Organization Of Digital Transformation
Published: 15 January, 2022
Organizations today must adapt to the rapid changes in technology. Linear growth is no longer enough. The new focus: exponential growth, rapid adaptations, and changes through digital transformation and innovations. What will organizations look like in the future? What impact will the digital transformation have on companies? In this article, Digital Leadership will guide you through digital transformation and organization design, including tips on how to transform organizations digitally and how to adapt to digitalization today.
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When it comes to digital transformation, companies usually always ask themselves the same fundamental questions:
- Who should be the primary force to drive digitalization?
- What is the best model for digital transformation & organization within a company?
Although these are fundamentally important questions, they are usually answered way too hastily. A wrong decision early on can have major consequences for companies and send them down the wrong path in the long term. Companies often rush into digitalization and carry out digital transformation without a real understanding of their own goals or the creation of a long-term plan.
Companies are equipped much better for digital transformation if they take into account the following three aspects:
- Defining their overarching goals
- Strategically selecting the digital model that is right for their organization and capabilities
- Gradually and carefully introduce the overarching strategies into the organization. Simply executing individual projects will lead to frustration, failure, and wasted money.
Where the implementation of digitalization begins
Many CEOs want to hand over the responsibility of digitalization to someone else, often hiring a Chief Digital Officer (CDO) right away. But these quick and rushed actions can lead to bigger problems instead of benefits.
Digitalization and digital transformation are not just computers or cell phones. It involves countless areas, all of which have to do with the customer – whether it’s marketing, back office, in-store promotions, decision-making based on data, or accounting. Digitalization affects all areas of a company thus decision-making should be with a clear strategy established prior.
This is reflected in the organization and governance. A company that cannot establish digital roles, clear authority, and decision paths for digital transformation will always face major setbacks and failures in the transformation. Likewise, a completely new model created from scratch can overwhelm existing teams and negatively impact their performance.
In short: any organization looking to execute its digital transformation faces a multitude of questions and opportunities. Some questions are about strategy, some are about functions, some are about management, and some are about culture. Thus, there should be clear stages that companies want to adapt and achieve at the strategic and organization & leadership levels.
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Goals and digital strategies for companies
Organizations usually only digitize their existing systems without rethinking the fundamental elements of their organization. The digital transformation of a company means that everything has to be rethought and new approaches have to be found. Linear models are no longer sustainable and companies must give way to digital and scalable business models.
This leads to companies needing to clearly define their goals and make sure they can answer at least these 3 fundamental questions.
- What is the big (overarching) goal of the company? Digitalization should be seen as a service to this goal and not as an effort of some sort. It has to align with the goal of the company.
- In which areas can digitalization support and drive the company’s goals? For most companies, it is impossible to digitize all areas at the same time due to a lack of capacity and resources. So it is important to create a clear list and prioritize the areas that add the most value.
- How ready is the company for digitalization? Companies must have the right skills to be able to implement projects properly. Examples include the digital skills of the employees but also the necessary infrastructure. If these are not in place, they should be built first.
Should a company build internal capacity for digitalization?
When it comes to implementing digital strategies, the question often arises of whether to focus on internal or external capacities.
If the goal is to sustainably integrate digital activities into the organization, companies will need to build their own digital capacities and hire internal specialists. The aim should be to engrain the digital mindset into the company as quickly as possible. This also includes the help of specialists with the necessary knowledge of digital transformation.
Often, the question of whether or not to appoint a Chief Digital Officer (CDO) to oversee and drive the implementation of the digital strategy arises. In some companies, this may be a good idea. However, depending on the structure of the company and the specific needs, a centralized team for digital transformation may work better.
The benefits of a centralized team include the advantage of having a spokesperson on the executive board who drives the change. A decentralized system means being able to monitor many different areas at once and often leads to easier adaptation as the change is carried more broadly into the organization. However, it may also lead to slow or little information exchange and no overarching global strategy.
The hybrid approach can offer a combination of both of these systems: the decentralized units ensure implementation in the individual functions while the centralized unit initiates and coordinates many things at once.
Should a company have a separate department for digitalization?
Generally speaking, a separate department is advised if the company’s ambitions for digital transformation focus on a completely new business model and the necessary capacities and specialists are still scarce. If companies try to work like start-ups or launch digital transformation projects as a new “small company”, then an independent construct can be perfectly suitable.
However, since this model is completely different from existing structures, the two systems can collide during implementation. These differences may be more or less severe depending on the company and should be taken into account when planning your strategy.
Integration into an existing organization
Ultimately, you have to be aware that changes that deviate strongly from the current corporate culture will often lead to more resistance and will take longer accordingly. If you consistently adopt the corporate culture, you will be able to implement digital strategies much easier and smoother in the long term. Companies must aim to fully implement digitalization in their day-to-day business. Digital transformation and organization design are crucial for every company strategy today.
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