Digital Economy Dispatch #139 -- How to Create Flexibility and Alignment to Drive Digital Transformation

Digital Economy Dispatch #139 -- How to Create Flexibility and Alignment to Drive Digital Transformation
9th July 2023

It always fascinates me to see how differently people react to the same situation. The opportunity recognized by one person is avoided at all costs by someone else. Where some people step back when they sense danger, others are attracted toward it and are excited by the challenge it brings. A strategy of slow, careful moves to maintain a clear path by one team is contrasted with rapid activity and a chaotic free-for-all by another. It is something that I’ve seen in every organization and team in which I’ve been involved.

Beyond idle curiosity, paying attention to these differences matters. It plays an important part of a digital leader’s role in understanding how work gets done. By observing these distinctions, it places a focus on many questions important to those responsible for digital transformation initiatives. What are the priority steps to successful transformation? Which aspects of our work can evolve at what pace? How do we scale and align change across the organization? How fast can we go in making changes?

Br recognizing these differences in how people view a situation, we can highlight how important this alignment of perspectives can be in influencing digital transformation success. It facilitates a coordinated view across the organization that enables flexibility to respond to changes.

Flexibility by Aligning the Organization

A key to successful digital transformation is to focus on how individuals and teams coordinate to deliver products and services in times of substantial digital disruption. This has been seen to be critical as organizations become more flexible in their ability to drive growth, and to react to changes in market conditions by moving quickly into new areas, adapting to different delivery channels, and forming new alliances as necessary to deliver more efficiently. In examining the objectives of these “elastic enterprises”, five key elements can be essential, as highlighted by Vitalari and Shaughnessy:

1. A clear business strategy where business rules and relationships are well-aligned to address customer needs and support value-driven opportunities;

2. The development of a healthy business ecosystem where interacting participants in the business are motivated to deliver major functional capabilities and services to support the organization’s business goals;

3. Explicit creation of universal connectors to services offered by the organization through interfaces that encourage and leverage business partners;

4. Use of Cloud infrastructure for rapid deployment and low overheads in the internal management of critical core services and external delivery of capabilities to clients and partners;

5. A leadership approach that recognizes the transformational impact of digital business and is unafraid to drive the organization in new directions toward reshaping its role, purpose, and operating model.

This alignment is especially important with respect to the leadership style that is adopted. Management in such “elastic” organizations must support teams with an aligned approach toward leadership, strategy, and decision-making. Unfortunately, traditional top-down hierarchies are unlikely to work effectively in such fast-changing circumstances. The bureaucratic approach developed during the industrial age emphasized the importance of productivity and efficiency through standardization and rigor. Hierarchical management models helped to organize large teams into manageable units aimed at achieving a common purpose through adherence to shared processes.

Alternative models have been proposed to add flexibility while emphasizing alignment. For example, in the information driven age that followed, several successful companies leveraged their insights and access to new knowledge to build organizations based on meritocracy. Rational analysis and current expertise were prioritized as they helped to coordinate activities and future directions. Strategic decision-making was based on evidence drawn from data. Teams align around the expertise of the leaders, supported by this evidence.

However, such organizational models have been challenged as sub-optimal in many digital transformation situations characterized by massive uncertainty and an ambiguous interpretation of which actions to take. Here the focus must necessarily be on speed of reaction to the weak signals received, with strategic intuition and opportunistic risk-taking playing a more significant role. This opportunistically-focused adhocracy approach is based on a fast-paced experimental learning cycle that encourages a form of “planned serendipity”. Alignment requires encouraging everyone in the organization to recognize the values that guide decisions and demands an incentive system that rewards taking managed risks.

Many companies’ strategic approach to problem-solving is a critical determinant of the organization’s dominant culture; highlighting the way problems are handled is particularly illustrative in understanding the differences across the range of organizational models. For example, when bureaucratic organizations solve complex problems, they would typically rely on their hierarchical management structure to understand roles and responsibilities and ensure everyone is on board, delegating and escalating decision-making as necessary. In contrast, problems faced in a meritocratic organization are solved through collecting data and using rational data-based arguments to justify a particular course of action that everyone buys into. In an adhocracy, the default problem-solving approach is to experiment to learn more, using feedback to refine direction, keep everyone up-to-speed, and continue operating through swift act-learn-refine cycles.

Bend Don’t Break

We recognize that understanding and alignment of different perspectives is crucial for successful digital transformation. Yet, it's fascinating how people react differently to the same situation - some avoid opportunities, while others are excited by challenges. By aligning perspectives, organizations can influence digital transformation success and respond flexibly to changes. Different elements of your digital transformation can play a role here, including a focus on clear business strategies, a healthy business ecosystem, an open service architecture, cloud infrastructure utilization, and a transformative leadership approach. When supported by appropriate leadership styles, this alignment drives a flexible and more “elastic” approach to organizational resilience.