When it comes to digital transformation within a company, giving up control is not an option. It is a requirement!
Trying to enter the digital era by using outdated, overly centralized ways for working will not work. These models are inefficient, resource intensive, low in innovation, short-sighted, and counterproductive. Businesses try to control everything – from creating all the ideas to doing all of the work.1 Digital transformation is disruptive to that approach. Yet, because businesses have experienced success using these models, it is difficult to break away from the old ways of doing things.
Digital transformation isn’t just about standing up an e-commerce website and selling a few items or services. Digital transformation represents a completely new way of thinking about how an organization delivers value through an ecosystem of activities. Digital transformation results in a culture that challenges the status quo and actively seeks out opportunities to deliver value in new, innovative ways.2 The old models of “control everything” are inhibitors. To get the value from digital transformation, a business must only retain essential control, not control essentially everything.
Really – Give Up Control!
In his recent blog article, “The Hardest Lesson of Digital Transformation: Designing for loss of Control”3, Dion Hinchcliffe wrote, “Deliberately giving up control in a conscious and designed way over your organization’s digital results, while guiding the emergent outcomes in directions that are good for both your business and your stakeholders.” Hinchcliffe writes that the rules of business in the digital era have changed – significantly. Today’s most successful open digital platforms create virtually nothing themselves directly. Instead they have gone to great lengths to provide a carefully constructed platform for their communities of millions to do it indirectly instead. The key is understanding why this is such a powerful concept, and the key to digital business is realizing that the more control you give up, the more value comes back through peer production.
First, you must have something of value to begin with, and that value must be capable of somehow being enriched by others. Having a digital platform, based on an architecture of participation is imperative. Hinchcliffe further states that for the organization that can leverage this architecture of participation and fully tap into their stakeholders to co-create the future together, nearly anything is possible.
What’s In The Way?
Many organizations may be hesitating to begin digital transformation because of the perceived needed investment in IT. For the average organization, this may be true, as digital companies far outspend their traditional counterparts.4 However, in my opinion, the investment in IT is the easiest obstacle to overcome if value can be obtained. There are more significant obstacles stand in the way.
As with many transformative initiatives within organizations, it’s the “usual suspects” that are the more significant obstacles.
Culture is among the first obstacles that must be overcome. People (and companies) are used to working in the ways that they’ve always worked. Too much focus on technology, the lack of understanding of operational issues at the decision-making level, and slow decision-making caused by internal politics, competing priorities, or attempts to reach consensus are cultural attributes holding companies back.5 Digital transformation disrupts that norm.
Many organizations don’t invest the time and effort into developing the business case for digital transformation. Compounding the situation is that the rules for calculating return and value are different in the digital era. The inability to prove business value of digital through traditional ROI calculations results in no senior management support.6
The state of current business processes could actually represent a number of challenges. The first challenge often is that the current processes are neither well understood or well documented. It’s difficult to determine what to change when the current processes are unclear or undefined.
The second challenge is that the current business processes are poorly designed or inefficient. Current processes are designed for the industrial era, with the company on one end of the process chain and the customer on the other. Inefficiencies are discounted as a “cost of doing business” and businesses become lax in revising processes as business models and needs evolve. In the digital era, companies and customers will interact differently, in many cases discovering new ways to derive value through that interaction.
The most significant challenge is that most current business processes are pipeline-oriented; that is, they are linear and internally-focused, with the business on one end and an individual customer on the other end. To take full advantage of digital transformation, business processes will have to be re-engineered. This means that business processes must shift from an internal focus to an external focus, moving from a perspective of resource control to resource orchestration which maximizes the value of an ecosystem consisting of both internal employees as well as external contributors and participants.
How To Give Up Control
For organizations to move into the digital era, control must shift from a few internal managers to the networked ecosystem of participants. This is not to say that the ecosystem receives “carte blanche”, but the fact of the matter is that a linear, pipeline-based approach simply cannot compete with an ecosystem of internally and externally linked participants. A clear shift of control must occur, but how? Here are four things to do to give up control.
- Focus on shifting the culture. Creating teams of digital change agents consisting of internal and external participants with the tools, know-how, and direct support for driving change.
- Because the digital marketplace has new rules, business processes must be re-imagined. What worked well in the non-digital world does not work in a digital one. Re-imagine business processes to exploit the ecosystem and enable changes to be done from the edge.
- Rethink governance and architecture. Traditionally, “governance” often means “barriers” and is an after-thought to architecture. In the digital era, companies must concurrently decide and design the governance and architecture of their digital platform, who to allow on their platforms, and what consumers, providers, and even competitors are allowed to do there. Moreover, these decisions are not fixed. Governance and architecture will evolve as new types of interactions and values are introduced. The governance and architecture of platforms must induce participation, inspire outsiders to bring valuable intellectual property, and a fair reward system. 7
- Invest in training and skill building for the digital business. An MIT Sloan Management Review report found that a digitally-mature organization invested four times as much in training and skill building than organizations at the opposite end of the spectrum8. Clearly, having a well-prepared, trained workforce is a clear differentiator for the digital business.
Sources:
1 Hinchcliffe, Dion. “Let The Network Do The Work.” On Digital Strategy Dion Hinchcliffe. N.p., 04 Aug. 2014. Web. 02 Aug. 2016. https://dionhinchcliffe.com/2014/08/04/let-the-network-do-the-work/
2 Tedder, Doug. “The Four Characteristics of Digital Transformation That Deliver Spectacular Results.” The Institute for Digital Transformation. N.p., 24 Mar. 2016. Web. 02 Aug. 2016. www.institutefordigitaltransformation.org/four-characteristics-digital-transformation/
3 Hinchcliffe, Dion. “The Hardest Lesson of Digital Transformation: Designing for Loss of Control.” On Digital Strategy Dion Hinchcliffe. N.p., 04 Jan. 2016. Web. 02 Aug. 2016. https://dionhinchcliffe.com/2016/01/04/the-hardest-lesson-of-digital-transformation-designing-for-loss-of-control/
4 Hinchcliffe, Dion. “The Digital Transformation Conversation Shifts to How | ZDNet.” ZDNet. Enterprise Web 2.0, 21 Mar. 2016. Web. 02 Aug. 2016. http://www.zdnet.com/article/the-digital-transformation-conversation-shifts-to-how/
5 McConnell, Jane. “The Company Cultures That Help (or Hinder) Digital Transformation.” Harvard Business Review. N.p., 28 Aug. 2015. Web. 02 Aug. 2016. https://hbr.org/2015/08/the-company-cultures-that-help-or-hinder-digital-transformation
6 McConnell, Jane. “The Company Cultures That Help (or Hinder) Digital Transformation.” Harvard Business Review. N.p., 28 Aug. 2015. Web. 02 Aug. 2016. https://hbr.org/2015/08/the-company-cultures-that-help-or-hinder-digital-transformation
7 Van Alstyne et al., “How Platforms Change Strategy”, HBR, April 2016. http://ideannualconference.com/wp-content/uploads/2016/05/04_Platform_Revolution_VanAlstyne.pdf
8 Kane, Gerald C., Doug Palmer, Anh Hyguen Phillips, David Kiron, and Natasha Buckely. “Strategy, Not Technology, Drives Digital Transformation.” MIT Sloan Management Review RSS. Deloitte University Press, 14 July 2015. Web. 02 Aug. 2016. http://sloanreview.mit.edu/projects/strategy-drives-digital-transformation/
About the Author:
A very timely word to the wise. It really is an ‘illusion of control’ – that small group of managers who hold the power. The real power is with the masses whose daily actions add up to how an organisation actually performs. The sooner we are in touch with reality and where power really lies, the better the organisation will perform. Now, the conversation needs to turn to how to ensure everyone is pulling in the same direction with the appropriate mechanisms that achieve that, as outlined in this article.
Thanks Cherri for reading the article and for your comments! In the Digital Era, the “power” is in the ecosystem and one of the first steps for tapping into that power is getting out of the way.
Considering all that has happened during the year 2020, was this prophetic?