Saturday, January 13, 2018

The “Interdependence” Characteristic of Digital Organizations

The challenge for digital organizations is to manage its portfolio of relevant cross-border strategic synergies and organizational interdependence, to achieve the digital equilibrium via delicate balance.

Digital makes a significant impact on almost every aspect of the business from people, process, to technology, both horizontally and vertically. It does make a smaller world, but also makes businesses and the world super complex and full of uncertainty and ambiguity. Due to the latest digital technologies such as social and mobile, the business and world are always on and have become hyper-connected and interdependent. What’s further understanding of interdependence as one of the significant characteristics in the emergent digital era?

Interdependence as the premium stage of digital maturity:
Humans progress has gone through three stages: Dependence, independence, and interdependence. What works and what doesn´t, depends on the nature of the organizational interdependence that needs to be enabled. The “organizational design problem” would be to build the great mix of organizational elements that enable the organizational interdependence, enforce cross-functional communication and collaboration. The collaboratively interdependent organizations can reach the higher state of business maturity because limited hierarchy works best in a creative environment where the free flow of ideas and their prompt implementation is a key element of business success. Thus, to gain the in-depth understanding of interdependence, it is important to apply System Thinking to view the digital organization as an interconnected and interdependent whole; and how to follow systems principles for solving problems in a structural way under complex, uncertain and ambiguous circumstances.

Organizational interdependencies have a lifecycle:
The challenge for organizations is to manage its portfolio of relevant cross-border strategic synergies and organizational interdependence with the appropriate mix of enabling organizational elements, engaging digital talent and balancing effectiveness and efficiency. The informal organizational elements are very effective to carry this “emergent traffic.” Then, some synergies prove to be very successful and need to be escalated. Usually, the original informal elements are replicated and augmented, but the coordination costs increase heavily. This is the result of carrying “heavy organizational traffic” through a network of effective but not very efficient small roads. This efficiency crisis eventually creates the need to incorporate the formally structured elements. The digital balance to human nature will need to have some combinations of structural design and incentives. The business becomes more successful when the corresponding learning curve has reduced uncertainty to the point where both the strategic synergy and organizational interdependence can be structured.

Structured cross-border interdependencies vs. Loosely structured cross-border interdependencies: There are two different types of organizational interdependence. Structured cross-border interdependencies can be enabled with formal organizational elements such as standardized business processes and management systems (planning, control), and centralized functions at headquarters. These elements function like a set of well-designed highways, are able to carry the “heavy organizational traffic” of cross-border structured interdependencies across well-known origins and destinations. Loosely structured cross-border interdependencies, on the other hand, require a much greater dose of informal organizational elements such as social networks, shared corporate values and culture, information flow, common business language, multidimensional knowledge and skills, regular face-to-face meetings of cross-border people, and so on. These management elements function like a large set of small roads (even non-paved), are able to carry the “capillary organizational traffic” of emergent cross-border, non-structured interdependencies across organizational nodes. Only if the company can successfully manage both types of organizational interdependence effectively, the business can reach the stage of frictionless changes and seamless flow to improve its business maturity.

The digital transformation, like the computer technology revolution itself, is a long journey. The challenge for digital organizations is to manage its portfolio of relevant cross-border strategic synergies and organizational interdependence, to achieve the digital equilibrium by strike a delicate balance. The outlines of the fully digitalized world have long been sketched, now the phenomenon of digital is reaching the inflection point, yet we are now entering an even more rapid and extensive period of change and the high degree of interdependency, with a sense of urgency to get digital ready.


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