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“Digital readiness is about embracing both, in equal amounts, the technical evolution and the change capacity in the organization. A one-sided investment in digital technology will make the organization less digitally prepared. That is the digital paradox.”

2014 has been a year dominated by digitalization. It is a topic that been discussed for some time in both IT and business, but it not until 2014 that we actually see real implications of digitalization. Companies are now investigating heavily in omnichannels, 3D printer, big data scientists, internet-of-things and digital managers to drive the digital transformation forward and with a purpose to defend its market position. Companies in the pinnacle of the digital storm are already living and breathing digital while those companies in periphery of the storm still hesitate to enter the digital landscape. 2015 will be a year when more and more companies will feel the digital effects of digitalization, the force of creative destruction and are forced to respond to the new business climate before it is too late.

There is somewhat of a paradox when it comes to digitalization. On one side, we embrace the technical evolution and its correlated business opportunities, and see innovation as a platform for securing future prosperity. The industrial history is dominated by a technical evolution that is driving economic growth. But never in history has the rate of change been this great – and it will not slow down! Technical change is good! On the other side, we fear change and avoid challenging our ways of working. Traditional governance structure has created an organizational environment of unengaged employees fearing change and evolution. It is the fear of being punished for not understanding, not delivering short-term results, taking responsibility and leaving our comfort zone into the unknown – where the magic happens. We don’t want to go there!

What is remarkable is that we both embrace and avoid change – at the same time. We embrace technical change and innovation, but avoid organizational or governance change. How is that even possible? Isn’t the fact that both changes are needed to become a digital company in the new normal? How come most companies invest one-sided on technical change (omniplatforms, 3D printer and big data capabilities) and not empathize the need for change capacity (leadership, governance and people)? The question is if we can leverage the technical evolution without addressing the fear of change, low engagement, and challenging our old governance models? These are the key questions for 2015.

A few days ago, a top-tier research firm launched a new paper on emerging trends driving digital business. The paper focused on internet-of-things and identified Democratization of Technology, Dematerialization and Disintermediation as key trends going forward. What is interesting, from my perspective, is that all of these trends focus on new technology such as smart cars, robots, and smart contact lenses – but not on how to drive engagement and agile organization to harbor the new technology. In a short survey, with digital managers in Sweden, digital success was built on something else. It was based on building effective cross-siloes relationships, creating passion and engagement for digital transformation, learning and understanding the time perspective in the digital revolution. Success was not about emerging technology – but rather how to address digital readiness of the organization. Worth thinking about!

Digital Paradox is that the more one-sided investment in digital technology and technical competence in a company, and not balanced with change capacity, the less prepare the company for the digitalization.

Organization change capability is obviously a key success factor for the future in order to meet the exploding digital evolution. But how many companies are actually investing in change capability? 3D printers, and omnichannel platforms are visual, cool and easy to build a business case around, but it will not solve the lacking change capacity in the organization. More data scientists – probably the opposite, do not raise the engagement levels among employees. I would say that many IT organizations invest only a small fraction of their IT budget on change capacity – which undermines its ambition to become digital. What is that?

My point of view is that the digital battles are not won by cool gadgets, new IT platforms nor new expertise but in the leadership and culture of the organization. Those that can raise engagement, and removing the fear of change are the winners – embracing a glowing change capability. Those companies that can engage the total work force in constant change, innovation and optimizing customer experience will be the champions of the digital race. Much of these effects can be achieved by implementing agile IT management methods designed for a constant changing environment. But still many organizations continue to invest in traditional governance structure limiting change capacity.

What I miss in the current discussions around digitalization is the need for change capacity in IT organizations – to balance heavy investments in new technology. There are millions of articles focusing on innovative technology and new technical competences – but very few on how to improve change capacity using agile IT management methods. I do not see that investments in 3D printer or Big Data capabilities (for example) alone will make you digital. Being digital is about embracing change (increasing in rate and magnitude) demanding new technology and an agile organizational structure and governance style. Not much is written about agile organizational structure or governance style. Why not – it is equally important?

Let me give you an example. A couple of years ago, I worked in a large multi-national cooperation positioned between the center and periphery of the digital storm. The digital pressure was increasing every minute. The IT department spent millions of Euro on application development (technical change) but only a fraction on change capacity (governance and organization). Senior managers even criticized change capacity openly undermining these initiatives. Now, the company is facing yet another sever cost cutting programs to guarantee survive in their industry. The investment in technology is not making them successful, but rather falling into a false sense of comfort that “we are doing all we can” to become digital. But the digital journey starts within us and our engagement for digital and change – with new agile management and culture.

My recommendations:

  1. Look at the balance between technological and change capability investments over the last three years. How many percent of the total budget was spent on change capability? Is that enough?
  2. What steps are you taking to improve change capacity? Does the management team have a passion for digital? What is the engagement level among your employees? How agile is your governance structure? These are the key question to ask going into 2015.
  3. Contact The Goodwind Company – we help you on the digital journey. We are experts at agile management models, balance between technology and change, and coaches for senior managers.

There is no doubt that digitalization will dominate IT and business social media in 2015. I hope that the articles and blogs will be more balanced between the technological evolution and the need for change capacity in the organization. Today, the information flow is too one-sided suggesting that only investments in technology will make you successful in the digital landscape. Nothing can be further from the truth. So, take this Christmas holiday to think about how prepared you ready are for the digital revolution. Do you have the right level of engagement and passion, learning, right IT governance structure? Make your own analysis without whispering consultants and experts. Come to your own conclusions. If you are not digital ready, dare to take the step out of your comfort zone to the digital environment – that is where the magic happens.

Merry Christmas & Happy New Year!

Hans Gillior

Hans Legend 1