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Digital Transformation is Organizational Transformation

Digitizing a business is not only a momentary market imperative. It will be tomorrow’s status quo.

This article was adapted from a previous publication on Medium

S. Mueller & P. Baumann

 
 
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“Digital Transformation”

The term is now commonplace across organizations and industries. Yet, achieving a clear definition of what it means is nearly as difficult as the effort itself.

While mainstream hype focuses on AI, Blockchain, VR/AR and IoT as the new frontiers of efficiency. Many companies digitize with slow day-to-day changes, achieving very little impact, rarely seizing the true transformational potential behind their efforts.

The limiting factor here is regularly the human element, which comes in various forms. True transformation requires a fundamental rethinking of the ways things are done, because what got us here will not necessarily get us there.

In MING Labs and Ecube’s work with innovation and transformation units of big corporations, as well as in many peer conversations, it becomes apparent that often the “digital” is emphasized over the “transformation” aspect in the initiative. Yet priorities should be the other way around.

This guide provides three key milestones that organizational leaders need to reach for a successful digital transformation to take place. Together with a three-pronged human success framework that will prime an organization for success.

This article also covers the importance of employing communication strategies to win over internal skeptics and to create allies for any organization’s transformation initiative.
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Transformation Milestones

  1. Inspire a Willingness to Change
  2. Foster the Ability to Change
  3. Offer a Real Opportunity to Change
 
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1. Inspire a Willingness to Change

Employees’ and stakeholders’ willingness to accept (digital) transformation might be the most complex and difficult to handle.

Organizations are complex social systems working hard to stabilize their internal forces and are constantly striving for survival. Therefore the status quo is often powerful and keeps people stuck in their routines. When things are going well, why change? Never change a winning team, right? But even when things are not going well, people may still prefer to keep the faulty machine running. It is not uncommon for employees to remain in what we call the “Uncomfortable Comfort Zone”.

Every transformation story begins with a performance challenge. Creating some level of dissatisfaction with the status quo and inspiration for a better future is crucial to overcoming the inertia and discomfort that comes with change. The challenge is to cross the chasm between right now and that desirable future state.

Reasons to abandon how things are currently done are needed. To build a healthy appreciation for change-positive discomfort, all employees should regularly experience some level of dissatisfaction with their current situation. Holding up a mirror to the organization for it to see its own real face is useful. This can be done by gathering feedback from influential stakeholders and other external players such as consultants, benchmarking the organization’s current performance with other organizations, or through assessment tools.

Alongside abandoning old ways, there need to be reasons for why a new way of doing things makes sense. Leaders must present a clear and compelling vision of what success will look like to offer employees a pathway out of the status quo. Depending on the culture and mindset of the organization, the messages around the vision may be framed as either a unique opportunity to soar to new heights, or as an antidote to stay relevant. After all, digitizing a business is not only a momentary market imperative (it’s continuous). It will be tomorrow’s status quo.

 
 
 
 
 
Every transformation story begins with a performance challenge... There need to be compelling reasons to abandon how things are currently done... reasons for why a new way of doing things makes sense... No matter the perspective, the organisation will most likely have to face this performance challenge in the long term in order to stay relevant.
 
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2. Foster the Ability to Change

Once employees are willing to accept the performance challenge, they will require support in building their competencies to master the challenge.

At first, it is common for employees to not even be aware of their “incompetence”. Once they become aware of their situation, they are consciously incompetent, thus opening up a space for learning to occur. As employees grow by mastering opportunities, they become more conscious of what they know, until, at some point, learners do not even realize what they are learning anymore. Their new skills have become part of the new normal of habitual and comfortably executed activities. They become, in other words, unconsciously competent.

Without a holistic and formal program, where training, coaching and mentoring occurs, employees will lack many of the hard and soft skills as well as the mindset to actively co-create the transformation. Without the right guidance to grow competencies, employees will quickly lose their willingness to transform. They will underperform, sit silently in the rear seat and merely observe what’s going on, if the company is lucky. In the worst-case scenario, they will actively sabotage the transformation or abandon ship. Building employee competency cannot be underestimated in a transformation for several reasons.
  • Learning new ways of doing things seldom occurs overnight. Learning is a journey, which is not always comfortable. Sometimes employees will not measure up to the challenge. It is a question of whether the company is ready to accept that and lose a few on the way. More often than not, employees will need to stretch themselves beyond what they thought they were capable of.

  • The performance challenge can overwhelm. When the challenge is just big enough to help an employee feel activated, alongside requiring the individual to make reasonable amounts of adjustments and improvements competency-wise, it is likely to make her feel empowered. Employees might even achieve the coveted state of flow in their learning! Yet, when employees either feel like they do not have – or actually lack – the ability to master the challenge, anxiety is a typical response.

  • In a conventional setting, mistakes instill fear. Since learning almost necessarily leads to and occurs due to mistakes, usually preceding lasting learning effects, the mistakes and solutions that employees find along the learning journey are part of building successful competencies. However, fears of a reduced chance of getting promoted, qualifying for a much-needed raise, or of being seen as a failure – even if only in one’s mind – can hold employees back from taking necessary risks.

When left unsupported by their leadership, most often in direct response to the visible behavior of leaders or the norms of the leadership-influenced corporate culture — employees might actively hide their incapability or feelings of being overwhelmed. Yet, temporary incompetence is nothing to be ashamed of! It is the most natural thing in the world for people to move through this stage when doing something new. Nevertheless, the greater the learning discomfort, anxiety and fears, the more likely employees will take the well-trodden path instead of embracing change.

Is it essential to have leadership involvement? If there is a culture of self-determination and self-management, it is possible and can be productive for companies to hand over the responsibility for learning and transitioning to their employees. However, if the company is like most others, employees will need their leaders’ support to enable the transition from anxiety to activation.

On this road to true ability, employees will need a frame to grow and experiment, with immediate feedback, allowing for deeper and more sustainable learning. The final part of the puzzle is then the organizational reality itself, where it can offer a real opportunity to change.
 
 
 


The final part of the puzzle is the organisational reality itself. Having all necessary factors in place to enable the organisation to change is only one side of the coin. Only together with a generated Willingness to Change can fostering the Ability to Change set everything in motion.
 
 
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3. Offer a Real Opportunity for Change

A major roadblock to change is the absence of a real opportunity to perform.

 
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When organizations fail to provide their employees a real transformation opportunity and do not create the conditions for employee willingness and capability to grow, employees quickly feel disoriented and frustrated. Instead, organizations need to ensure the quality and involvement of their leadership and establish an organizational setup that empowers employees to change. Managing this involves three human factors:

  • Picking the Right Leader for the Transformation
  • Creating an Empowering Organizational Setup
  • Employing a Communication Strategy to Win over Skeptics and Create Allies


3.1. Picking the Right Leader for the Transformation

Does the individual in charge of the transformation really have the knowledge and skills to deal with the complete innovation process? Firstly, Leaders should be capable in managing change and projects (stakeholders, delivery plans and communication). Secondly, they need the ability to pick the right people for their teams to create real solutions that can be rolled out and create impact (combining energy, experience and cognitive skills). Thirdly, a growth mindset is crucial. Some of our clients hire for mindset rather than skill. Training, coaching, and team moderation can often compensate for any lack in trainable skills. But an inadequate mindset is not something that can easily be changed. Apart from presenting a compelling vision to match the dissatisfaction with the status quo that has been created, it’s up to the leader to ensure that clarity for the transformational effort exists regarding the following questions:
  • Where are we going, and how?
  • What is the timeline?
  • Who is responsible and accountable for each task or domain and respective results?
  • How are we continuously, effectively communicating and managing the performance of all involved in the effort?
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3.2. Employ a Communication Strategy to Win Over
Skeptics and Create Allies

Many mistakes can be made in the organizational setup, depending on the target setting of the unit and the way it is positioned. Considering the large structural impact of the transformation, this is where things can go completely wrong – or right.

Firstly, let’s take a look at the legal entity. Will the team be a standalone subsidiary with or be part of the mothership? The former has advantages in being able to operate outside of corporate processes, which means being able to move faster and operate with more freedom. Yet, operationalizing results might become more difficult, as many corporate hoops will need to be jumped through when trying to re-integrate the results.

Secondly, location. Is the transformation team located in the same, mundane office space as the business teams, or do they get their own space? Often the latter means nicer locations, better facilities, and hence being able to attract the talent that large corporates might otherwise not have access to. Sought-after talent — especially in the digital realm — rarely want to work out of large corporate campuses in remote areas. At the same time, being in the same office as the business units means they get to interact more, see problems up close, and build empathy. Being remote may make them more of a phantom phenomenon.

Thirdly, reporting. Having a transformation team report directly to the CEO with full access means they will have resources, attention, and sway. They will be innovating top-down. Reporting to a department means being focused on the topics that are top-of-mind for the department head, and staying within that framework, but more often, the creation of real solutions that get adopted get innovated from the bottom-up.

Fourthly, involvement. In most cases, problems are framed, tackled, and solved within the transformation team, with more or less input and involvement from the business unit they are trying to help. Running through a successful process will leave the team with a successful Proof of Concept or Minimum Viable Product, which they will want to integrate into the business unit to be adopted and create the envisioned impact.

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3.3. Employ a Communication Strategy to Win Over
Skeptics and Create Allies

At the core of the shift, and in any initiative, is communication. Communication can make or break the success of the undertaking as it is the glue that holds organizations together. Communicate almost to the point of being annoying, because complete interpersonal understanding is almost impossible to achieve.

Basing communication on the needs of stakeholders and using the language that they understand will immensely increase the chances of having messages resonate, getting them to buy into the ideas being proposed. Having transparent and effective need-based stakeholder communication will also help to clearly see the opportunity to transform, where the team is in terms of capabilities and where it still needs to improve. This way of communication will help reduce resistance as stakeholders are truly listened to, feel respected and taken seriously.

Although this can result in quick wins, which are nice and might move the needle a little, innovation and transformation are projects that seek to create fundamental changes, and so need to result in fundamental impact. A >10x improvement, new revenue sources, or improved competitiveness are what people are looking for. Being able to show, communicate and claim victories in the short, mid- and long-term will ensure longevity and impact of the effort.

To take the organization on this journey, internal PR and marketing are vital tasks of transformation units which help create buy-in, open minds, and finally have impact. Having a good communication strategy is one of the keys to lasting success. The whole digital transformation hype is, at its core, really a people and organizational culture-based topic. Employees in a company need regular, constant communication, they need to be taken by the hand, and they need to be respectfully treated and communicated with. Communication can support the building of employee willingness, ability and the (perceived) real opportunity to change. It is then that employees will buy into the digital transformation effort and support the shift that needs to take place.


Sebastian Mueller is Chief Operating Officer at MING Labs and Philipp Baumann is Partner and Head of Solutions Development at Ecube.

For more information on Digitalisation, contact Ecube for a consultation.