Large scale enterprises have a tradition to be excellent in executing structured business processes to deliver value to the end customer. It is about standardizing for efficiency, ensuring performance predictability and minimizing risk. This is done by crafting a plan, setting budgets and targets followed by a set of reporting KPI’s to deliver feedback on performance. The top of the organization is guarding and steering the managerial hierarchy to ensure targets are being met. In short an enterprise is a permanent organization designed to execute a repeatable and scalable business model in a known environment. This worked well for several decades, but not anymore. Times have changed, the B2B tsunami is coming and its impact on the business world will be even more profound than the B2C one which was led by Amazon, Airbnb, Uber, Spotify and alike.
In the words of Hubert Tardieu: “the 3rd Digital Revolution ensues organizations can no longer ignore the warning signs, we estimate that businesses have around two years to prepare, adapting their core processes and culture to thrive in a world of digitalization.”
Area of Big Change
To surf the coming B2B tsunami, enterprises have to enter an area of big change. They have to embark on a digital transformation journey to ensure they are ready to adapt to the new business environment. It will be big change, because they will have to significantly alter their ongoing operations in a high risk environment which can be characterized by elevated volatility, disruption, novelty and scope.
To realize big change the current way of structuring, managing, organizing and implementing change isn’t good enough anymore to deliver results, because the hierarchy model is not capable to enable/implement transformational change.
Although knowing this, most organizations still have the tendency to manage their big change processes in this way. So specialized committees and (change) programs are added to the overall structure to boost change, but they easily fall in the ‘bureaucratic’ trap, whereby change initiatives becoming part of the formal structure which is aiming at predictability, efficiency, control by standard KPI’s derived from the hierarchy, which in turn leads to risk averse change initiatives with almost no or little effect.
Limitations of hierarchy
So a typical change initiative starts at the top of the organization and the ones selected to lead the initiative are always chosen from a small number of trusted managers surrounding the top management. They mimic the behavior from senior management, so in a closed group they work on a solution which will be communicated and implemented top-down in the formal organization with KPI reporting to measure progress.
If big change programs are managed as described above, communication across silos will not happen with sufficient speed or effectiveness. Also the Information flow from top to bottom and vice versa is slow, because of all the managerial levels in combination with all the policies, rules, procedures become barriers for the strategic needed speed. Middle management will cling to their habits and fear loss of power and stature. It is easy to blame the middle management, but the problems are related to the limitations of hierarchy and basic managerial processes.
So if change is organized this way it will work for incremental change, like implementing a best practice (novelty), relatively small improvements to existing processes (disruption), if just a small part of the organization is in scope (scope), or a rather slow change implementation in a stable environment (volatility), but when the change required to adapt is beyond this, those methods will fail big time and big change and a different approach are needed.
Gartner’s big change characteristics
Digital transformation is big change
Digital transformation is big change, why… because probably some of the next phrases will go through the minds of those involved: we have never done it, it is disruptive to our processes, it touches a lot of departments and our people and systems can’t keep up with the pace of change needed.
Dual operating system
A first step to overcome this and to prepare the organizational soil for big change is to establish a dual operating system structure in the enterprise. This will be done by the introduction and formalization of a network structure besides the current hierarchal structure. But this can only work when complicatedness is minimized, cooperation is designed, management is aligned and networks are empowered.
Processes in networks look less like management and more like mobilized leadership, because the network organization contains no bureaucratic layers, no command-and-control and processes which provide the necessary strategic speed. The network is well equipped to easily liberate information from different silos and hierarchical layers in the organization, also a level of individualism, creativity, and innovation is permitted which the hierarchical organization cannot provide.
To connect hierarchy and networks, guiding coalitions are needed to provide the alignment with the hierarchy and setting direction and bandwidth by formulating a strategic urgency/issue statement for big change needed to realize the transformation. Members of the guiding coalition are employees with authority in the hierarchy, who are well connected. They make sure, the change vision is aligned with the big opportunity digital transformation is offering, align the hierarchy-side of the organization with the network. The guiding coalition keeps tight communication with the executive committee and monitors (not controlling) the activities in the network.
The hierarchy can be found in the organization chart, all departments are well defined with functions and employees involved and if you are lucky it is reflected in the active directory. For the network side there are no formal documents and there is just one system which could reflect the network character of the organization: the Enterprise Social Network.
Intelligent Networked Enterprise
To make the transition to an organization with a dual operating system, whereby the network side becomes the engine of big change, a well adopted Enterprise Social Network becomes a necessity to guarantee the right people get onboard to successfully tackle the strategic urgency/issue statement presented by the executive leadership team.
A new paradigm for the digital enterprise is arising; a view to frame the end state of the needed digital transformation to prepare for the upcoming B2B tsunami fueled by a process of big change. We call it the Intelligent Networked Enterprise, which was introduced in earlier post.
In this one we touched one facet on a high level: “Networked” and described it in relation to big change and the need for formalizing the informal network to make the big change happen. In the current business environment, digital transformation is not just an option anymore, it is a must.
Why? Just give the following some thought: every product and/or service will become information/digital enabled, this leads to an information/digital enabled environment which will offer enormous disruptive opportunities the business world hasn’t seen before. I guess you surely can come up with some, if not, others will.
 Accelerate: building strategic agility for a faster-moving world, J.P. Kotter, Harvard Business Review Press, 2014