A capabilities approach to digital transformation

The challenge of digital transformation; to build capabilities in people whilst at the same time moving away from the capabilities that the organisation holds in its processes and values in order to deal with new problems.

Christensen & Overdorf said,

“As successful companies mature, employees gradually come to assume that the processes and priorities they’ve used so successfully so often are the right way to do their work. Once that happens and employees begin to follow processes and decide priorities by assumption rather than by conscious choice, those processes and values come to constitute the organization’s culture. As companies grow from a few employees to hundreds and thousands of them, the challenge of getting all employees to agree on what needs to be done and how can be daunting for even the best managers. Culture is a powerful management tool in those situations. It enables employees to act autonomously but causes them to act consistently. Hence, the factors that define an organization’s capabilities and disabilities evolve over time-they start in resources; then move to visible, articulated processes and values,- and migrate finally to culture. As long as the organization continues to face the same sorts of problems that its processes and values were designed to address, managing the organization can be straightforward. But because those factors also define what an organization cannot do, they constitute disabilities when the problems facing the company change fundamentally. When the organization’s capabilities reside primarily in its people, changing capabilities to address the new problems is relatively simple. But when the capabilities have come to reside in processes and values, and especially when they have become embedded in culture, change can be extraordinarily difficult.”

The processes organisations use are designed to be repeatable with minimal variation, the values organisations hold show themselves in the assumptions decisions are based on, and the culture that organisations promote becomes mono-culture, preventing counter-culture, and holding back change.

What capabilities do organisations need their people to have in order to respond effectively to new problems? Broadly speaking the answer is obvious. They need more digital capabilities. To be ‘digital’ means to be user-focused first and foremost, to utilise internet-era ways of working and thinking, to build on the known success of others. But how do organisations get more digital capabilities?

The usual approach to learning and development is based on some variation of the 70-20-10 model of organisational learning where 70% of learning is experiential or on-the-job. This relies on the assumption that there is sufficient knowledge and experience within the organisation, but in many cases there isn’t and in the cases where there is it is prevented from being utilised by the existing values and culture. Of course, very few organisations are completely lacking in digital capabilities. They have good people everywhere who outside of work are probably as digital at home as the organisation wish they were at work, but when they sign-in each morning they adopt those organisational values and processes that prevent them from using those capabilities.

There is no perfect organisational structure, but there is a lot to be said for decoupling how power flows through the organisation from how information (and so learning) flows. Power flows through hierarchies and traditional org structures and it will for a long time to come. Many organisations have tried flat, holocratic and matrix structures and it never works, so let power and authority flow through the hierarchies. Focus on creating networks for the information to flow. The more people that feel able to share more information and learning the more they all benefit. The more learning opportunities people create the faster people can learn.

Transforming an organisation into a 21st century fit, digital organisation requires breaking down those existing processes and values to put people first.