Introduction to digital transformation: 6- Impact on the organization ?
As the digital transformation impacts individuals, it does the same to organizations.
by Giandomenico Rivetti, Lars Dittmann
In these series of articles, we have discussed the difference between traditional and modern business models. In traditional set-ups, producers are offering their assets to satisfy customer needs, whilemodern business models are designed starting from customer needs. The organizational structure in traditional and modern business models is different.
But even more important is the difference in the company culture, which is defined as a set of shared values, goals, attitudes, and practices that characterize an organization.
Let us take a look at two extreme organizational philosophies.
Strict hierarchical organization
To emphasis the cultural differences of companies with traditional and modern business models we describe the difference architypes of the respective organizations.
The traditional organization is hierarchical and driven by profit. Structure and authority come before culture. The leadership style is based on command and control. The boss manages the team and rewards individual achievements.
Organizational silos are to be found having scarce information flows from one part of the organization to the other. The workforce is fixed and well-functioning in its place. It can be summarized as static and efficient.
We bear in mind that these organizations served many companies well for many years and decades.
It is the changing business, social, and technological environment that challenges the existing structures.
Pure network organization
The pure network organization is the other extreme of the spectrum.
It serves modern business models, and it is driven by purpose. Culture and personal fit come first.
One person can be the project manager and leader in one task, while she or he is a regular team member in the next mission – or maybe that person receives a role as coach or technical expert.
Roles keep changing while tasks keep changing.
The leadership style is based on collaboration, just-do-it approach, coaching, and quick adaptation of learnings. People are connected through networks and share information transparently to conclude the tasks. The workforce is dynamic and global talents are added on-demand without frontiers. It can be described as agile and effective.
While the upside of the network organization is the ability to get new things done – speaking of effectiveness. The challenge is that the best price for the solution is not guaranteed. But this does not matter if the solution is derived from the customer need and the perceived value is number one in the marketplace because the number one perception allows premium pricing. Pure network organizations are also great at changing and adopting.
For companies with traditional business models going through a transformation, means that the organization will change as well.
A more modern business model requires less hierarchy and more networking. However, most companies, in fact, represent a mix of both worlds. Depending on the selected transformation mode, companies need to find the right balance between the two extremes.
Our recommendation is knowing and understanding the reasons for the different models is the first step to find the right calibration.
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