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The COVID-19 pandemic has risen the bar (overnight) and is creating significant challenges for organisations in all sectors, worldwide. Digital transformations are considered an absolute necessity to remain in business. The ‘people dimension’ of these transformations – covering culture, structure, ways of working and leadership – is seen as the single biggest difference-maker in achieving transformation outcomes.
Digital is making work better for humans, and humans better at work
Alongside the widespread loss brought to so many companies, COVID-19 also brought a sudden boost in demand for some. In one case, a well-known international retailer saw its online and click-and-collect sales shoot up hundreds of percentage points. The company had previously relied mainly on a traditional model to drive revenue, but its online platform now represents the vast majority of new revenue as customers look for safer ways of purchasing the everyday things they need.
This was unimaginable a few months earlier, before COVID-19. The company’s CEO recognised that physical stores closing and social distancing revealed the possibilities of digital-first customer engagement in an immediate way: Instead of implementing digital solutions incrementally, over many years with half measures, it became time to accelerate. The retailer’s strategy now involves a holistic way forward, integrating changes in operating model and structure, team selection, leadership development, performance management and new ways of working.
In Deloitte’s article ‘Digital transformation after COVID-19: Acceleration with control’, we spoke about the goal of being digital, and the challenge to become future proof – able to weather future COVID-19 disruptions. Achieving that goal equates to an overall digital transformation: becoming an adaptable organisation that is technology led and able to adopt and fully optimise digitalisation in all aspects of business.
This demands the mastery of three vital domains: Digital Customer, Digital Core and Digital Work. They’re interlinked and contribute to success in different ways: Digital Customer drives top-line growth, Digital Core improves the operating margin and Digital Work is the indispensable link between the first two domains. This third article in our series covering digital transformation focuses on the Digital Work realm, offering a deeper look at how we organise work and empower our workforce with digitalisation. Spoiler alert: Unlocking human potential is the answer.
Digitalisation: Unlocking human potential
For many years, the term ‘digital’ has been defined in many different ways. It’s all about technology, for some; for others, it is about new business models, and for many more it is about doing work differently. All definitions are right. At Deloitte we tend to think about it as a movement toward a new way of working, rather than any single intervention. In this context, the term means the ability to use technology and new ways of working to humanise an experience. It is, ultimately, about accelerating human-to-human connection, giving people access to information, products and services that meet their individual needs. Digital technology is what makes work better for humans, and humans better at work.
When focusing only on technology, we run the risk of zooming in too much on the means, rather than the end, in and of itself. Accelerating digitalisation initiatives requires that we reconfigure organisational structures, processes, ways of working and decision-making, to become better equipped to keep up with the fast pace of change.
Digital maturity and the human catalysts of rapid change
A burning question for many leaders is, Where do we start unlocking the human potential that will drive a digital transformation? This depends on the level of your organisation’s digital maturity. That’s the view of Deloitte and MIT in the book The Technology Fallacy: How People Are the Real Key to Digital Transformation. The study conducted for the book prompted the authors to conclude that ‘digital maturing’ is a flexible, never-ending process and a verb rather than a noun. It means “aligning an organisation’s people culture, structure and tasks to compete effectively by taking advantage of opportunities enabled by technological infrastructure, both inside and outside the organisation”. All these organisational elements need to fire together over time, in a congruent manner, so organisations can thrive in highly volatile environments.
The study distinguishes among three general levels of maturity; various interventions are required to accelerate successfully through each stage:
Early-stage digital companies should be cautious, avoiding jumping into transforming the entire business without establishing the basics of improved customer service and engagement.
Furthermore, Deloitte and MIT’s research showed that, despite 85 per cent of organisations regarding digital business as key to their success, only 30 per cent rated themselves digitally mature. For many, this low confidence in their digital maturity has come from years of piecemeal attempts at ‘doing digital’ through individual initiatives, or quick-fix or one-off measures, with a strong focus on technology-related solutions. The reality is much more complicated than that, and a more holistic approach is needed to evolve ways of working from just doing digital to actually being digital, if we want to truly unlock human potential at work.
Figure 2 illustrates movement up this curve toward being digital and creating a truly digital workspace, workforce and work. Accelerating the pace of that movement means maximising the value of digital solutions by elevating ways of working across five levers (as detailed later in this article), to unlock human potential:
The path up the curve to being digital requires a mindset shift, recognising that digital maturity no longer relies on the use of technology alone, but rather how people engage with, use and embrace technology in their daily behaviour and ways of working. In that sense, digitalisation is a human opportunity.
Easier said than done: The challenges of transformation
Accelerating toward being digital requires a reconfiguration of organisational structures, processes, ways of working and decision-making to become better equipped to keep up with the fast pace of change. For many entities, that path ahead is not straightforward. Without aspirations and (strategic) priorities aligned, and resources allocated effectively, it will be complicated to scale up digital ways of working, and technology, across an organisation so that they have a lasting impact.
For example, some organisations falter because of a ‘knowing-doing gap’ : They focus too quickly on defining solutions, instead of aligning first on why they believe the need for (rapid) change exists. They also fail to build up knowledge that will shape holistic guidance and strategic direction for a response to digital disruption. This rushing into ‘doing’ results in quick fixes and a fragmented response.
Then there are organisations that apply ‘spot solutions’, which means they rely on a single intervention, like reorganising your way to digitalisation as the answer. Changing organisational structure will only get you so far. New roles, accountabilities and reporting lines interact with all five of the levers listed above. Leaders who focus only on spot solutions soon realise that while they solve some problems, they may also be generating others.
Another issue is that many communication and decision-making structures can’t respond to digital disruptions as quickly as needed; the technology isn’t holding us back, it’s the different rates at which people, organisations and policies respond to technology advances. As MIT/Deloitte stated in The Technology Fallacy: “While the increasing rate of technology innovation is a significant part of the challenge that companies face, it is not the problem in and of itself. Technology changes faster than individuals can adopt it; individuals adapt more quickly to change than organisations can; and organisations adjust more quickly than legal and societal institutions can. Each of these gaps poses a different challenge to organisations, and they are only increasing.”
We can’t predict future advances in artificial intelligence or bots, or future health, economic or climate crises, but we can expect a continued and rapid evolution in how we get our work done. The companies that will pull ahead of the competition this year are those that can harness the momentum of this crisis. They’ll keep moving forward, reconfiguring their organisational structures, processes, ways of working and decision-making to use the fast pace of change to their advantage.
Shaping a holistic path to being digital
Remember the large retailer whose online sales skyrocketed when the pandemic hit? That company’s CEO looked beyond short-term changes that could be exploited, instead considering ‘the art of the possible’. The company took a holistic transformation approach, resulting in a comprehensive, digital transformation strategy – one based on streamlined priorities and solid reasons for change, and aligned to their digital maturity. The benefits brought by such a strategy are less likely to disappear when COVID-19 does.
Business leaders should take a hard look at their own unique context. What specific challenges exist? What’s your current state of digital maturity? With a clear picture, you can begin to crystallise relevant, effective next steps with the guidance of five key levers:
Lever 1 Ecosystem | Transcend organisational boundaries to capture new value with missions that matter
With business complexity only increasing, organisations are putting the brakes on their own potential by only looking at opportunities, resources and solutions in the here (inside their four walls) and now (at this moment). Harnessing the ‘network effect’ of ecosystem partners, alliances, crowdsourcing, and off-balance sheet pools of talent – and exploring your business across future time horizons – dramatically increases opportunities to create and capture new value.
In addition to looking ‘outside’ to a broader ecosystem, thinking about overarching market missions to mobilise teams around is essential. Cascading these missions in manageable and consumable components for teams to execute upon is crucial. For example, ‘happy customers’ is a difficult outcome to organise around, but ‘great online experience’ or ‘surprise and delight with after-sales care’ is something teams can easily envision.
Lever 2 Organisation | Accelerate digital maturity with multi-disciplinary teams
Once missions are established that are ‘winnable’ and that require harnessing the collective wisdom of diverse skills, setting about to organise multi-disciplinary teams is essential. This is not about copying the latest fads or the ‘chapters and squads’ of others, but by finding the opportunities for cross-functional collaboration that have historically been difficult to mobilise. Thinking about ‘pods’ tied to an overarching mission, and underlying squads/teams that deliver sub-aspects of that mission is a helpful starting point. In the end it’s about translating manageable market/customer goals into tactical units mobilised, focused and empowered to deliver against them.
Considerable experimentation is underway in multi-disciplinary teaming, and 71 per cent of companies in Deloitte’s Human Capital Trends survey have identified recent successes in team performance by breaking out of silos. Yet 65 per cent say that most work is still organised across hierarchical functional lines – breaking these old patterns of organising is essential to setting up agile teams for success, so that they can learn and adapt to the latest technologies, customer engagement tactics and new ways of working.
Lever 3 Leaders | Empower teams through clear direction and empathic orchestration
A recent study indicates that engagement scores in the first five months of 2020 showed an 11 percent increase over previous years; this was particularly visible in organisations where leaders paid attention and time to their teams, and invested (practically with tools, and mentally) in providing clear direction to keep them connected. In a digital context such traits of good leadership remain essential, and we may need more of them.
The most valuable leadership trait remains the ability to provide vision, direction and purpose . The workforce needs a transformative vision to subscribe to, and leaders who can adjust their priorities if circumstances change. They must also be able to lead multidisciplinary teams and missions. This requires a shift from a ‘command and control’ mindset and positional authority toward empathic orchestration. Leaders bring together leading experts who have much deeper expertise than they may have themselves; it takes vulnerability to acknowledge this, and demonstrate it in the way leaders interact with teams.
The Technology Fallacy research states that 68 per cent of respondents agreed that their organisation needs new leadership to compete . The ones who have made organisations successful so far are not necessarily those with the skills to continuously face new challenges and adapt the organisation and their leadership style to new (digital) environments. Moving up the curve to being digital requires leaders who can set a clear and inspiring direction. They should be open to dealing with ambiguity and translating opportunities into experiments, to find new solutions to address increasing complexity and market fluctuations.
Lever 4 Teams | Enabling multi-disciplinary teams through connected ways of working and technology
If set up appropriately, and applying agile ways of working effectively, multidisciplinary teams can have four key strategic advantages over teams that are operating in a hierarchical, bureaucratic context with multiple management layers:
Lever 5 Individuals | Nurture resilience in the workforce and re-engineer talent management
Great digital strategies require great talent – a workforce that embraces change, and can navigate it. Ideally, resilience and accepting change will become part of an enterprise’s ‘DNA’, and talent programmes should be designed to enable this resilience. Individuals and teams need guidance to help navigate the digital organisation and team environment, with safe boundaries provided to explore their own careers. Traditional talent programmes should become more flexible and customised to support individual resilience (for a collective impact).
In addition, a re-evaluation of performance management, succession planning, and diversity and inclusion are critical to enable people to work in new ways, understand expectations, and be incentivised. Initiatives may include team-based performance management, mission outcome-based rewards and recognition, self-led team-based learning and development journeys, and more room for variety in horizontal career development (instead of just vertical, ‘up the ladder’).
It takes holistic congruence and alignment among all five of these levers to move up the curve from doing digital to being digital and unlock the human potential to fully benefit from technology.
For many organisations, the COVID-19 pandemic brought a rude awakening: They were not as far along the digital curve as they had thought. Numerous CEOs have described finding the need to expand their efforts, going beyond doing digital (individual interventions) to being digital and fully embracing new ways of working for every facet of the company and operations. This means unlocking the true potential of the workforce, giving continuous attention to all five levers. Before the crisis, the people dimensions of transformation – like culture, structure, ways of working, leadership – were seen as nice to have. Now they stand out clearly as the single biggest differentiator in achieving digital maturity and a successful digital transformation.
Tom is a leader in the Deloitte Organisation Transformation practice focusing on enterprise adaptability, accelerating digital transformation and organisation design. He has guided multiple clients globally on their journey to truly anchor their organisation in customer centricity, adaptability and being able to thrive in a digital world. As a natural innovator and connector, he thrives on helping organisations to learn, adapt, build and execute their strategy and loves to design and guide organisations to create a high performance culture where it is inspiring and fun to work in.
Michael works with Financial Services industry clients in all areas of Human Capital. He has worked extensively in the Asia Pacific and European regions. His areas of expertise include Business Transformation, Organisation Design and Workforce Transition, Change Management, HR Transformation, Finance Transformation, Cost Reduction and Post Merger Integration.