What about Organizational and Cultural Changes in the Digitalizing Process and Manufacturing Industries?
April 28, 2021
In industrial digital capability development, the focus has turned from technology-oriented pilots to functional business core changes. Simultaneously for data, we have seen a transition from data creation and collection to totally new data-driven services and business solutions. If in the 2010s it was possible to develop digital solutions for internal purposes in industrial companies, that is now turning out-fashioned. Digital capabilities must create network enabled operating capabilities for industrial customers, suppliers and partners. Shortly: for ecosystems.
These changes lead to the fact that digital development has become more transformative than ever. It not only involves processes, data and technology but also organizational and cultural changes. Why? Because in the 2020s digital capability development has effects that are integral to the whole industrial value chain. Functional integrations and solid information flows from product strategy to service business operations within the company and with customers and partners will be standard operational procedure. Digital capabilities are enabling but also widely changing the way in which people are acting in their daily operations and ecosystems. Overall and long-lasting digital development actions require high quality change management approaches. However, the question is not about change management. New kinds of leadership and blue-collar readiness are needed in network-enabled business operations.
Putting all this in a very simple format: The updated focus of digital capability development leads to several effects in organizational and cultural point of views. Handling those effects requires more effort.
Midagon is continuously asking ourselves if we are focusing enough on fundamental organizational and cultural changes in digital business solution development. We want to be sure that we do not develop digital capabilities that will be isolated entities from real industrial operations. Did we develop digital capabilities that are adopted by workers and are the capabilities supporting workers’ daily actions, instead of adding control and bureaucracy? Of course, these questions are also valid ones for industrial companies in their digital business solution development. The following simplification is figuring out the transition that is ongoing in industrial business development:
As described, we have seen that needs for organizational and cultural development are increasing rapidly. This does not mean that needs for process and technology development will decrease. They will also relevant in the future. However, the growing trend is to focus on the organizational and cultural aspects. There is a clear reason behind the trend: Without organizational and cultural commitment, the final development value approaches zero or is even negative. There are too many organizations that have proven this fact in practice.
From a development maturity perspective, we have identified that organizational and cultural development capabilities require many improvements. We are all good at process and technology focused development, but difficulties appear when we turn the focus to organizational and cultural changes.
The critical question is “How do you face the challenge of an increasing need for organizational and cultural development?” There are no simple answers to this question. However, I have identified some guidelines and have selected five perspectives for this blog.
In industrial environments, the development focus is often pragmatic. We can touch it – we can develop it. These development actions are tangible, and everyone can accept the relevance. Results of this kind of development are visible and are leading immediate improvements in business efficiency. When thinking about the other side of the coin, organization and culture, they are abstract and the development benefits are realized slowly. If you are honest: you have already proved several cases where the focus has been in tangible process and technology development, but you have noticed that the real needs are in organizational and cultural levels.
Admit the need even it is abstract, and benefits will appear with delay.
Just on purpose, I have used terms organization and organizational in this blog. Perhaps you have read those as organization structures. Structures are important and must be noticed in organizational development. But even more it is the question about people. People are doing, structures are only giving the supportive frame for people. The hardest part of business and operating model digitalisations is to support people in their behavioral changes and competence development. This cannot be done separately. Human oriented development must be embedded and is often almost the first action to take in digital business solution development.
Keep fixing organizational structures but turn the centre of gravity to people.
The level of abstraction and critical role of people means that new kinds of targeting and tasking are needed for organizational and cultural development. For pure process- and technology-oriented development, you can define tangible requirements and set KPIs for following the progress. However, you cannot say “I’m ordering that my people are thinking like I am by the end Q2”. And if you would order so, can you measure the results in the end of Q2? Of course not. There is no silver bullet or common rule for targeting and tasking organizational and cultural changes because those are absolutely context dependent. You must put plenty of effort and identify the governing approach which is appropriate to your context.
Do not govern abstract things as you govern tangible things – Define your own approach.
When objectives are abstract, benefits must be clear for both business and personnel. It is important that the big picture and business benefits exist and are shared among personnel but that is not enough. Business and corporate oriented developers must jump to personnel’s daily world and understand what is causing pleasure and what is irritating among personnel. Putting this very straight: if personnel’s motivation does not exist, this underground resistance movement is easily stopping whatever business change. Developers must be very demanding about transformation towards business benefits but simultaneously personnel benefits must be understood and delivered. This requires that personnel benefits be analysed and formulated in development initiation, communicated continuously and finally delivered to personnel during implementations.
Be demanding with the business benefit but take seriously care of personnel motivation.
I have already emphasized the relevance of people-oriented development in several ways. However, I would like to return to people once more. This time we look at people as leaders. There is considerable discussion about how AI and digitalization are changing employees’ roles and tasks. Although this is true, we may not be paying enough attention about the required changes for leadership and leaders. In the 2010s we were creating many control-focused administrative duties for managers and many IT-systems were used to confirm that managers were following the procedures. With digitalized business solutions, many of these control-oriented actions are handled by technology. As a result, managers hopefully will be again available for leading their own people.
Perhaps you noticed that the fifth guideline is different. It is more a development target than a guideline. Why did I pick this one? Many companies are questioning how to initiate cultural transformation and what is the necessary approach for change management. For digital business solution implementation and cultural commitment, I strongly believe in crowdsourcing. You can start crowdsourcing with your own managers. This can be done by systematically preparing managers for their upcoming leader focused roles. When managers are prepared for leading instead of administration, they will also be your best partners for change management actions. When change tigers are integral in different teams, changes happen. Otherwise, you are shouting to the wind.
Start organizational and cultural changes with systematic internal leadership development.
Do you find something interesting or are you disagreeing about some claims? Organizational and cultural changes are a very broad topic. It is not possible to figure out all of the relevant aspects and perspectives in one blog. Please contact me, if you would like to discuss in more detail the organizational and cultural changes in digitalizing industries! My contact information is as follows: +358 44 5841 702 or firstname.lastname@example.org
Author: Teemu Metsola, Director, Midagon Digital Business Services
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