The Situation, Strategy, and Structure of Digital Organization

More and more organizations realize that they have to connect relevant dots, renew themselves periodically to cope with change effectively.

The business world has shifted from the static industrial age to the exponential digital era, traditional management is often inside out and process-driven, sometimes encouraging silo thinking and stifling innovation. However, the emerging digital business is always on and hyperconnected, expanding into all dimensions of the business ecosystem.


Thus, digital management discipline should become less mechanical and more organic, inspiring systems thinking and holistic perspectives, to ensure business as a whole is superior to the sum of pieces. Situation, strategy, and structure are a few interconnected dots business executives could connect to enforce an in-depth understanding of the dynamic business new normal and improve the overall organizational manageability and competency.

Situation (trends, competition, requirements): We live in the “VUCA” new normal with characteristics such as high velocity, complexity, diversification, ambiguity, unpredictability, nonlinearity, increased flux, and continuous disruptions. There's nothing to be done about an uncontrollable situation although the management can do enough homework and truly have a humble attitude to collect information and feedback and be nimble to assess the environment via the following relevant dots, for improving the business visibility and manageability.

-trends: With an ever-evolving digital dynamic, business leaders today need to envision the future trends, see the context, perceive invisible, identify the leverage point of the hyperconnected digital ecosystem, proactively influence changes and gain long-term business advantages via the lenses of technology, sociology, psychology, anthropology, and economics of education, etc.

-competition: Competition is an inevitable part of human evolution. Competition has different connotations and meanings in different situations or contexts. Good competition can lead to enhanced quality through innovation and progress. But bad competition can produce a myriad of negative externalities. For example, some internal competition can create undue stress that may actually prove to be counter-productive to some worker's efforts. With the fierce competition in the business ecosystem, no competitive advantage is set forever; any operational advantage in creating value is likely to be copied fast. Thus, an objective assessment of competition is critical to building differentiated business competency.

-requirements: To improve business manageability, facilitating requirements negotiations is very beneficial to keeping everyone involved, the manager never loses sight of all requirements and relationships, and make sure those requirements whose improvement has the most benefit to the business.

Strategy (value proposition, business model, capability, implementation plan): In a world where change is significantly speeding up, the strategy can no longer stay static, in fact, the strategy management is an iterative continuum. A strategy is a detailed plot to beat the competition, co-authored and in effect owned by a critical mass of thought leaders in a company, with the following aspects.

-value proposition: Not all business value is directly related to ROI. Businesses value is multi-faceted and it expands the concept of the value of the firm beyond economic value (also known as economic profit, economic value-added, and shareholder value) to include other forms of value such as employee value, customer value, supplier value, channel partner value, alliance partner value, managerial value, and societal value, etc.

-business model: Business models describe, as a system, how the pieces of a business fit together. It is an entire frame of elements that describe the intents and constraints of an organization, and it defines the manner by which the business enterprise delivers value to customers, entices customers to pay for value, and converts those payments to profit. Business Model is a simulation of different strategy scenarios.

-capability: The corporate capability is the collective ability to implement the strategy by integrating, building, and reconfiguring internal and external competences to address rapidly changing environments. The high-mature organizational capability is the digital business differentiator, to keep the business unique, competitive, and innovative, and a capability-based strategy has a higher success rate to achieve well-set business goals.

-implementation: Implementation is about the realization of strategic planning. The multitude of management gaps is created when strategies are misaligned with the expectation of the implementation team. It is all about taking an integrated system approach and every step is essential in reaching a specific outcome, and enforce the whole thing.

Structure (alignment, relationship, interdependence, synergy): The “organizational structure design problem” would be to build the “best” mix of organizational elements that enable the organizational interdependence and business strategy. What works and what doesn´t, depends on the nature of the organizational interdependence that needs to be enabled.

-alignment: In today’s hybrid organizations, business alignment means you have to understand the struggles of companies, deal with business conflicts, maintain and fix any imbalance in key business elements, and update structures, methodologies, and cultures to catalyze the digital flow. So the physical organizational structure, relationships, and virtual platforms and social connections wrap around each other to ensure clear responsibility and smooth business flow.

-relationship: Digitalization is about hyperconnectivity, interdependence, people-centricity, and information savvy, digital organizations today need to understand how relationships, ecosystems, market dynamics, and the connections between business units are related, fine-tune the organizational structure, and manage multi-layer, and multi-dimensional business relationships such as cross-functional relationship, customer relationship, vendor relationship, etc, effectively.

-interdependence: Digital organizations are hyper-connected and interdependent, structured cross-border interdependencies can be enabled with crucial organizational elements; such as standardized business processes and management systems (planning, control), centralized functions. These elements function as a set of well-designed highways able to carry the “heavy organizational traffic” of cross-border structured interdependencies across well-known origins and destinations.

-synergy: Digital businesses become more dynamic and hyperconnected, organizations have to enable desirable synergy and achieve a higher level of responsiveness. The challenge for organizations is to manage its portfolio of relevant cross-border strategic synergies with the appropriate mix of enabling organizational elements, engaging digital talent and balancing effectiveness and efficiency, manage the two fundamental business cycles - balance cycle and growth cycle effectively to create business synergy effortlessly.

Digital is the era of innovation. More and more organizations realize that they have to connect relevant dots, renew themselves periodically to cope with change effectively. Business leaders need to be both bold and cautious, apply multifaceted management disciplines to drill down the critical success factors, rejuvenate the business culture, catalyze changes, and accelerate digital transformation relentlessly.

Posted in: Organizational structure tuning,Strategy