June 15, 2018
As the use of digital technologies and data to create new value propositions and operating models becomes more commonplace, workplaces across the world are being affected across sectors, from manufacturing to local government. Almost all areas have been touched by the megatrend, whether from own initiatives or to keep up with competitors. However, Arthur D. Little’s Digital Transformation Study reports that almost 80 percent of companies surveyed were only “digitally adaptive”, with digital efforts limited to products and services at best, and no comprehensive approach to adapting their mind-sets. To help traditional organizations adapt sufficiently to compete with digitally minded start-ups, we have identified four key questions to consider when developing digitalization strategies and the creation of a fully digital workplace.
How can we adapt organizational structures to accelerate transformation?
In order to match the agility and customer focus of digital players, traditional companies need to improve communication and collaboration between their departments. Processes, such as product development, need to flow seamlessly across departments. Collaboration also needs to extend outside the organization to partners and customers.
The choice of which organizational model to adopt to facilitate digitalization depends on multiple factors, including current adoption of digital technologies, intended target picture, urgency of change and risk aversion.
Digitally aware organizations may start with central models. This brings clear accountability and transparency at the expense of a possible “us-and-them” relationship with the wider organization.
An integrated model overcomes this issue, providing greater momentum for change. However, it risks creating alignment issues due to unclear accountability and the difficulty of following a common vision.
The hybrid model combines the positives of the central and integrated models, but is more complex and difficult to deliver.
The end state for many newer, digital-centric companies is a centrally facilitated and fully integrated model. Here digital is fully embedded in the business model, products and services, processes, and mind-set of the company.
What cultural shift is required to build a fundamental advantage over digital competitors?
In order for an organization to digitalize successfully across its layers, it needs to overhaul its corporate culture. Traditional companies, which have often succeeded through creating systems and structures to control complicated tasks, generally have cultures that hinder rather than help digital transformation, and the traits that hold back digitalization need to be identified to move forward. While the technology to enable the digital shift is often already in place, ways of working and thinking within the organization need to be challenged in order for operational culture to change too.
For traditional organizations, this shift is normally around areas such as ways of collaborating, employee mobility, and knowledge creation and storage. In digitally minded organizations, collaboration is often decentralized (such as through social media), video is frequently used and hierarchies are replaced with cross-functional teams. Employee mobility is enabled through cloud solutions, and the focus is on goal fulfillment rather than process, with knowledge built online through communities and networks.
Traditional companies face serious challenges in their digitalization journeys – they are often unaware, sometimes ignorant and most often unprepared for one of the most important battles for their survival. While nurturing their core businesses, these companies need to take a leaf out of the book of digital-savvy players and make structural changes to their organizational models.
About the authors:
Jonas Andrén is a Manager in the Stockholm office of Arthur D. Little and a member of the Strategy & Organization Practice.
Lokesh Dadhich is a Principal in the Dubai office of Arthur D. Little and a member of the Telecommunication, Information, Media & Electronics Practice.
Johan Treutiger is a Partner in the Stockholm office of Arthur D. Little and a member of the Strategy & Organization Practice.
Tove Kjellén is a Consultant in the Stockholm office of Arthur D. Little and a member of the Strategy & Organization Practice.