Organizational Structures That Drive Digital Success

Insights

• Most companies face a challenge with getting what they want out of their digital investments.
• They often lack the right organizational structure and cultural practices that are required for it.
• Focussing on building a product-centric model, smooth flow of live data, good leadership, and a great company culture can help them achieve successful digital transformation.

Businesses around the world are choosing to undertake digital transformation: Statista, says that global digital transformation spending is forecast to reach $3.4 trillion by 2026. Yet few realize the role that organizational structure and culture play in a successful digital transformation, and tend to focus solely on technology aspects.

This could be the reason many companies are not getting what they want out of their digital investments. Infosys Digital Radar 2023 found that nine out of 10 companies have the wrong organizational structure and culture to unlock the next frontier of digital growth. In fact, only 14% of firms in Infosys’s study are prioritizing the right cultural practices.

Practices that hinder digital transformation

Prioritizing technology over culture as critical to achieving digital transformation and innovation goals is a common mistake, the Infosys study found. With many other companies adopting technology in the same manner, what sets some companies apart from their competitors will be how they build a culture that is conducive to digital transformation.

One key issue is the attitude of leadership and their willingness to learn from failures. The Infosys study found that only 35% of companies saw failure as a learning opportunity. For example, not investing in high-integrity live data can mean the business takes risks that are not properly evaluated.

Leaders blaming others for failed risks also hampers digital transformation as it can create a fear of trying new things among teams, harming the mindset necessary for innovation and digital transformation.

Aspects that aid digital transformation

Solid organizational structure

• When an organizational structure is designed to be less about a specific product in the firm’s offerings and more about the value it delivers, the organization develops the agility needed to help it to thrive in difficult market conditions. Companies must consider grouping business lines that offer capabilities and services around an end-to-end customer journey. An outcome-centric business model means they can monitor value and increase engagement around measurable goals. It ensures customer-centricity across the value chain and aids the creation of market-specific innovative products. A product-centric delivery model helps firms achieve value faster and adapt for greater innovation.

  A product-centric delivery model helps firms achieve value faster and adapt for greater innovation.

  
• Live data is the oil required for the smooth functioning of a product-centric organization. Data must flow swiftly and efficiently across teams to support collaboration, and the creation of innovative products.
• Besides being organized around its products – which shows an estimated 45% to 50% increase in likelihood to have excellent product creation speed as per Infosys’s research – an organization must also consider subscription-based business models and look for growth across alternative industries. The use of subscription-based business models impacts digital experience outcomes and has shown post-sales customer engagement and loyalty increases by 80%.
• The study also found that effective use of digital experience boosts profits and improves brand perception and employee retention. Firms are instituting the role of chief experience officer to look after both customer experience (CX) and employee experience (EX), and using live data more than others to improve post-sales customer engagement and loyalty. Recent research by Deloitte recommends that companies that make the necessary investments in technology to help staff to do their jobs well will have better employee retention.
• Transparent data reporting is key for improving digital experiences: both leaders and employees are more likely to prioritize customer needs when they see the positive results of digital experience initiatives.

Inspirational leadership and culture

• Of the practices that the study’s respondents ranked as helping them meet digital experience, innovation, and net-zero objectives, five of the top six had to do with a data-driven, diverse, and flexible leadership that made quick, inspirational decisions. Clearly, good leadership is vital for successful digital transformation. “CIOs and CISOs have such a unique opportunity right now in driving the enterprise forward. Be that through shaping corporate culture or guiding the company through their digital journey, technology leaders have a strong upper hand,” says Hunter Muller, president and CEO of HMG Strategy.
• Firms that encourage taking responsible risks, backed by live data, are more likely to create products faster, retain employees, and increase profit than those that don’t. Leaders who view failure as a learning opportunity and guide employees, so they can try again, help them stay close to the customer to ensure that learnings are applied to the product or service delivered. Witnessing setbacks that have been transformed into successes fosters a mindset aligned to Agile practices. A company that prioritizes its products and customer feedback can act quickly to modify the products accordingly and refine customer experience.

  Firms that encourage taking responsible risks, backed by live data, are more likely to create products faster, retain employees, and increase profit than those that don’t.

• To prevent fatigue from constant digital deployments, companies must continuously optimize usability and integration, such as identifying points of friction and eliminating them in later iterations. Providing continuous digital learning to employees helps enhance their digital experience. Unilever offers its Future-fit Plan to help its employees develop the priority skills the company needs them to have. Diversity in both the leadership teams and the wider workforce also fosters better innovation, as does having a leadership that cascades target commitments throughout the business. Research by Great Place to Work shows how workplace diversity and inclusion can help unlock innovation by giving rise to more unconventional ideas. Another example is the fast food chain Chick-fil-A, which allots funds specifically for professional development to its employees and ensures that they get continuous training in innovation processes.

Combining the right organizational structure and healthy culture can significantly impact how quickly and efficiently companies innovate and transform digitally. The sooner organizations see value in it, the better their chances of attaining success in their digital transformation journeys.