Want to be a digital company? First solve these four organisational problems

Many executives think that becoming a digital enterprise is first and foremost a technology challenge. But as technology has become cheaper and more usable, its becoming clear that the organisational challenges are more intractable. Specifically, firms seeking to drive the maximum value from digital face four issues:
1. Removing structural boundaries. Becoming digital requires a shift in organisational paradigm. Historically, businesses have typically been aligned by function, product or geography. Processes and supporting data and systems have grown up in alignment with those boundaries. Business process overlays attempt to stitch together disparate activities into a joined-up experience, but all-too-often the customer carries much of the burden for integrating services. In the digital world, the customer is the new ‘axis of alignment’. Customers expect services to be seamlessly integrated across functions, products and geographies in real time. The burden for integration has fully shifted to the supplier. To react to this shift, firms need to change organisational structures. At the very least, activities such as IT architecture and data management, which provide the common foundations on which digital services are constructed, need to be centralised, often globally. Some firms are also choosing to carve out the digital channel from existing businesses, to enable a high-quality customer experience and deliver economies of scale. As business systems become progressively digitised, we might expect to see more radical structures emerging (e.g. organisations that are aligned to end-to-end customer journeys) or even businesses with little rigid structure but the tools to rapidly self-organise to meet shifting needs.
2. Adding new skills to old knowledge. Few roles remain untouched by technology. Knowledge workers are profoundly impacted as software development skills start to become a core component of many roles. For example petrochemical engineers are increasingly becoming software engineers as sophisticated algorithms are needed to find oil reserves. Hiring software engineers into these roles is not the answer – much better to retrain petroleum engineers to use latest tools available. But this re-training is expensive and not always successful – not all experienced knowledge workers will have the intellectual plasticity to graft on new skills mid-way through their careers.
3. Finding homes for digital natives. Digital is creating whole new career paths (e.g., data scientist) and massively boosting demand for existing digitally oriented roles (e.g. software engineer). This has created a marked skills shortage in many countries, and left digitally-skilled workers with a broad set of employment options. Incumbent businesses such as banks and insurers are finding themselves unable to compete vs. the excitement offered by a start-up or the experience offered by a large technology firm. Culture is a big barrier – few digital experts want to wear a suit and tie to work for example. Incumbent firms are experimenting with ways to make their environment more attractive – for example by housing their digital teams in a different location well away from the corporate centre, or by spinning off their digital teams in a separate company that can operate under its own terms.
4. Leading from the front. The digital agenda needs a focal point. Some organisations have created Chief Digital Officer role for this purpose, other are driving digitisation from the IT function. In some organisations CEOs are driving the agenda personally – Angela Ahrendts had led Burberry through an extraordinary transformation with digital at its core, for example. But digital leaders with the right mix of skills are in short supply. To counteract this, firms are starting to rotate high-potential leaders through functional roles such as IT and marketing, in addition to classic P&L roles, to build the right profiles over time.

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