IT & Operations

Digital strategy as a hype

February 8, 2017

The digital agenda is very promising and for some organizations challenging too. Sometimes it becomes a hype to talk about the necessity of having a digital strategy. It seems a little like the start of this century when all companies were looking for an Internet strategy.

Change is not only difficult for individuals, but also for organizations. We have a natural preference for stability and clarity. The possibilities of digitization are innumerable, not always easy to predict, and develop rapidly. These are good ingredients for uncertainty. New enterprise models pop up quickly, the life cycle of existing enterprise models is shortening enormously. Researchers show that existing enterprise models are shortening to ten years, or even shorter, instead of the current corporate thinking that is based on many decades. 

Transition is underway

Traditionally, digital innovation came about through the technology department. Digitization went from the back office to the front office systems and there was a plan of action for modernizing the existing IT solutions. This usually demanded a long-term plan, partly due to the significant investments and ongoing costs in existing IT solutions. This transition is still underway at many companies.

Parallel to this, innovation is also underway via start-ups, via partnerships in the chain and directly in the business itself. There is a fast dynamic world alongside the systematic change sketched above. We all know of examples of new entrants into certain sectors, that ‘threaten’ existing companies or at least thoroughly shake them up. It is interesting that these innovations are usually not brought about by technology experts, but in combination with other areas of expertise. They work in flexible teams so as to be able to provide a short-term impact. This demands steering with a focus on innovation.

Puzzle 

How to combine the developments mentioned above? That is the puzzle before us. Companies have a standing business and structure and also want to implement structural innovations by means of digital possibilities. Some companies solve this by appointing a separate Chief Digital Officer (CDO) alongside the CIO function. The CIO function then takes care of the standing IT solutions and infrastructure, the CDO tackles the digital strategy. There are also companies that lay down a separate innovation structure, focused on digital innovation. 

Organizing separate structures from the digital agenda would seem to be at odds with the current application possibilities. We are now in the phase that the daily actions of companies are digitized including the introduction of completely new enterprise models. This demands teamwork with all areas of expertise on board in order to arrive at proper solutions. In addition to this, in the current age there is more a continuous improvement in small steps, whereas formerly large changes were envisaged. In a way, we can learn here from the new way of developing software. Large systems used to be built according to the classic waterfall approach with a lead time of a few years. Now agile work forms are usually employed, whereby short sprints are taken – by teams in which IT and the business play a part – to steadily implement iterative improvements. Really, such a philosophy should also be given a place in the manner in which organizations implement their digital strategy.

Team of Teams

This aspect of the challenge can be found in the book 'Team of Teams' by General Stanley McChrystal, who led the American troops during the war in Afghanistan. One of his most important conclusions was: 'It takes a network to fight a network'. The background to this is: the world is developing into a network in which individuals feed themselves on information from different, ever evolving, sources. A classic hierarchical organization with functional responsibilities has little or no common purpose in such a world and cannot keep up with the pace.

This school of thought is really relevant for any organization. Many large organizations are undergoing a serious struggle. There is no lack of talent, financial resources and other important assets. But they do experience a great lack of speed, decisiveness and flexibility. There is also a growing group of people who have not only grown up with ubiquitous communication technologies but – at least as important – have from childhood done nothing else than sharing things in networks and organizing themselves into networks for arranging parties or for making appointments. They are simply not used to hierarchical structures.

This demands a significant change of thought and way of working together – within and between organizations – that is still very much detached from daily practice. The digital possibilities can accelerate this transformation.

Prof. Dr. R.G.A. Fijneman works as a partner for KPMG Advisory N.V, is a member of the Board of Directors of KPMG with Advisory responsibility and is as IT professor connected with Tilburg University and TIAS School for Business and Society.

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