Suddenly, we are in the Digital Era. Organisations that failed to notice and respond to change face an uncertain future.

Transition into the Digital Era is it is immensely disruptive and difficult. Digital Transformation is more than established business adopting new technology: it’s a reinventing business to exploit technology and operate in ways and places not previously imagined.

Reinventing business is a business leadership problem, so Digital Transformation is a business leadership problem. The issue is not how to manage technology: it’s how to manage use of technology and how to transform business to be effective and competitive in the Digital Era.

Evolving a business involves organisational change, which is not easy!
Organisations which make change look easy apply substantial effort to achieve the apparent smoothness of their change agenda.

Making intelligent choices about change – especially digital transformation – depends on understanding the scope and context of change that is happening.

Here we propose a Business Space and Context frame of reference in which to understand and manage the significant impacts that digital transformation can have.

Leavitt’s model (1964) for organisation change remains valid despite the relationship between the organisation and the contexts in which it operates (market, regulatory, community etc) having evolved.

In the 1960s, most organisations were substantially self-contained, and the boundaries of control were also the boundaries of change.

Leavitt’s Diamond with boundary context

An organisation pursuing change needed to give little concern to external factors. Change could typically be pursued through command and control mechanisms. Everybody involved in change could be readily accessed and problems arose, it was straight-forward to make adjustments. Even when change was driven by an external force, such as a regulatory change, the actual business change was still substantially within the organisation’s boundaries.

Today’s business boundaries are profoundly different. Relentless pursuit of efficiency, performance, market share and competitive advantage has changed the way organisations interact with their business context. Many aspects of business operations lie outside the boundaries of direct control. Organisations continue to develop new ways to work with other actors in the marketplace, transferring workload and responsibility to parties who are outside the reach of a directive approach to change.

There are six layers, or spaces, which may be a factor when organisations confront the imperatives of digital transformation.

Spaces for Digital Transformation

  • The Local space is the organisation itself. The complexities of change are within the reach of the organisation’s leaders who can direct and control change. Regardless, some of the people involved in the change are external to the organisation. Similarly, the organisation has limited control over many process, structure and technology elements that must change. Some organisational change will impact on, or be constrained by, aspects of people, process, structure and technology over which the organisation has limited control.
  • The Supplier space is driven by innovation in sourcing arrangements. Previously focused on raw materials, sourcing can now extend to entire organisational capabilities. Many organisations cannot function without reliable performance of their suppliers. To change their business systems and behaviours, organisations today may also need complementary and enabling change in the systems and behaviours of their suppliers.
  • The Customer space has evolved substantially. When Leavitt’s model was published, customer interaction was largely at arms’ length. Customers who wanted to influence the organisation and those were not satisfied with the result had limited means of exerting pressure. Today’s customers often get involved in the production of goods and services they acquire, such as when they perform tasks that were once entirely contained within the boundaries of the organisation. Social media has empowered customers to be loud and influential. Organisations that offend their customer base risk extensive, uncontrollable negative commentary. Digital era change in the customer space means going beyond simply informing customers of change, to now engaging customers in the change from the earliest stages.
  • The Regulatory space spans from legislated controls to industry codes of practice and professional standards. Digital transformation risk stems from the propensity for regulation to lag innovation. Technology advances and innovation enables organisations to build and deploy capability in fields were the regulatory space is immature. Previously appropriate regulation can become obstructive, ineffective, or inefficient because its planners did not consider future possibilities that are now reality. Further, the extended reach afforded to organisations through technology has the potential to greatly increase the range of regulation that applies to any organisation’s activities. The challenge in organisational change from today’s regulatory standpoint is not merely to understand the current regulatory situation. It requires awareness of gaps and emerging trends and conscious management of associated risk with direct effort to guide development of a suitable, workable future regulatory environment.
  • The Market space extends beyond the supplier, customer, and regulatory spaces to include other elements in today’s landscape for business and government activities. The market space embraces competitors and other organisations which may influence the setting and achieving of goals for change. It includes research and learning institutions, startups and their supporting ecosystems, industry associations and lobbies, and specialist media. The market space may also include organisations which operate in completely unrelated fields, but which through their own innovations may provide inspiration and experience for others.
  • The Public space includes everything not already mentioned. In the context of organisation change, it includes the general population and special interest groups of many kinds. It includes media and other entities that may influence perception and capability to deliver intended change in an effective manner. As technology enabled change becomes pervasive, the public space has become a significant factor in planning and implementing change – especially as it also undergoes its own subtle and sometimes unsubtle technology enabled changes.

Digital technologies enable new ways of doing the things we have always done, but more importantly they open the doors to a vast array of new possibilities within any given organisation and across the spaces in which it operates. Navigating any organisation through digital transformation demands a proper understanding of how these spaces are evolving as the organisation itself evolves (or doesn’t).

Digital Leadership Institute membership includes full access to the rich version of this and future papers, as part of a broad range of opportunities to build and share knowledge about digital leadership.

To learn more about the DLI and to become a member, please follow the link on the home page.

Untangling Digital Transformation’s Gordian Knot
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