Why certain organizations seem to master digital transformation lightyears faster than others? Over the last few years I've seen the whole range of digital development from different industries ranging from enormous leaps into complete stagnation. Reasons behind differ for sure, but there are still similarities to be recognized. One of them is to be closely related to the industry where the organization is operating. It seems that the more regulated the industry, the slower the digital transformation.
In practice, if a company is operating in an industry with much regulations, directives and control requiring a lot of reporting, inspections and insurance, the so-called culture of caution evolves easily. And as it does, the majority of time is spent on creating reports or other evidence to prove, that one can be absolute sure no mistakes have been done. With the core business that isn't a major problem - since that's what required for operating in the industry, right? But as employees are often involved in projects related to both core business and other functions, the same culture quickly affects all parts of the organization - including IT and digital development.
I've found real life Finnish examples from industries like insurances, transportation, medicals and pharmaceuticals. Obviously regulations as such are not to blame - we wouldn't want to have our pension funds invested recklessly. However, as the same practices reach the parts of the organization that wouldn't necessarily need it, the speed of development decreases at the same pace as the amount of pages in procedures, manuals and reports increases.
Recently BCG listed industries that are at different stages in adopting digital technology. According to their study, heavily regulated industries like energy and health care seem to progress rather slowly globally as well.
How to keep the culture of caution out of the operations where it's not needed?
Obviously neither IT nor other digital development can't work without any rules or guidelines at all - especially in large organizations. A clear decision-making framework is an essential for defining which decisions can be done independently and by whom. That lowers the need for unnecessary double or triple checking. While planning an Operating Model for IT and digital development, one should take carefully into consideration, which operations need to be managed by the book, and which can allow more room for experiments, creativity, agility - and therefore innovation.
"Who owns digitalization at our company" is becoming a common question among executives and managers while the focus of digitalization is slowly shifting from what to how. To accelerate digital transformation, Chief Digital Officers (CDO) are joining management teams to focus on customer dialogue, digital content and customer experience. Still, often the total ownership of digitalization seems to be missing - which actually slows the development down instead of accelerating it.
Especially in large companies at least three functions are involved in developing new digital services. The R&D is in charge of research and development while IT ensures that the new solutions fit to other solutions and systems.
Business is often the source of the actual need and on the other hand the end user as well as responsible for generating profit with the new solutions. Often the stakeholders have a clear view of their own responsibility, but no one is in charge of the big picture. In addition the deep understanding of customer experience and customer dialogue are missing.
To add the customer point of view and to speed up digitalization, CDO's have joined various companies lately. How does that affect the ownership? That depends on the role of the CDO.
In case the CDO becomes another stakeholder next to IT, R&D and the Business, the company surely gets the required capabilities to support digital service development. But the total ownership of digitalization is still not solved.
Another position for the CDO is in the center of the development. With proper mandate from the top management the position can be ideal for digital development. On the other hand if ownership is not clear, the CDO becomes a coordinator or a facilitator without true possibilities to affect the development. And in worst case (s)he won't even have enough time to bring the digital insight to the table.
Obviously the CDO as such is not necessary in every company and it's not required for the CDO to take the ownership of digitalization - other stakeholders can take the same position. Who ever takes the ownership should have (1) the required skills, (2) enough time to truly push digitalization forward and (3) proper mandate from the top management.
If you had to mention one thing describing the era of digitalization, what would it be? I'd say the need for speed. Competition tightens and changes within industries happen faster than ever before. For decision making this obviously means that decisions should be made quicker - and hopefully just the right decisions.
To ensure the decision really is the right one, managers and directors need to gather insight from the substance experts - no one want's to make a decision without knowing enough about the matter. In this sense the digital era increases the need for collective decision making - for example the CMO, the CTO, the CIO (and / or the CDO) and the CEO need to co-operate efficiently to reach the best decisions.
In general there are at least three challenges characterizing collective decision making in the digital era:
Lack of shared time
Because of the need for speed, the key experts are too busy to give proper input to the decision making. Meanwhile the management struggles in getting the key people round the same table and therefore the need for speed is actually slowing down the decision making which again increases the need for speed. The cycle is ready and in the meantime the risk for a delayed decision increases. The more agile competitor has probably already made the decision while the others are still searching for empty slots in their calendars.
Inefficient (and expensive) meetings
If the management happens to get the key people together to discuss about important topics requiring decisions, the meetings are often inefficient and the shared time is not very well spent. Often people without required expertise are invited to the meetings just in case and the total cost of a single meeting is rarely calculated. On the other hand digital devices often get more attention than the actual meeting topic. Bad meetings is a popular theme for blogs and articles - my earlier post stresses the importance of proper facilitation.
Lack of shared views
In deciding on complex matters, numerous experts with different backgrounds and agendas need to work efficiently together. Reaching just the right decisions requires that the participants have shared understanding on the matters - for example pros, cons, consequences, risks, opportunities and so on. Since proper facilitation methods are rarely used in (management) meetings, the participants might leave the room without a shared understanding and the decisions are then made without proper commitment. Often the lack of shared time and inefficient meetings are actually causing the lack of shared view since the group doesn't have enough time to concentrate on the essentials.
What can be done differently?
Obviously decision making varies between organizations and some of them are more developed when it comes to digitalization. Still generally speaking it's easier to make small decisions than large decisions. Splitting the large decision items into smaller human sized decision points helps to retain the agility in the decision making and allows one to constantly identify and rate the best ideas - which is essential in gaining competitive advantage in the digital era.
It's also easier to reach a decision involving small group of people instead of a large one. Therefore involving only the right people makes it easier to come up with shared understanding about the matter - also leading to higher commitment to the decisions. While digital services and tools allow managers to involve large groups into collective work, involving just the right individuals often brings the best ROI.
Using time and place independent online solutions between (and even instead of) the meetings helps to better leverage the limited time. Proper online facilitation combines the open discussions with ratings and prioritizations and valuations allowing the key people to give their input when they have the time (where ever they are located) as well as identify the best ideas.