By Nathan Simon
The impact of digital technologies spans the corporate value chain: from how companies connect with and deliver products and services to their customers, to how they organize their operations to maximize productivity. Digital technologies have even effected complete business model transformation in sectors like media and publishing.
But not knowing how to respond to such pervasive change can land executives in one of two traps: trying to control everything, or hoping that digital benefits will accrue organically. The first reaction leads to corporate paralysis, the second confusion and risk.
Companies that had become confident about their strategy bona fides are finding that speed, one of digital technologies' most pronounced characteristics, is playing havoc with annual planning cycles and forcing real-time responsiveness.
One reaction has been to forsake strategy in favor of ad hoc tactics. After all, "war," insisted Frederick the Great, "is decided only by battles and it is not finished except by them." But purely tactical and reactive adaptation, albeit good enough to "get by," is a poor formula for fully exploiting what is perhaps digital technologies' greatest value: heaps of data and the ability to derive insights from them that can drive product innovation, improved customer experience and loyalty, and productivity gains across the organization and extended value chain. To realize the full potential of digital technologies requires a balance of careful, but aggressive strategic planning, disciplined processes, and a firm-wide commitment.
Part of the problem is that the common wisdom to align strategy and organizational structure has not kept pace with the speed of change. When the Dutch East India Company deployed the "factory" system of field operating units, sending a message between the home office and factories took about two years.
Today, SKUs are exploding, companies are diversifying, product life cycles are shortening, and supply chains are spreading across the globe; meaning more complexity and less time to manage it.
With the help of consultants, clients are adopting wholly-new and radically different organizational structures to transport the elusive combination of flexibility and control into the digital age. One model is the military's mating of a command-and-control structure with Special Forces units. Translated to the arena of digital commerce, the idea is to maximize freedom of tactical maneuverability for those closest to customers and operations without sacrificing centralized governance.
Some companies are opting to silo digital engagements in functional areas—typically marketing, focusing on individual projects and initiatives. Others are injecting digital strategy and operating models into the C-Suite and diffusing them across the organization.
Either way, the lesson to be learned is that "doing digital well" requires a top-down, coordinated approach that brings longstanding strategies and organizational models into play. Companies that fail to learn this lesson may well end up reflecting Copernicus's characterization of the astronomers of his day: "taking from various places hands, feet, a head, and other pieces, very well depicted . . . but not for the representation of a single person; … a monster rather than a man would be put together from them."
Which likeness prevails, well-depicted person (even elite soldier) or monster, will depend on whether executives guide technology's transformative power with a flexible, forward looking strategy and aligned organizational structure or default to a reactive skirmish mentality.
Nathan Simon is Senior Analyst, Strategy and Operations Management Consulting for Kennedy Consulting Research & Advisory. For more information, visit www.kennedyinfo.com/consulting.
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