It’s Not Just About Technology: The People Side of Digitization

Anything that can be digitized will be digitized! The process of digitization affects almost everything in today’s organizations and puts huge pressure on these to change. Therefore, it is crucial for leaders to understand the implications of digitization on their organization and employees. Digitization not only changes the way of working, it also accelerates the speed of change that companies are facing. Both implications lead to three major requirements that have to be tackled to be successful: New skills and competencies, new forms of leadership, and new organizational capabilities. Depending on the degree to which organizations fulfill these requirements they will also evolve their culture towards a ‘digital mindset’. But digital transformation initiatives are facing huge challenges to realize the expected business benefits. Current studies clearly show the importance of managing people and organizational issues in digital transformations. Organizational change management is considered to be a critical success factor for any digital transformation program and embraces four major areas: Aligning leadership (e.g., digital vision, role modeling), mobilizing the organization (e.g., communication), building capabilities (e.g., digital skills), and ensuring sustainability (e.g., adapting KPI and incentive systems).

Digitization as Technology Driven Organizational Change

Anything that can be digitalized will be digitalized, and the technologies and applications to support this process will become more and more sophisticated and powerful. Digitization will have huge consequences for current business models and practices. Most organizations have realized the importance and criticality of digital technologies for their industry or their own business. They want to become more ‘digital’, and the executive support for such initiatives is growing. Digitization refers to “the increasing penetration of digital technologies in society with the associated changes in the connection of individuals and their behaviors”. Currently, four technologies are associated with digitization:

Analytic technologies and applications including ‘big data’ that allow innovative forms of information processing for better insights and decision making.
Mobile technologies like smartphones and tablets as well as applications that enable new business scenarios for customers, partners, suppliers, and employees.
Cloud technologies and solutions that offer flexible and shareable digital capabilities (e.g., marketplaces, software as a service) to drive business agility.
Social media technologies and applications that facilitate new forms of social interactions.

Together these fours technologies are having a tremendous effect on how organizations and industries are transforming themselves—and this process is occurring rapidly at a majority of organizations. Furthermore, research found that the likelihood of being transformed towards a digital enterprise is significantly higher among those organizations that deem multiple technologies to be critical. It is not just about simply implementing these technologies to increase efficiency or to cut costs. Organizations are using digital tools and applications to drive innovation, e.g., developing new business models or customer journeys.

Digital experiments in the early stages of digital transformation such as innovation labs, incubators and new digital products have helped to cultivate digital capabilities and produced remarkable results. However, since digitization affects almost everything in today’s organizations, any digital initiative requires an unprecedented coordination of people, processes, and technologies. Digitization is placing enormous pressure on organizations to evolve. Therefore, becoming a digital organization requires fundamental changes regarding how organizations operate and do business. One of the key questions is how to scale these capabilities in an upward direction while integrating them into the core business.

“None of the changes enabled by these technologies comes without accompanying organizational changes—management mind-sets, organizational behavior, operating culture” says Prof. Marchant of IMD. “Deep change over time coupled with these technologies is where transformation happens. Digital technologies can only lead to improved performance through organizational change. At its core, digital transformation is change, and, as with every organizational change initiative, it must be managed with extreme care.

In addition, a digital transformation isn’t a single effort but rather a portfolio of initiatives that work together to scale the change. Having a ‘let a hundred flowers bloom’ approach, where each initiative works independently in a spirit of experimentation, can lead to interesting and powerful results in all areas of ideation and 70 O. Kohnke innovation, but it is not a formula for scaling a digital transformation across an organization. Success ultimately depends on how management coordinates initiatives as they run at the same time. New skills and organizational capabilities are needed to increase the organization-wide adoption of digitization. Managing the transition to a digitally driven business model isn’t just critical in order to outperform competitors—it’s crucial for survival. Leaders of digital transformation programs have to come to understand the implications of digitization on their organizations and the people working in them.