Digital transformation in organisations and people functions

Why digital transformation matters to people professionals

1. It’s about people, not technology. Digital transformation is more about changing people’s mindset and organisational practices than it is about choosing specific technology. It is about formulating a business strategy that appeals to both employees and customers,  shaping a new culture that supports agile decision-making, and dealing with anxiety about or resistance to change. 
2. It’s a critical topic impacting the current and future world of work that people professionals have identified in the People Profession 2030 report. To thrive in 2030 and beyond, the report recommends bringing people expertise to digital transformation to add real value in organisations.
3. Knowing how to manage it is a core knowledge of a CIPD-qualified people professional. Business Acumen, Change, and Culture and Behaviour are three core knowledge areas in the CIPD’s New People Profession Map that are important for paving the path to digital transformation.

What is meant by ‘digital transformation’ and ‘digital maturity’?

Before digital transformation became a buzzword, enterprise or business transformation was commonly used to describe a radically new way of running an organisation. As technology increasingly disrupted the status quo, people began using digital transformation to describe enterprise transformation in response to evolving digital technologies. Somehow in the process, ‘enterprise’ was dropped from the terminology. Other flavours of digital transformation developed, focusing on radical changes within organisational functions like finance and marketing. In this series, we delve into digital transformation in organisations as well as people functions.

In essence, digital transformation is about an organisation and their people’s ability to adapt to rapid changes caused by evolving digital technologies. The transformation here is not an end state but a milestone in a continuous journey of adaptation as digital technologies evolve. Digital transformation is about becoming more digitally mature as an organisation. 

In Technology Fallacy, Kane et al. defines digital maturity as follows:

‘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.’

This definition builds on an established organisational theory by Nadler and Tushman (1980) by considering the opportunities created by evolving technologies.

People, culture, structure, tasks and technology must be tightly aligned for an organisation to achieve powerful results. As Kane et al. stated, ‘for example, a conservative and hierarchical organisation that recruits energetic entrepreneurs won’t be able to harness their drive and energy.’ 

What people professionals said about digital transformation

People professionals who contributed to the CIPD People Profession 2030 report recognised that the profession has a significant role to play in digital transformation. For example, in shaping the culture, engaging the workforce throughout the change and dealing with anxiety or resistance. They debated the ongoing relationship between the people function and IT. While some had a good business partnership with IT, others felt they were working in siloes. In the latter case it meant that people issues might not be considered. There was also discussion on ‘closing the skills gap around technology and analytics’ in the workforce and within the people function. Having the technology and analytics alone is not enough. It’s important to know how to use it.

How to do digital transformation effectively

Kane et al. outlined four steps to effective digital transformation and becoming a more digitally mature organisation:

1. Assess – Survey your employees to understand where your organisation is with respect to the 23 traits of digital maturity. Then conduct a workshop for senior leaders to review the survey findings and have them to complete the survey themselves.
2. Enable – Determine how digitally mature your organisation needs to become today. Organisations that have mastered digital maturity build on existing strengths, while more traditional organisations might want to work on minimising their weaknesses so that they become less digitally immature. The least digitally mature part of your organisation may be holding the entire organisation back.
3. Transform – Decide how your organisation improves on the target area and practically moves toward digital maturity. Decide which areas to focus on by doing a cost-benefit analysis of the 23 areas. Target three to five areas that give the best return in terms of time, effort and resources. Develop small, six to eight-week initiatives on the areas that you want to improve.
4. Review and repeat – Review what you have learned from the small initiatives and whether they were successful. If so, make plans to repeat the initiative with other small groups to drive change across the organisation. If not, learn from the experience and try something else.

To help create an organisation that can operate effectively in a changing future of work, they suggest focusing on initiatives such as:

• redesigning work activities and processes with the best combination of automation and human skills
• delivering an integrated customer and employee experience through physical and virtual workplaces and digital tools that drive productivity and promote personalisation
• using an insight-driven change analytics and design-thinking approach that puts the customer at the centre and embraces iteration
• being digital first and shaping the organisation through new cultural behaviours and delivering consumer-grade employee experiences.

Interestingly, digitally mature organisations share a single set of cultural characteristics. Organisations looking to mature digitally should aim to adopt these:

• accepts risk of failure as part of experimenting with new initiatives
• actively implements initiatives to increase agility in response to rapidly changing markets
• values and encourages experiments and testing as a way of continuous organisational learning
• recognises and rewards collaboration across teams and divisions as part of its culture and operating model
• increasingly organises projects around cross-functional teams
• increasingly empowers those teams to act autonomously.

To become future-ready, an organisation needs to be skilful at both significantly improving its customer experience and reducing cost through simplification. Many of the organisations identified in Kane et al.’s research achieved good performance mainly through the heroics of their people, who overcame complexities to create great customer experiences.

Pathways to digital transformation

Stephanie Woerner identified four pathways to digital transformation that organisations can choose from: 

1. Standardise first by improving operational efficiencies. The downside is that eliminating legacy processes and systems takes time without any improvement in customer experience.
2. Improve customer experience first. This includes building mobile apps, improving call centres and empowering relationship managers, with the goal of increasing satisfaction. But this doesn’t address operational issues.
3. Take incremental steps by alternating between the first two pathways, to improve customer experience and operational efficiency. The difference between success and failure is having a roadmap that informs everyone’s efforts.
4. Create a new organisation that is future ready and continue improving the existing organisation by following one of the other pathways.

One organisation that chose the fourth pathway was Axiom Telecom in the UAE. It went through a transformation from a traditional bricks-and-mortar to a predominantly online retailer. In the next chapter of this series, its Group People Director Dominic Keogh-Peters discusses his experience and the role the people function played on that journey.