(by Kane, Phillips, Copulsky, Andrus; ISBN ...)
"Executives cannot simply impose change on organizations, yet grassroots change is unlikely to be sustainable without strong executive support."
"Perhaps the most important observation about the cyclone [from the Wizard of Oz], however, is that the story of the Wizard of Oz isn't really about the cyclone. Dorothy's adventures certainly never would have happened had the cyclone not come to Kansas, but the story is more about Dorothy making her way in this strange new world than it is about how she got there in the first place. In the same way, the story of digital disruption we explore here isn't really about technology. Rather, it is about how companies navigate their way through the new competitive environment to which technology has brought us. … In the book, Dorothy realizes that she can never return permanently to Kansas and remains in Oz. Like the heroine of the book, companies can never return to the predigital disruption world they once inhabited."
"We [in partnership with MIT Sloan Management Review and Deloitte] surveyed more than 16,000 people over four years about their experience with digital disruption and their perceptions of the nature and adequacy of their organization's response. … Each year's survey consists of between 3,700 and 4,800 responses. … We also conducted more sophisticated statistical analyses on our data to confirm that our findings are not purely the result of some other company characteristic, such as company size or age. … We also use two other types of data to augment our survey findings. First, we interviewed more than seventy-five thought leaders at companies like WalMart, Google, MetLife, Salesforce, Marriott, and Facebook. … Second, we augment the insights of our primary research by drawing on established literature in the fields of information systems, management, marketing, psychology, and operations to set our findings in the broader context of management science."
"Established companies in particular typically face significant challenges from digital transformation--one of the biggest is their past success. This is often referred to in the management literature as a competency trap. These are beliefs that the factors of past success will also lead to future success. (Example: GE, Six Sigma--difficult to maintain while also experimenting with new ways of doing business, and FastWorks--which emphasizes Lean Startup principles.)"
"Another key reason for the disparity between knowing and doing is that many executives simply don't understand how quickly this thread may emerge. … For example, profits in the newspaper industry grew steadily well into the dot-com boom, at which point the profits fell off a cliff."
"The biggest threat that respondents reported falls under internal organizational issues, such as complacency, inflexible culture, and lack of agility. In other words, the biggest threat of digital disruption is in the org itself--that the company would be either unable or unwilling to change fast enough to respond to the threats posed by digital disruption."
How is digital business different?
* The pace of doing business--companies have to act & respond faster than ever before
* Mindset and culture--competency traps with successful traditional-mindset employees
* Organizational structure--the need for a flexible, distributed workplace. Part of this is about collaboration, decision-making, and team organization. But this is also about rethinking teams and talent.
* Productivity. "If you're truly going to accelerate performance improvement, you have to stop focusing on efficiency. The more cost-effective and faster you are, the harder it's going to be to get to that next level of efficiency. But if you focus on effectiveness, on impact, on value delivered to whatever the arena is--the sky's the limit. That's a mindset shift, getting out of that efficiency mindset."
What we Know
* Everyone recognizes that digital disruption is happening, but most companies are not doing enough in response
* A key reason for this knowing-doing gap is the tendency of many organizations to underestimate the threat posed by digital disruption and the need to response quickly
What To Do About It
* Ask yourself if your org is part of the 43-percentage-point gap between knowers and doers
* Start with an inventory of the opportunities and threats that the poses for your org
* Sequence the inventory based on potential impact and immediacy
* For each opportunity and threat, describe how you are responding
* Rate each response in terms of its likely effectiveness
* For the areas where your response is less effective than you might like, assess what you might do to enhance or improve your response
* Identify what's getting in the way of a more effective response and what you might need to do differently (i.e., potential interventions)
* Create an action plan for the three most urgent interventions
Adoption: the gap between the rate at which technology changes and the rate at which individuals make those changes a part of their daily lives. … Adoption is not the most critical digital disruption problem most managers face. Individuals generally still adopt technology faster than organizations can adopt to it. … This situation is fairly new. As recently as ten to fifteen years ago, businesses adapted more quickly to technology than individuals did. The reason was simple economics. Prior to the first decade of this century, most people could only afford technology through their employers. As costs dropped, online platforms became widely available, and powerful mobile devices have become ubiquitous.
Adaptation: between the gaps of adoption and assimilation lies adaptation, the gap between how the majority of individuals want (and expect) to use technology to engage with companies and how companies have adapted to support those interactions. … [A] disconnect between individual and organizational technology use represents a real competitive threat. … As companies embrace digital channels for reaching customers, however, this effort can also exacerbate another facet of the adaptation gap--the space between employees and the companies for which they work. ... For example, it was often easier to apply for jobs outside the company than inside it.
Assimilation: the gap between how many orgs use technology and the laws and regulations that societies agree on to govern their use. … For most companies, waiting for the legal policymakers to catch up to practice is not an option.
The main problem posed by digital disruption is not the rapid pace of tech innovation but the uneven rates of assimilating those techs into different levels of human organization. Thus companies can effectively navigate the challenges of digital disruption by undertaking initiatives that are far more organizational and managerial than technical. Only by fundamentally changing the way the organization works--through flattening hierarchies, speeding up decision-making, helping employees develop needed skills, and successfully understanding both opportunities and threats in the environment--can an organization truly adapt. … Cohen/Levinthal introduced the concept of an org's absorptive capacity: the org's ability to identify, assimilate, transform, and use external knowledge, research, and practice. In other words, the rate at which a company can learn and use scientific, technological, or other knowledge that exists outside the firm.
Some specific steps a company can take to increase its absorptive capacity:
1. Expand talent diversity with a goal of increasing prior related knowledge. The challenge here is how to attract the right kind of individuals.
2. Augment the prior knowledge base of individual employees by providing them opportunities to develop skills for working in a digital environment.
3. Enhance the organization's mechanisms for more effectively acquiring knowledge from the external environment, thereby increasing the firm's knowledge base.
4. Increase the velocity of internal information flows through initiatives that range from employee rotation to collaboration tools to redesigned workplaces that encourage serendipitous exchanges among employees.
5. Focus on helping employees understand the "why" that is so important to close the knowing-doing gap.
We have come to believe that that term "digital maturity" may be much more helpful [over "digital transformation"] in seeking to understand how to engage effectively with a fast-moving and continuously changing environment. Digital maturity is aligning an organization's people, culture, structure, and tasks to compete effectively by taking advantage of opportunities enabled by technological infrastructure, both inside and outside the organization.
Organizational congruence: only when the essential components of a business--its culture, people, structure, and tasks--are tightly aligned can the company achieve powerful results.
We believe that the fundamentals of good management haven't become completely irrelevant just because of digital disruption; digital disruption has simply changed the conditions under which those management principles operate, and they will play out differently as a result.
Key challenge is twofold: First, many have not realigned their orgs to account for tech developments and must close considerable gaps between how their orgs operate and what is possible/expected now. Second, pace of change is increasing, making it necessary to continually adapt; some aspects will need to change, some won't.
Why "digital maturity"?
1. Maturity is a gradual and continuous process that unfolds over time.
2. Gradual maturation should not be confused with less significant changes.
3. Orgs may not fully know what they will eventually look like when they begin to mature.
4. Maturation is a natural process, but it will not happen automatically.
5. Maturity is never complete.
Measuring digital maturity
three categories: early, developing, maturing. (Standard bell curve distribution here)
The importance of humility
digital maturity is never complete. A healthy recognition that your org falls--and always will--a little short of the ideal is an important element of maturity.
Another way that companies exhibit a lack of humility is that they tend to view digital disruption in purely optimistic terms. … While viewing digital maturity as an opportunity rises with digital maturity, viewing it as a threat is stable across maturity levels; this is logically inconsistent. If tech represents an opportunity for your org, it also represents a threat for your competitors--and vice versa.
What We Know
* The existence and socialization of a clear and coherent digital strategy is the single most important determinant of a company's digital maturity
* Insufficient technical skills and lack of management understanding of digital trends are usually not the top barriers to the success of digital strategies. The more likely barrier is competition with other priorities for management attention and resources.
Top barriers by maturity stage:
* Early
* Lack of strategy
* Too many priorities
* Lack of management understanding
* Developing
* Too many priorities
* Lack of strategy
* Insufficient tech skills
* Maturing
* Too many priorities
* Security concerns
* Insufficient tech skills
Tradeoff between established and new business initiatives as "exploration vs exploitation"
* Exploration processes are about innovation, often resulting in lower-performing short-term outcomes required to figure out the new processes but better long-term outcomes that result from the new processes
* Exploitation yields better short-term outcomes from orgs doing things in familiar ways but lower overall long-term outcomes by not searching for new ways of doing things
Think differently to develop digital strategy.
* See differently; making sense of the actions possible in the current environment. Determine a single action that will yield the biggest positive impact on the org.
* Think differently: If the "see differently" initiative is successful, consider whether new capabilities may be possible as part of working toward this goal.
* Do differently: Plan a six- to eight-week initiative to make significant progress toward the goal. Leverage significant resources to attempt to work differently in this short period.
* Repeat
Digital strategy is about adapting the org to a changing environment in a way that leads to a sustainable competitive advantage. The academic concept of affordances can facilitate this proactive view: the possible ways that humans/animals can interact with their environment. The environment determines the actions available to the animal, and the animal can alter the environment in ways that change its capabilities for acting. An affordances perspective suggests that merely owning and implementing technology is not enough to deliver business advantage. An affordances perspective suggests that the path toward digital maturity is a recursive process in which technologies and the organizational environment mutually influence one another over time, rather than being a linear progression. (Tech creates new opportunities to work differently, and working differently creates new opportunities to infuse tech into the work process.)
Concept of hidden affordances suggests that orgs need to grow into effective digital strategy. Early-stage focus mostly on improving customer service and engagement. Developing-stage tend to focus more on improving innovation and business decision-making. Maturing-stage are most likely to add transforming the business to these strategic goals (all goals come into play).
False affordances are actions that do not have any real function. (Placebo buttons: crosswalk buttons or elevator close buttons.) Case study: two clothing brands. One invested in flashy techs in its flagship store, such as digital dressing rooms, RFID-tagged clothing, and sophisticated recommendation engines; turned out to be more of a novelty than delivery of real value. The second, Zara, used IT infrastructure to deliver "fast fashion" by looking for inspiration from popular designs and getting the clothing to the marketplace in a matter of days--yet the IT infrastructure that drives these advantages is relatively rudimentary from a tech perspective (Zara spends about 25% of the industry average on tech).
Collective affordances recognize the need for an org to use the possible actions performed by tech in a way consistent with or complementary to other users within the org. Groups that tended to gravitate toward a common set of actions with a new tech performed better than groups in which the individuals used the tech in divergent ways. Need for collective affordances raises the importance of strong communication between management and employees to effectively enact digital strategy.
What We Know
* An affordance perspective suggests that the value of the tech is found in the new capabilities it enables for your business, not simply in owning it. As with duct tape, a single tech may elicit many possible strategic moves.
* Hidden affordances refers to strategic moves enabled by tech that aren't apparent when you first adopt it. They reveal themselves as you being using the tech.
* Progressive affordances suggest that certain capabilities must be mastered before subsequent capabilities can be tackled. Companies often move from efficiency/customer-experience to improving-innovation/decision-making to business-transformation.
Fundamentals of leadership
* Direction: Providing vision and purpose.
* Business judgment: Making decisions in an uncertain context.
* Execution: Empowering people to think differently.
* Inspirational leadership: Getting people to follow you.
* Innovation: Creating the conditions for people to experiment.
* Talent building: Supporting continuous self-development.
* Influence: Persuading and influencing stakeholders.
* Collaboration: Getting people to collaborate across boundaries.
Diagnosing mistakes in understanding the nature of digital leadership
1. Many leaders mistakenly believe that the genotype (the set of genes that an organism carries, the genetic blueprint for the organism, fixed at conception and unchanged through the organism's life) for successful leadership fundamentally changes in digital environments, and thus ignore many tried and true leadership lessons and experience.
2. Many leaders mistakenly think that the phenotype (describes the physical characteristics of the organism, which results from interactions between its genetic blueprint and the environment) of good leadership will somehow be unchanged in a digital environment; it will necessarily be expressed differently in a radically new environment.
3. Many leaders mistake the outward expression of digital leadership for the phenotypic expression of good leadership in a digital environment; doing things digitally does not automatically make one an effective leader.
Digital leaders focus on the business value of initiatives and invest appropriately
Digital leaders lead from the front
Digital leaders equip employees to succeed (adequate training, ensuring adequate resources are available online, move employees within the org more frequently so that they can learn other ways of doing things from coworkers, …)
What We Know
* Strong leaders are critical for digitally maturing companies. Of respondents from digitally maturing companies, 90% said their leaders have the skills necessary to lead, vs 25% from early-stage companies do.
* There are core leadership skills that good leaders always need, but additional leadership skills are needed in a digitally maturing environment
Skills for digital leaders
* Transformative vision: Knowledge of market and trends, business acumen, problem solving skills
* Forward looking: Clear vision, sound strategy, foresight
* Understanding technology: Pre-existing experience, digital literacy
* Change oriented: Open minded, adaptable, innovative
* Strong leadership skills: Pragmatic, focused, decisive
* Other: collaborative, team builder
What traits do leaders need more of?
* Providing vision and purpose
* Creating conditions to experiment
* Empowering people to think differently
* Getting people to collaborate across boundaries
What We Know
* The most important skills for succeeding in a digital environment are strategic thinking, change orientation, and growth mindset
* Most respondents are dissatisfied with the opportunities their org provides to develop relevant digital skills
* The trend of continual learning is not driven just by millennials. Employees of all ages reported a desire to work for digitally maturing companies that allow them to continue to develop their digital skillset
First, make good use of the talent you have
Don't lose the talent once you have it
Passive recruiting exacerbates the talent threat
Survey: How are companies primarily strengthening digital innovation capabilities?
* Early
* Hiring contractors/consultants
* Don't know
* External relationships
* Developing employees
* Developing
* Developing employees
* External relationships
* Hiring contractors/consultants
* Recruiting digital employees
* Maturing
* Developing employees
* Recruiting digital employees
* External relationships
* Recruiting digital leaders
Look outside your industry for fresh perspectives
Leverage talent beyond your four walls
Encourage talent to leak within your organization; companies are increasingly adopting a "tour of duty" model, in which employees spend a fixed period in a certain assignment, then move on to another assignment, which may be entirely different.
What We Know
* Developing your employees is a necessary, but not sufficient, means of securing talent required to compete in a digital world. Acquiring and retaining talent are also key.
* Developing and retaining talent are interrelated. Employees reported being up to fifteen times less likely to leave their companies within a year if they received developmental opportunities.
* Primary reasons employees gave for wanting to leave an org were concerns with company viability and lack of opportunities to continue to enhance digitally relevant skills.
* Even digitally maturing companies reported needing more talent. They know that they possess a recruiting advantage and reach out regularly on LinkedIn and other platforms to cultivate desirable employees.
* Attracting sufficient digital talent requires assessing what skills will be needed in the future, locating to attract talent, and leveraging talent outside the industry or company.
Implications for Individuals: "Pivoting" on the career path
* Step up. Choose to develop the skills that will make them more valuable and marketable in a digitally disrupted business. Ex: pursuing advanced degrees, continuing skill development.
* Step aside. Develop strengths in areas that are not easily disrupted by tech, such as emotional IQ or tacit knowledge that isn't easily codified (creative skills or tradecraft).
* Step in. Begin to develop their skill set for the digitally disrupted industry.
* Step narrowly. Specialize deeply in an area that computers are not likely to disrupt in the near future.
* Step forward. Attempt to get out ahead of digital disruption and develop the technology that will represent the next wave of disruption.
What We Know
* Tech will continue to disrupt all types of work, even if we do not know precisely how and when that disruption will happen. Paradoxically, work about to be disrupted may become particularly valuable before disappearing.
* For the work of the future, people will have to be lifelong learners, acquiring new skills to help them address the needs and opportunities created by digital disruption.
Digital culture is often described as being "in the air" or part of the "vibe" of a place. Culture is not optional. Culture is often defined as the social behavior, norms, and beliefs of a group. It is not just what is written in a mission statement or a code of ethics; it is what people in the org believe to be the accepted patterns of behavior. An inflexible culture, complacency, and lack of agility are cited as the biggest threats companies face because of digital trends.
Three levels of organizational culture:
* Artifacts. What we see.
* Espoused values. What they say.
* Underlying assumptions. What they deeply believe in and act on.
Digital culture is critical to driving digital business adoption; early and developing companies push digital transformation through directive or provision, whereas maturing companies pull digital transformation by cultivating conditions that are ripe for transformation to occur. Early-stage use mandates from management. Developing-stage expect employees to adopt digital platforms by building them. Maturing-stage companies drive transformation by focusing on creating environments where it can occur: cultivating a strong culture that prizes risk taking, collaboration, agility, and continuous learning.
Last modified 06 April 2022