When we try to define what a “digital organization” is, what first comes to mind are technological devices: employees toting laptops, permanently connected to a shared, real-time flow of information on virtual platforms, constantly communicating with customers or suppliers – people working from anywhere, with others they have never met in person.
But digitization is more than just a change of tools. Daily practices, workplace structures, reporting relationships, information sharing, customer interaction, and even competition are also thereby transformed. Becoming a true digital organization is not just about becoming tech-savvy. It means embracing a new culture and mindset, where hierarchy fades and innovation happens through networks.
Drucker Forum 2015: Managing in the Digital Age
This post is one in a series of perspectives by presenters and participants in the 7th Global Drucker Forum.
At the company level, it is quite clear that digital maturity is synonymous with stronger economic growth and a higher level of well-being for employees. In a study conducted with Google Europe, Roland Berger assessed the digital maturity of French companies, looking into three distinct dimensions: equipment, practices and uses, and organization and skills. We found that the more digitally mature companies grew revenue at six times the rate of their less mature counterparts. Beyond this financial impact, employees in the digitally advanced companies also reported a 50% higher index of well-being at work. Mature digital organizations are characterized by a flexible, less hierarchical culture where employees enjoy a real autonomy and the possibility to express their creativity. No wonder employees like them.
At a more macro level, the possibilities opened up by connected, more efficient production and new business models are also highly promising. A study conducted by Roland Berger with the Bundesverband der Deutschen Industrie (Federation of German Industries, or BDI) found that, if Europe harnessed digitization, by 2025, the continent could see its manufacturing industry add gross value of 1.25 trillion euros. The risks of failing to digitize are equally dramatic: from missing out on digital transformation, European industries could suffer potential losses of up to 605 billion euros in the same period.
Nevertheless, we should be careful not to overestimate the boon of digital transformation. For example, we are only beginning to understand digitization’s effects on unemployment. In 2013 Carl Benedikt Frey and Michael A. Osborne from Oxford University calculated that about 47% of American jobs could disappear by 2020 due to digitization. Roland Berger applied its methodology to the French labor market and estimated that 42% of French jobs could be at risk. Not surprisingly, low-skilled jobs are most threatened, but even intermediate jobs could also be affected. These include administrative or middle management functions, which have historically provided jobs for the middle class.
Management’s challenge is to figure out how to capture the benefits of digitization, while minimizing the costs – and making sure those costs are shared and not borne disproportionately by one group.
This places additional responsibility on managers, in terms of anticipating changes in skills, adapting our training policies, and empowering our staff – in other words, ensuring that digitization makes, within our companies, more winners than losers. While the goal is ambitious, there are many things managers can do to evolve their conventional organization into a digital one while ensuring that employees are keeping pace.
The first step managers need to take is to assess their organization’s purpose and vision. What are the organization’s goals? Why does it need digital transformation to achieve them? This in turn gives rise to more tough questions: Which jobs will be crucial to the company in the next years? Which jobs will be less crucial? How many employees are potentially affected? How should we adapt our training and recruitment policies?
The second step towards digital transformation is to acknowledge that technical devices are not the main issue. Instead of designing tools and implementing them in a top-down approach, managers should rely on their staff’s digital maturity, which is often higher than they might assume. For instance, in our study on the digital maturity of French companies, we saw that while nearly six in 10 French people shopped online in 2013, only one in 10 French companies sold online that same year. This gap means that, in most organizations, the employees’ digital maturity offers significant untapped potential. Managers should encourage their staff to suggest and experiment with digital solutions, and allow them to adapt these into their work practices.
The third step is about developing an organization that will foster digital practices. It means changing, step by step, from a traditional functional, siloed organization into a modular one with a loose alliance of autonomous and multidisciplinary teams. Research shows that modular organizations reach digital maturity with greater ease. They want to encourage distributed decision-making and empower middle management. This change is happening more commonly than we think. After all, when HR people routinely talk to finance staff, they are effectively working as members of a cross-functional team. Recognize these teams formally and empower them with digital tools, so that they can reach a higher degree of autonomy. While these teams will not replace the traditional organization, they will work from within to reform it.
Managers and employees will need to navigate the digital frontier together, and this requires a new set of leadership skills. Ultimately, success in the digital age lies not in the efficiency of technology, but in the dexterity and adaptability of the people who wield it.
This post is one in a series of perspectives by presenters and participants in the 7th Global Drucker Forum, taking place November 5-6, 2015 in Vienna. The theme: Claiming Our Humanity — Managing in the Digital Age.