-functional teams are better at it. They have three strategic advantages: they can act more quickly; they can tackle separate initiatives and pursue various options simultaneously and they encourage employees to think differently.
Julian Birkinshaw describes five lessons learned from ING Group’s agile journey:
- Shifting power from executives to others in the organization
- Prepare stakeholders for the leap
- Build structure around customers and keep it fluid
- Balance between oversight and autonomy
- Provide employees with development and growth opportunities.
Another potential development in organization is build a modularity. This can be used in talent management. Using on-demand talent markets as strategic resource pool. Combination of core people and on-demand talent pool can be maintained if you create effective delegation model. To do that you need know how to source critical skills, how to assemble teams and how to use decision support tools effectively to meet the goals.
The nature of work in a digital age requires organizations to work more across functions, become more agile and operate more iteratively. Digital collaboration tools can help groups communicate vastly more efficiently and effectively. Specifically, platforms provide two key capabilities in the enterprise context that support better and more intentional collaboration: managing networks and sharing content.
Managing networks is about visibility, transparency of behavior and defining and populating structural holes. Regarding context it is about transparency and permanence of content. But that is not enough, content is valuable to organization only to the extent that it is actually used. Both transparency and permanence of content support an organization’s transactive memory. Transactive memory describes the extent to which people are aware of who knows what in organization, so that they are able to access that knowledge when needed.
Companies should aim at intentional collaboration. Connecting with like-minded people is enjoyable, but it often reinforces existing biases and degrades effective decision making.
James Surowecki in his The Wisdom of Crowds identify conditions under which groups can come together and make stronger decisions than as individuals:
- The group has diversity of opinion.
- Group members make decisions independently from one another.
- Decentralization enables individuals to draw on local knowledge.
- There is an appropriate mechanism for aggregating individual opinions to make decision.
The goal of intentional collaboration is collective intelligence. Most of the times the biggest barriers to collaboration are organizational. Many digitally maturing companies are also thinking about collaboration across the boundaries of the organization – customers, partners and even competition.
Being innovative is not only about innovation, it is about cultivating an organizational environment that is conductive to innovation. A key approach to successfully navigating digital disruption is experimentation. Experimentation is challenging in most traditional companies because they don’t have the necessary mindset for experimentation. The problem is that traditional companies think of experimentation in terms of success or failure. Instead, the outcomes of an experiment should be measured in what was learned, not whether is succeeded. Companies need to manage risk as portfolio and keep failure within a certain tolerance level. Understating why something went wrong is where the insights are found and where the learning happens for the organization. You should clearly identify and intentionally engage in processes that help the organization learn from its experience.
Digitally maturing companies have found a way to be innovative amid the need to maintain business operations. You should balance explorations with exploitation in organizational learning. You need not only to learn, but also to learn new ways of learning. And you need to be consistent. As Drucker pointed out, if diligence, persistence and commitment are lacking, talent, ingenuity and knowledge are of no avail.
The process for making practical progress toward digital maturity and ultimately becoming a digital organization involves three distinct steps. Your goal is to reimagine how works gets done at your company, how it will align with the future of work and how it sets the stage for cultivating a digitally maturing organization. Steps are: assess, enable and mature. The standards for maturity keep changing as technology keep evolving. So, development goes from:
- Exploring digital efforts (early stage)
- Doing digital initiatives (developing stage)
- Becoming digitally mature (maturing stage)
- Being a digital organization (aspirational goal)
Being digital is part of the organization’s DNA and not an alternative approach of acting or being. DNA traits can be seen in those spaces:
- Organize: structure, physical space, capabilities and geography.
- Operate: process, technology, talent and governance.
- Behave: policies, rewards, leadership and performance management mechanisms.
Digital DNA Traits that are needed most by organization:
- Continuously innovating
- Real time and on demand
- Shifting decision rights and power
- Modulating risk and security boundaries
- Geography agnostic
- Morphing team structures
- Intentionally collaborative
- Dynamic skill building
- Changing nature and types of work
- Constant disruption
- Customer centricity
- Democratizing information
- Managing multimodal operations
- Synchronizing ways of working
- Productive mobility
- Changing mix of traditional and nontraditional stakeholders
- Flattening and changing hierarchy
- Continuous ecosystem disruption
- Constantly changing decision criteria
- Falling forward, learning faster