Some thoughts about the evolution of digital transformation, and how it is being forced upon everyone in real time.
Former General Electric CEO, Jack Welch, once said,
“If the rate of change on the outside exceeds the rate of change on the inside, the end is near.”
As the race towards evolving business into the next economy continues, many organizations are already identifying and embracing the idea that all human communities, including organizations and business, are essentially the same at the fundamental, communication and collaborative level.
Adoption of virtual collaboration platforms and remote work technologies has exploded, and many leaders had already understood the radical shift that was coming across the entire business landscape — but didn’t anticipate the speed at which the shift would take place as the result of a global pandemic.
Truly agile organizations are emerging as the keyword mantra to define, not just the goal, but the very key to survival in midst of this new tidal wave of transformation.
The rate of change external to each of our organizations is now so massive, no organization can really ensure it is changing faster than the external system.
Global interconnectedness, the rapid speed of ideas in a digital economy & new means of working and collaborating means that change will only continue to accelerate.
As the flow of information increases, companies are gaining competitive advantages by shifting their focus from efficiency to their ability to learn and respond rapidly to new information.
As we shift into the next economy, companies are realizing that adaptability and iteration speed are paramount, necessitating a fundamental rethinking of corporate structures and information systems.
Previous organizational strategies were designed for job functions that were mostly routine and static.
Hierarchical systems of command and control allowed senior leadership to drive efficiency and predictability but at the expense of adaptability, free information flow, and rapid response.
Survivors and thrivers are now being forced into greater adaptability and iteration speed.
An agile organization must be built to learn and respond rapidly by optimizing for the open flow of information; encouraging experimentation and learning on rapid cycles; and organizing as a network of employees, customers, and partners motivated by shared purpose.
A number of fundamental shifts in corporate structures and information systems are required to take advantage of the increased speed of information.
- From Efficiency to Responsiveness
- From Heirarchies to Networks
- From Controlling to Empowering
- From Extrinsic Rewards to Intrinsic Motivation
- From Office & Office Hours to Anywhere & Anytime
- From Customers & Partners to Community
- From Efficiency to Responsiveness
Historically, competitive advantages came from optimizing for efficiency and labor productivity of standardized product, with companies such as Walmart and Ford being common examples.
As the flow of information increases, the competitive advantage is held by the organization that can react the fastest to new information.
Companies achieve increased responsiveness by reducing the friction of information flow, increasing their iteration rate, decreasing their cost of failure, and optimizing their structures for adaptability.
From Heirarchies to Networks
Organizational hierarchies were optimized for efficiency and predictability. They centralized authority to eliminate duplication of responsibilities, but as we are quickly finding, at the expense of responsiveness.
Organizing into networks, rather than hierarchies, reduces coordination overhead that slows down execution and thus increases the ability to make and test decisions.
A robustly networked organization improves information sharing, which in turn enhances information quality, context, and alignment through increased transparency.
The open flow of information in an organization gives those empowered individuals maximum context and connections with which to make decisions and provides greater accountability through transparency.
Controlling to Empowering (Routine to Non-routine work)
As information flows faster, the pace of digital transformation will continue to accelerate. Job descriptions, organizational structures, budgets, and processes are will become obsolete faster than they can be updated.
Even long before this pandemic, since 1975, the number of jobs requiring non-routine work has increased by 50% (from 40% to 60%).
These trends were already leading to increased pressure to exchange bureaucracy for trust – empowering more of the workforce to act autonomously, instead of escalating to a central authority which creates bottlenecks and slows decision-making.
The need for rapid, autonomous decision-making changes the role of management from managing tasks to empowering individuals.
The quickest response time occurs when a person learning new information can make high-quality decisions and act immediately, regardless of their position in the org chart.
Extrinsic Rewards to Intrinsic Motivation
Organizations have historically used performance targets and rewards to motivate employee behavior toward predictable business outcomes.
As adaptability and rapid iteration become key drivers of business performance, organizations are recognizing that targets often discourage experimentation, discourage failure, and limit adaptability.
As information flows faster, targets become obsolete and can become counter-productive before leaders can update them.
In order to motivate the right behavior, employees must be aligned on common objectives, be encouraged to experiment, and be provided an environment in which they gain autonomy, mastery and purpose.
These factors help make organizations more adaptable and positively impact employee engagement.
Organizations in the top decile of employee engagement outperform their peers by 147 percent in earnings per share, and have 90 percent better growth trend than their competition.
Office Hours TO Anywhere, Anytime
Until recently, workers needed to regularly be in the office during business hours to get their jobs done, due to limited collaboration technology, lack of access from outside the corporate firewall, and reluctance on the part of management to give up the illusion of control over their workers.
Companies that survive will only do so by taking advantage of these advances in technologies that enable collaboration without being co-located and they are becoming increasingly comfortable with employees working more flexible schedules.
The ability to connect with anyone from anywhere at any time increases the speed at which information from anyone in the organization can be shared and acted upon.
From Customers & Suppliers TO Community
Historically, customers and partners were treated as separate, independent entities, by separate, independent parts of the organization.
Additionally, the flow of information among customers and among partners was slow, and thus sentiment and relationships could be largely controlled by silos of marketing, sales, and partner relationship teams.
These factors kept the feedback channel narrow and on a long cycle time.
Today, the shift in how we operate with the rapid adoption of technology has empowered customers and partners to communicate and collaborate as networks, with more rapid information flow than companies can control.
Organizations are recognizing that it takes a network to serve a network, and to treat themselves, their partners, and customers as parts of the same extended organization.
This broader network enables access to better information, faster feedback, and collaboration beyond the traditional company boundary.
These Trends Mean…
- Participation NOT Consensus
- Decentralized networks NOT Flat
- Transparency NOT Nothing is private
- Anywhere & Anytime NOT No value in in-person/slacking off at home
- Experimentation, some failures are okay NOT Completely unpredictable results
- Decreasing cycle time NOT Lack of long term point of view
- Adaptability NOT Lack of Direction
- Empowerment NOT Lack of Leadership
- Intrinsic motivation NOT Ignoring business objectives
As an early stage company, these are the things we built for before this global pandemic forced the chaotic, instantaneous shift in business operations.
If we can help you navigate through your digital transformation and decentralization imperative, let us know ASAP! We’ve got a team of crazy successful, wicked smart people, always up to mentor, advise and consult. All you have to do is reach out!
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