Digital Transformation – Breaking Free of the Industrial Age Straitjacket

This article originally appeared on the Institute for Digital Transformation website.

A search for Digital Transformation on Google finds ~500,000,000 results, which is likely close to ~500,000,000 more than would have been found only a decade ago. However, finding a clear, let alone consistent definition is more difficult. The term is not well understood, and all too often grossly misused. Part of the reason for this is that neither of its component words are well understood. The purpose of this article is to clarify what digital transformation is, or should be, and what it isn’t, and to reframe it in a way that makes it more understandable.  I close by discussing the significant cultural changes that will be required if we are to come close to realizing the full value of the digital age.

I’ll start with “transformation”, a word that  I first used more than two decades ago in the first version of The Information Paradox in the context of the three stages of evolution of the use of information technology: Automation of Work; Management of Information; and  Business Transformation. I aligned the third with the implementation of what was then an emerging type of software labelled Enterprise Resource Planning systems (ERP), which I positioned as being complex systems. Over time, I became increasingly uncomfortable with my use, or misuse, of the term. I understood why when I was exposed to  David Snowden’s Cynefin Framework. He describes four stages of system evolution: simple/ordered; complicated; complex; and chaotic. It became clear to me that what I was describing as complex were, and still are certainly complicated endeavours, often requiring significant organizational change (a requirement usually recognized too late and poorly managed). They are primarily about integrating information and making it more accurate, accessible and timely. There are proven practices available to do this, although, again,  all too often not adopted, or adopted too late. They do not essentially change what organizations do – they just do it differently and, hopefully, better. That certainly involves considerable organizational change but is hardly transformational.

Moving on to “digital” we have seen increasing use of the term Digital Transformation over the last decade. Unfortunately, in this context, the word “digital”  is still equated by most people to be just another word for information technology. As a result, digital transformation is more often than not still used in the context of the complicated work that I wrongly labelled transformation 20 years ago. This is well  described by Gartner in their Information Technology Glossary, where they say “The term is widely used in public-sector organizations to refer to modest initiatives such as putting services online or legacy modernization. Thus, the term is more like “digitization” than “digital business transformation.” [1] While likely more prevalent in the public sector, I would argue that is also more than often the case in the private sector.

Over the last decade, I have reframed the term to be “digitally-enabled business transformation”, and taken it further to describe it as “an ever-evolving journey of digitally-enabled business transformation”.  Digitally-enabled business transformation is about a lot more than technology.  While new and emerging technologies, including the internet of everything, smart everything, quantum computing, augmented analytics, AI, machine learning, deep learning, robotics, RPA etc. are both driving and enabling the transformation journey, technology is only one part of the transformation. The journey of digitally-enabled business transformation will require continually reimagining, rethinking, and reinventing all aspects of the business model. It will be about new models of how work is governed, lead, organized and managed.

Our traditional industrial age, top-down hierarchical control-oriented approach to governance, leadership and management, and the resulting organizational structures are no longer fit for purpose in in a digital world. One indicator of this is that only 30% or less employees feel engaged with their organizations (and it’s not much better for managers). In his new book, “Humanocracy”, Gary Hamel capture the reasons for this, saying that “The typical medium- or large-scale organization infantilizes employees, enforces dull conformity, and discourages entrepreneurship; it wedges people into narrow roles, stymies personal growth, and treats humans as mere resources.” He goes on to say that “…a small but growing band of post-bureaucratic pioneers are proving that it is possible to capture the benefits of bureaucracy – control, consistency and coordination – while avoiding the penalties – inflexibility, mediocrity and apathy.”[2]

The global and social context within which we live and work has changed beyond recognition. We are more globally aware and socially connected. We have 24/7 access to almost unlimited knowledge, information and expertise. As Gary Hamel’s book illustrates, we are increasingly seeing organizations exploring and experimenting with new and emerging business models. Organizations that are enabling greater engagement and two-way communication with and between employees. That are orchestrating self-managing teams who can work collaboratively in a much more agile and responsive way. That are “democratizing” their approach to leadership and governance – letting their people use their brains again with light but relevant and appropriate oversight. Organizations that are committed to continually reimagining, repurposing and reinventing themselves.

We now have a vision of what the future of work could be, but don’t see that anywhere close to being universally realized. The challenge ahead is to break out of the straitjacket of more than a century of hierarchical, siloed industrial age mindsets which are controlling, risk-averse and “know it all”. To evolve them into mindsets that are enabling, learning and willing to try new things and fail. To move to a more agile and inclusive approach to governance, leadership and management. A value-focused, data and analytics-driven, agile, sense and respond approach that transcends functional and organisational boundaries, and engages employees, customers and other key stakeholders. One that places accountability and decision-making at the most appropriate level, while supporting decisions with broader and more knowledgeable input. One that can survive and thrive in an ever-evolving, complex and chaotic context.

All this will require a major cultural change. A fundamental rethinking and reimagining of how all organizations, public or private, large or small are governed, lead, organized and managed, and of the capabilities that are required to ensure and assure that the use of technology contributes to creating and sustaining business and societal value in the digital world. It will require replacing current top-down, hierarchical and siloed processes with leadership across and beyond the C-suite with leadership capabilities recognized, nurtured, and empowered throughout organizations. Only when this is done will we come close to realizing the full value of the digital age –  a new era of digital exploration, experimentation and transformation.

[1] Source: Mckinsey Information Technology Glossary, https://www.gartner.com/en/information-technology/glossary/digital-transformation

[2] Source: “Humanocracy: Creating Organizations as Amazing as the People Inside them”, Gary Hamel and Michele Zanini, Harvard Business Review Press, 2020

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