TOW#540 — Digital transformation
Digital transformation as a way to maintain the status quo
The above title is yet another phrase that people expect will solve the problems of businesses and influence the communities in which we live. The digitalization of business processes and the related transformation of enterprises is a topic that has spread rapidly in the business world over the last few years. It’s often written about in newspapers, and even more often in specialized magazines or on websites. This is especially true of those mediums that discuss what a business needs to do to maintain or gain a competitive advantage.
The digital transformation of business processes can mean anything and everything: from moving some data and systems to the cloud to redesigning business processes, creating jobs that didn’t exist before, or a combination of all of these. Every business, based on the ideas and strategies of its management, should properly plan its transformation before embarking on a digital transformation.
Generally speaking, digital transformation is the integration of digital technology into all areas of business. It results in changes in the way a business operates, and therefore also in the way it generates value for its customers. Problems arise if digital technology is integrated into business processes without prior thought given to how the business needs to change strategically in order to survive in the market. In other words, the use of digital technology alone does not guarantee better business performance. On the contrary, due to the high cost of implementation, it can actually accelerate a company’s slide in the wrong direction. Nevertheless, when a business chooses to digitalize its processes, it’s most commonly precisely in order to maintain the old ways of working, which are simply transferred to a digital platform. This merely cements the existing situation, even though management boasts that it introduced digital technology into the company!
Transformation before digitalization
Businesses should first think about where they want to be in the future, then how they plan to get there, and only then how technology can help them to do so. Therefore, we can’t say that digital transformation will help with the implementation of a particular business concept. Its introduction depends solely on the ability of management to look at the current situation and to formulate a vision for the company’s development. This is why all company managers should be constantly working on their leadership skills and abilities. Similarly, business owners should look for managers who really understand their strategic role and are not afraid of taking full responsibility in the workplace.
Often, digital transformation entails breaking down hierarchical structures that companies have been using since the Industrial Revolution, even though it’s not entirely clear why. Some authors justify this with the fact that hierarchies slow down decision-making as if it’s somehow necessary for all decisions to be made immediately. Others, however, emphasize that digital communication in itself eliminates hierarchy. It allows each of us to communicate with anyone and, consequently, for the formation of teams that change regularly. Nevertheless, hierarchical structures also have their advantages. They systematize key business areas to optimize growth, in accordance with the power that individuals have within the enterprise. At the highest level, the company has a Board or a CEO. If it’s a larger company, there’s more management, then there are department heads, and then workers organized into areas of responsibility, experience, and authority.
Transforming hierarchical structures
Depending on the size of the organization, there may be several levels. We see this very well indeed in an organization we all encounter on a daily basis. State and public administrations have many hierarchical levels precisely because of their number of employees. In addition to them, military organizations also haven’t given up on a hierarchical structure, and it’s a similar thing with health care. Despite the fact that organizational theories and practices are changing, hierarchical structures, despite all their shortcomings, almost always form the basis of most businesses. Nonetheless, recently they’ve been functioning in a much looser framework than ever before. One of the most important benefits of hierarchical structures is that employees have a clear understanding of their roles and responsibilities within the organization. Companies organized in this way have many rules that allow managers to use certain predetermined guidelines. This makes it easier to control business operations, and when a problem arises there are clear rules regarding who is allowed to make decisions.
In such companies, job descriptions are relatively well defined, making it easier to find and hire employees with specific skills. Hierarchical structures make it easier to maximize the skills and talents of mid-level managers due to their expert knowledge of the areas for which they are responsible. This can create a better sense of teamwork and collaboration, assuming that the manager knows and uses “soft skills” in their work. One practical application of hierarchical organizations enables individuals to be promoted within the hierarchical structure. In their 2010 meta-analysis, Anderson and Brown conclude that the benefits of hierarchical structures depend on five factors: (1) the type of tasks the group is working on; (2) whether the right individuals were selected to be managers; (3) the extent to which power changes managers’ behavior; (4) whether the hierarchy facilitates or hinders coordination within the group; and (5) how the hierarchy affects the motivation of the group’s members. The authors emphasize that these five factors are not limited to hierarchical structures, but to any type of structure in any kind of organization.
Transformation depends on management
If these factors relate to any organizational structure, on who does their implementation depend? The answer is very simple, especially for the readers of this blog! It’s up to the managers. However, not all managers are prepared to assume managerial responsibilities and commitments because they lack the relevant competencies. These make it easier for them to interact with other people, so they’re not necessarily only for managers but for every individual. Working in a company requires employees to work as part of a team. That’s why the ability to communicate with others positively is equally valuable, and sometimes more valuable, than expertise in an area. For this reason, companies look to fill all job positions with people who are able to work together, collaborate, communicate, solve problems, as well as work in changeable, interdisciplinary teams that are often geographically dispersed or culturally diverse.
We consider management skills as a special prerequisite for tasks to be carried out in an efficient, high-quality, and simple way, regardless of whether a company is introducing digital transformation or continuing with a hierarchical structure. Meanwhile, the effective introduction of any kind of organizational change will be reserved only for those capable and courageous individuals who will dare to devise a vision for their company and will take responsibility for its realization, regardless of which business model they choose as the platform for development.
Wishing you success with the changes to come,
Igor Pureta
President of the Board of Directors of Grawe Croatia
- You can read the original article in Croatian on the following link.
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