Digital enterprise and change capability

Mathilde Tempert
Posted by Mathilde Tempert on Jan 8, 2014

Business Model Management, Enterprise Architecture, Governance, Risk & Compliance

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New technological developments emerge at an increasing pace.  Recent examples include Google Glass, Big Data, e-Coaching, wearables, 3D printing, Internet of Things etc. The potential is considered enormous, and expectations to derive value from these innovations are sky high.We already see this around us: HEMA, a Dutch chain of retail stores recently started a 3D printing service which allows customers to design and print their own jewelry.

New jewelry product lines can be designed and sold at a reasonable price, once patterns are discovered among the custom designs. Organizations have no choice than to adapt and respond to these new developments in order to survive. A digital enterprise is an organization that builds upon such digital technologies, within the organization as well as in co-operation with partners and customers, in order to create a competitive position in the market.

Executive leadership should recognize that innovation is of the essence, and take action by considering the following questions:

  • How do these new innovations impact our services to our customers? How can we leverage the new developments, and if so, should we be followers or leaders? Does this have impact on the (future) identity of our organization. Does this change our market position, or the understanding of this market position by customers and partners? Answers to these questions can lead to radical changes in the business model of the organization. Therefore a solid change capability is essential.
  • Can the adoption of new developments solve our current challenges, can it lead to a more effective operation? An example is a high way authority that installs sensors on roads and bridges for the purpose of preventive maintenance. These sensors show when and where maintenance should be performed, eliminating the need for visual inspection. This leads to a much more efficient management of the authority’s assets.

Ambi... what? 

Writing this makes me think of the word ambidexterity: Innovation and efficiency go hand in hand.  Charles O’Reilly of Stanford introduced therefore the word ambidextrous organization. While many organizations focus on programs to reduce costs to establish a more efficient operation, other organizations use innovation to survive turbulence in the markets. Few organizations however are able to apply both.

One of the reasons might be that innovation and efficiency require conflicting management approaches. An informal corporate culture with responsibilities delegated to lower levels in the organization in combination with a long-term focus and agile processes supports innovation. This contrast with a more formal culture in combination with a centralized governance framework, highly standardized processes and a short term focus, typically leads to efficiency and cost savings. An ambidextrous organization is able to follow these contradictory tracks at the same time. Companies who can be innovative and at the same time efficient perform better than their competitors. Bringing together both innovation and efficiency in an organization can lead to tensions that need to be managed and balanced: the challenge of ambidexterity.

Transformational leadership

An ambidextrous organization requires the right type of leadership style. Transformational leadership has a positive influence on the investigative abilities of employees contributing to innovation and transactional leadership has a positive impact on the operational abilities of employees. With transformational leadership I mean leadership by example, inspirational motivation, intellectual stimulation and attention for the individual. These aspects of leadership are based on intrinsic motivation of employees of involvement and the realization of objectives based on motivation and self-confidence.

Where transformational leadership focuses on intrinsic motivation, transactional leadership is more focused on extrinsic motivation. Transactional leadership is mainly focused on the control of employees based on rational and economic indicators and is characterized by rating systems, management based on exceptions and indifference. The goal of this is to work more efficiently.

In summary, the challenge for an organization transforming into a digital enterprise is  to have the right change capabilities in place. This means that the organization needs to aim for ambidexterity, and to find a good balance between innovation and efficiency and to use an appropriate leadership style. Last but not least, organizations should be prevent falling back on traditional paradigms when thinking about new (technological) developments.

In early 2015 BiZZdesign together with InnoValor will start an open innovative research project in cooperation with customers to explore the digital enterprise and what it means for you. For more information please leave a comment.

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