Saturday, February 24, 2018

The Endogenous and Exogenous drivers of Digitalization

Everything is interconnected and the business ecosystem becomes more interdependent and dynamic than ever.

With the increasing pace of change and unprecedented uncertainty, enterprises of the future are increasingly exhibiting “VUCA” characteristics in various shades, intensity, and extensiveness. Companies have to stretch out in every business dimension for driving the full-fledged digital transformation, in order to adapt to the new business dynamic. Organizations need to have both endogenous and exogenous drivers, both internal and external focus when it comes to lead digitalization.

Endogenous drivers:
Traditional organizations are hierarchical and mechanical, they perhaps operate OK in the considerably static industry age with the slow pace of change and information scarcity. However, it is not capable of addressing the needs of today’s more dynamic, information-explosive and complex changing world. So, it is failing, and all attempts to solve the existing challenges through the lens of the old paradigm is also failing. The “hard” issue to stifle the organizational change and business performance is that the systems, processes, and technologies many organizations are using to manage the business are becoming inefficient or outdated in this rapidly changing world. The digital convergence of devices and services are creating new business models and revenue source as most companies across industries are being forced to become technology companies and run information businesses. The soft forces such as culture or communication also need to be rejuvenated to catalyze changes. Both these hard and soft internal focuses are more of what has been called the endogenous forces of the business. The hard forces of digitization are disruptive and push the organization to adapt to the dynamic environment. But the soft business elements can truly touch the mind and heart, and make change sustainable. Organizations should tailor their management styles to make these soft business elements well mixed into the hard organizational competency. Designing a highly adaptive organization, that is a sociotechnical system, is the order of magnitude more difficult than designing a mechanical or technical system. The companies must reclaim the right balance of standardization and innovation, process and flexibility; stability and change, competition and collaboration, etc. The part of the digital journey is also to prepare people for the new structures and to recognize this is a crucial step, talent multiplication moves from a key competitive mindset to an important and distinctive source of competitive advantage- innovation capability. Because one of the key determinants of whether an organization can move to new digital structures is the development level of the people. People have to be ready for moving to a more fluid structure and dynamic digital new normal.

Exogenous drivers: Digital business is dynamic and expansive, with blurred functional, organizational, and geographical boundaries. The new age of digital thinking attributes value and purpose to the ecosystem, and understand that the real-world development is multifaceted, non-linear, unrepeatable, and unpredictable, with exogenous drivers which couldn't be controlled completely. The digital enterprise consists of an amalgam of socio-systems, techno-systems, bio-systems, and Econo-systems. In order to succeed in today’s fast-changing business world, harnessing the power of ecosystems is critical. You have to gain interdisciplinary understanding via the multitude of dimensions (socio-cultural, socio-technical, socio-economic, organizational, scientific, philosophical, psychological, or artistic, etc). You can't expect an individual to fully develop such broad-based concepts, it takes the team effort, and more importantly, team coordination. Many companies have never been better positioned to engage in multi-industry collaborations. But few have broken out of the static industry box, treats customers, channel partners, suppliers, and industry ecosystem participants as active agents for co-solving crucial business problems or creating new business ideas or models, to catalyze changes and accelerate digitalization. Instead of being rigidly grouped around a specific business, ecosystems draw together mutually supportive companies from multiple industries that collectively seek to create differentiated offerings and capture value they could not reach alone.

Everything is interconnected and the business ecosystem becomes more interdependent and dynamic than ever. The permeating information has made every object of the digital system and nature responsive, communicative, and innovative. By understanding both these endogenous and exogenous drivers of digitalization well, businesses can make the radical shift from a silo, linear classic management style to holistic and nonlinear management discipline.


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