Adjusting the operating model for success and overcoming stalled digital efforts.
The digested read is an ongoing blog series where I take a white paper or long-form article and digest it to a palatable five minute or so read for you. TL;DR? I read so you don’t have to.
This week we are looking at Organising for a Digital World by Jenny Davis-Peccoud, Laurent-Pierre Baculard, Greg Caimi and Oliver Straehle. They all work for Bain and Company. The PDF is here.
Digital is upending most operations and markets as organisations struggle with the pace of change. The operating model long used by business leaders needs to be rethought.
Digital transformation has proven less successful than conventional transformation programs – so the cause of this stagnation should be examined. How you integrate digital into a business depends on the level of disruption faced by the business, the level of digital maturity currently found in the business and how open the culture is to change.
Companies therefore select different levels of integration from fully-integrated, semi-integrated or totally functionally separate. Feeding into this level of integration is how the business defines the role of a chief digital officer (CDO).
This is impacted by leadership’s sense of urgency, the internal people and technology capabilities and the desired pace of change within the organisation.
For old dogs to learn new tricks it seems the best chance lies in establishing new ways of working company wide. You need to involve everyone currently working and take on board their intimate knowledge of how the business works to integrate effective digital endeavours. And, as with all change programmes they won’t work unless employees see senior leaders out in front demonstrating flexibility, empowering and delegating, taking risks and increasing collaboration.
You’ve got to define your operating model to understand how to integrate digital.
The operating model is the blueprint for how resources are organised and operated to get critical work done. It impacts the size of the business, it defines the functions, how people work together across functions, how the corporate centre adds value and what behaviours are encouraged. Basically, the organisation needs to make decisions in the following five areas to create its operating model:
Structure – functions, boundaries, centres of expertise.
Accountability – define ownership of P&Ls, define responsibilities of functions.
Governance – management process for high quality decisions is set as are budgets and incentives.
Capabilities – how people process, and technology are combined to deliver desired outcomes.
You need to decide where each digital initiative you are looking to implement sits within the operating model. If you do not then you won’t assign ownership and your efforts will just become a rapid prototyping exercise for innovation that will never be implemented or adopted. However this puts pressure on the old-line operating models and shows how legacy systems are not able to cope with the pace at which digital change occurs and which customers demand. Companies find digital innovation hard to scale up beyond small projects and this means it is hard to attract really top people to the mission.
To integrate digital into an operating model successfully you need to know where you are and embed accordingly.
Map your business against the level of disruption your industry is facing, the level of digital maturity and capability currently in the business and access how open your culture is to change. Once you have done this you can decide on the approach to integration:
Who is in charge and what they oversee is the most important question to ask when hiring a chief digital officer (CDO).
They will all have a say in setting the digital vision or plan. But depending on how the corporate leadership integrates digital it could be at a functionally separate level or in a fully integrated fashion with buy in and co-sponsoring from business unit leaders. Ultimately, it seems that most integrated approach is one where the CDO will effectively make herself redundant. The business unit leaders should over time fully embrace the planning, funding and execution of digital innovations.
The key takeaway from all this is the ability for a business to come up with and implement a scaled plan quickly is more important than the exact plan chosen. So if you can embrace agile ways of working and scale the results without putting undue pressure on the operating model you achieve two things. One, you can make smart digital decisions and investments and two, you don’t have to blow up the concept of the structured organisation to implement digital transformation.
Author – Edward Conmy – I am the managing director of Rattleberry, we are a recruitment consultancy who provide the skills needed for the digital age.
Also published on Medium.ByEdward