digital

Introduction

When looking at any Transformation initiative, most experts would concur on saying that it should encompass 3 domains i.e. People, Process and Technology (PPT). Typically such a PPT framework states that a good balance between the 3 components needs to be maintained for any organizational transformation, digital or not, as People perform tasks using Processes facilitated and streamlined by Technology. Therefore, for the success of the Transformation and for defining the future state, all 3 components People, Process and Technology must be considered and reviewed.

A little bit of history

Back in 1965, Harold J. Leavitt from Carnegie Institute of Technology wrote a paper titled “Applied Organisational Change in Industry: Structural, Technological and Humanistic Approaches”. He explained that industrial organizations are complex systems in which 4 large variables are interacting: Task variables, Structural variables, Technological variables and Human variables.

Task refers to the production of goods or services
Human refer to people
Technology refers to tools, machines and computers
Structure refers to systems of authority, systems of communication and systems of workflow

As these 4 variables are highly interdependent, any change in one variable results in a change (compensatory or retaliatory) in another variable. Usually, efforts to effect change are ultimately designed to influence the Task variable (e.g. produce goods faster or cheaper). Thus, structural change should consider the performance of the other variables: Structure, Technology and People.

The missing element in the People, Process and Technology framework

Based on recent engagements with large companies in South-East Asia, a Digital Transformation initiative may very often require a review of the company structure (or part of) as well as the definition of the new Roles & Responsibilities, KPIs and Policies.

Example 1

In a large manufacturing company with multiple product lines, should Procurement be centralized or decentralized? Or in other words, what should be centralized, what should be decentralized and what should be the interactions between the Central Procurement office and the Product Lines Procurement departments? What should be the workflows between these departments? What should be the organizations KPIs? Obviously such a Structural decision with newly defined Procurement policies, approvals and roles will heavily impact all other components i.e. People, Process and Technology.

Example 2

In an other large manufacturing company, the Digital Transformation would involve changing the core ERP system and all associated custom-developed applications running on local servers. The IT team is fully busy keeping the lights on, would need to learn new skills and adjust its internal organization, processes and tools. There is nothing really new here as such a situation happens in almost every large Transformation initiative. However, the interim IT Structure (incl. R&R, KPIs and policies) as well as the future-state IT Structure (incl. R&R, KPIs and policies) would need to be defined so that the other components i.e. People, Process and Technology can be adapted too.

Conclusion

For an effective and successful organizational Transformation or Change, not only the usual People, Process and Technology components should be considered. The often-forgotten or neglected Structure component should also be added into the picture together with its corresponding Roles & Responsibilities, KPIs, Workflows and Policies.

Reference:
Harold J. Leavitt, Carnegie Institute of Technology “Applied Organisational Change in Industry: Structural, Technological and Humanistic Approaches”.

Back in 1995, John P. Kotter published an article in the Harvard Business Review titled “Leading change: Why Transformation efforts fail?”
At that time, he listed a set of 8 errors that he had observed over a decade. We are now in 2019 i.e. 25 years later and these errors are still happening today.

Error #1: Not Establishing a Great Enough Sense of Urgency
I can see companies today that are talking about transformation however there is no leadership call on a hard timeline. Top management is paralyzed, does not see it as a priority on the agenda and nothing will happen as a result.

Error #2: Not Creating a Powerful Enough Guiding Coalition
Although a Transformation can be initiated by the idea of 1 person, it cannot be sustained by that 1 person through the iterations and cycles of decisions and management reviews in any large company. Unless this idea is offshoot as a start-up outside the organization. Otherwise, a team of dedicated leaders, managers and experts must be assembled and grow over time. If expertise is not available inside, budgets must be allocated to bring in the required external expertise & knowledge. I can see companies today trying to leverage their current internal structure exclusively for their digital transformation. and not allocating any budget. This can only fail as everyone is 1. busy with day-to-day operations, 2. not empowered to transform, 3. largely resistant to change due to fear and 4. there is not enough knowledge internally. Here again, this can only fail.

Error #3: Lacking a Vision
In my opinion, this is the most critical error and I would actually move it to the top of list. Without a vision, there will be no timeline and no guiding coalition. The vision has to be imagined by the company founder or the actual CEO. This is a top-down approach and I will comment on this in a specific post. The vision is about WHY the company is going to transform. The HOW and the WHAT can be defined once the WHY is known. Talking about the HOW or the WHAT is a futile exercise if the destination (the WHY or the Vision) is not known. Transformation initiatives without a Vision and Mission statement fail and will continue to fail.

The 5 other errors are in the HBR article (see link below)

References

Harvard Business Review: Leading Change: Why Transformation Efforts Fail
Books: John P. Kotter books on amazon.com

Digital Transformation… the missing element