Digital capabilities in companies are widespread according to the fifth annual research study by MIT Sloan Management Review and Deloitte, with more than two-thirds (68 percent) of respondents having moved beyond the early stages of digital maturity. This seems prudent, as nearly 90 percent of the executives surveyed believe their industry will be disrupted by digital technologies. Still, less than half (44 percent) believe they are adequately preparing for that disruption. A common practice has been to wade into the digital waters by setting up digital capabilities in pockets of the organization. The challenge comes when trying to integrate these pockets into the wider legacy organization. Interactions between the two are often inconsistent and stifle the digital organization, preventing it from being as effective as it could be. But by rewiring the organization—rather than wholesale redesigning it—these digital subgroups can not only become an integral part of the company but also more effective in their own right.
Digital operations face real obstacles to growth and performance. Survey respondents reported the largest barrier to becoming more digital was “internal issues,” defined as inflexible culture and lack of agility within the business. This is not surprising: traditional business models can thwart agility in several ways. Legacy organizations often hesitate (or are unable) to change course in the context of changing market conditions. Their traditional hierarchies add layers of complexity and can get in the way of effective teaming. Silos make it challenging to understand the interaction points between parts of the business. And the culture tends to favor complete, comprehensive planning and to view adjustments negatively.
All of these factors work against digital organizations, whose MO is a new mindset that is dynamic, intentional, and flexible, characterized by:
- Nontraditional & shifting stakeholders—including an increased role for the Chief Marketing Officer
- Morphing team structures—breaking down silos and developing collaborative cross-functional teams
- Uneven velocity with the legacy business—different (faster) pace of decision making and the need to compete with core business priorities
- Imperfect solutions and continual iteration—fine tuning employee behaviors through continual and sustainable change management
Connecting the dots
In order to exist in harmony and enhance each other, legacy and digital organizations need to interact effectively. Achieving this doesn’t necessarily require major restructuring or culture change; it’s more a matter of rewiring. Rewiring is a two-part, interrelated process: (1) understanding the underlying networks of the organization and (2) embedding any changes through effective governance. The goal is improve the interactions between the digital and legacy organizations, thus enabling the digital organization to operate more effectively within the broader organization.
First, analyze and rewire
Rewiring begins by identifying the key interaction points between the digital and legacy organizations, uncovering and analyzing the network of how communications, information, and decisions flow. Once identified, these interaction points are adjusted (rewired) to support strong collaboration and smooth workflows. This rewiring is supported and sustained by adjusting the overarching governance model. Rewiring key areas, such as collaboration and communication, between digital and legacy operations enables continuity of work and successful transformation.
Then, adjust governance accordingly
Governance is about enabling the right people to have the right authority to make decisions in a timely manner. By cementing and supporting the way work gets done in the organization, proper governance can help teams to circumvent costly, time-stealing bureaucracy and could help minimize managerial confusion about who is responsible for what decisions.
Working together, network analysis adds value by creating efficiency within the digital organization, while governance reinforces and solidifies that value in the context of the larger organization.
A practical solution
Digital operations can take different forms within the organization, and each comes with challenges:
|Each function has its own digital capability and manages digital interactions with customers.
However, having functional silos with no structural cross-functional governance or coordination means that digital strategy is often disjointed.
|A single digital function controls strategic and operational digital capabilities.
However, while influential over the execution of the digital agenda, a centralized operation can be difficult to establish without the right level of leverage in the business.
|Digital capabilities and responsibilities remain functionally aligned with a small central digital team that provides advice and guidance to divisional teams.
However, while this model allows for closer alignment with individual teams and products, it may struggle to operate consistently across different subteams.
|Core digital capabilities are consolidated into a central function that services all functions, enabling sharing knowledge and skills across functions.
However, digital capabilities not embedded within a product or team leads to challenges in prioritization.
A case in point
For example, one company we worked with had established a centralized Enterprise Digital group to support the organization’s business units with digital capabilities. Although the level of monetary investment in the group had increased, not all business units experienced a proportional return from this investment.
To remedy this inequity, the Enterprise Digital team decided to embark on a digital transformation effort to deliver a more efficient experience to its customers, clients, and other stakeholders. Specifically, the Enterprise Digital group was striving to better integrate respective business units through digital offerings to drive revenue and profit growth for the enterprise. To do so, the group assessed its current operations and then designed a future-state operating model, governance model, and organization structure that was more responsive to internal business units and provided a more consistent external customer experience.
As a result, the company was able to:
- Drive revenue growth through digital platforms in each business unit
- Provide an integrated experience for customers across business units
- Align with and support its future omnichannel strategy
If your company is also looking to better integrate digital operations, a rewiring effort could provide the fine tuning needed for digital innovation to thrive and deliver a positive and ongoing return on investment.