Wednesday, May 3, 2017

Transactional vs. Transformational Digital Competency

Transactional capabilities keep your lights on, but transformative capabilities make your organization stand out.

Forward-looking organizations are on the journey of digital transformation, to become more nimble, innovative and customer-centric and achieve a high-performance business result consistently. To reach the digital vision, businesses have to build the healthy digital capability portfolio with the balance of transactional capabilities for “keeping the lights on,” and the transformative capabilities for lifting the organization to the upper level of maturity. The cohesive set of business capabilities is built into the digital competency of the organization for gaining a long-term business advantage.

Transactional vs. Transformational competency: The transactional business capabilities are usually operation driven, to keep the lights on and improve business efficiency. Where transactional or operational capability usually makes only minor adjustments in the organization’s, structure, and management, etc., it often takes the linear step for tuning the enterprise machine and ensure it keeps spinning. On the other hand, the transformational capability can often make of leap of business transformation, they also evoke fundamental evolutions in the basic political and cultural systems of the organization for achieving the high -performance business results. Transformational capability creates something new out of something old, reach the new horizon out of an old vision. Transaction-driven operational management may be viewing things from a single side (internally) and transformation-driven strategic management takes a holistic view of things (both internally and externally) as the way of coming up with actions that will improve organizational performance and conformance in order to achieve the set goals. In the digital era, we will be confronting a number of high-complex problems in the hyper-connected world, the business solutions will require an integration of different sets of knowledge and digital fluency across multiple disciplines. So the transformational capability is the ability to work across disciplines to solve complex problems with contextual understanding and systematic approach. It helps to expand the organization’s horizon and elevate the business up to the next level of maturity.

Competitive necessity vs. competitive uniqueness: Organizations need to have two sets of competency, the necessary competency to run the business as others do and reap some quick wins; also the unique competency to stand out and build the long-term business advantage as well as a strong business brand. Competitive necessity focuses on meeting customer expectation and deliver what the business asks for; while competitive uniqueness allows the business to “dream bigger,” and achieve the art of possible -  it involves new ways of bringing together ideas and resources to create something novel, figure out “the best or most innovative solution" for the business' requirement, offering added value and feature insights based on system understanding. Competitive necessity is the “me too” feature, to keep the bottom line; but competitive uniqueness makes you shine even on the raining day. It provides the opportunity to think the new way to do things; it helps the business to differentiate itself from competitors. The differentiation provided by unique capabilities usually is more long-lived than differentiation provided by marketing actions that can be copied easier. Hence, a clear understanding of what capabilities, services or solutions are supporting your competitive advantage is needed in order to build unique competency.

Reactive vs. proactive change capability: The digital capability maturity depends on how the business manages changes (reactive vs. proactive mode). Transactional management reacts to the business changes with lagging time; while transformational management takes initiatives to drive changes proactively and timely. Digital means increasing the speed of change and continuous disruption, how successful the organization can handle digital disruption depends on how fast and capable they can adapt to the ever-changing environment. Hence, proactive change capability will differentiate the digital masters from laggards. Due to the increasing speed of changes, organizations need to pay more attention to creating shared and admirable goals and then encourage the teams to compete and collaborate as they deem fit. Digital organizations need to be self-adaptive to the dynamic environment, and those highly adaptive enterprises can succeed in combining two distinct but interconnected elements, strategic responsiveness, and organizational flexibility, with the combination of an innovative culture that promotes responsiveness throughout the company and builds the transformative digital competency across the digital ecosystem.

Digital organizations today have to strike the right balance of being transactional to keep spinning and being transformational to make a leap. The organizational management short-sightedness and running the business in a transactional mode only can cause digital ineffectiveness in the long run. The competitive necessity and competitive uniqueness are both important, the maturity of a business capability would be based on its ability to deliver on either customer needs or to achieve the desired capability outcome, but also importantly, to build the differentiated brand and the long-term business competency.


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