Established Organizations, Level of Digital Literacy, Mindset, and the 4th Industrial Revolution

Established companies are striving to conquer outdated operating models and frameworks.

As an enterprise changes its way of working with digital technology, it will come up against resistance from both culture and bureaucracy. Such resistance is a necessary part of transformation, since both culture and bureaucracy are simply forms of institutional memory.¹

The digital revolution is disrupting traditional industry value chains as nimble and creative competitors leverage access to global talent and platforms for innovation, development, marketing, sales, and services. This enables them to outpace established players with greater efficiency, delivering higher quality, faster speeds, and more competitive pricing. The shift from IT serving businesses as customers in the Third Industrial Revolution to innovation driven by technology and advanced delivery practices in the Fourth Industrial Revolution requires companies to rethink their operations management strategies.

In the book Accelerate, Nicole Forsgren, Jez Humble, and Gene Kim present from their research that the companies making the most use of DevOps practices were the most successful. High performers are twice as likely to exceed organizational performance goals as low performers: profitability, productivity, market share, and the number of customers.1 They also found that employees in high-performing organizations were 2.2 times more likely to recommend their organization as a great place to work. Other studies have also shown that this is correlated with better business outcomes.2

Organizations must be able to increase their speed (improve time to value) and change direction (adapt). It is essential to seek out business leaders who recognize the necessity of transformation and perceive a meaningful incentive to make such changes.

Overcoming the Challenges of Leadership

The transition to digital transformation requires total commitment from the leadership team, which necessitates a fusion of technology and business practices. However, the challenge is that many leaders still need to utilize outdated methodologies from the Industrial Revolution, resulting in misalignment between expectations and realities during the transition to agile practices.

The traditional financial planning model, which prioritizes predictability, is incompatible with agile practices, leading to resistance from senior management and boards. This resistance can result in the business becoming a bottleneck in the transformation process, requiring investments in unlearning, relearning, and rethinking old practices.

The transition to digital transformation also requires a change in leadership style, as a growth mindset must replace a fixed mindset. The journey towards this change can be difficult, as it often involves acknowledging the need for coaching and learning new performance practices.

From personal experience, I can attest to the struggle of adapting to new methodologies. Initially, I subscribed to outdated leadership styles, such as the command and control approach of the Waterfall Software Development Life Cycle. It was when I underwent my unlearning, relearning, and rethinking that I could fully embrace agile, Lean, and DevOps practices and become a more effective leader.

Thoughts on digital transformation and leadership in established organizations

A digital transformation vision is a journey. You must sow the seed at the top if you want it to be a reality.

Amazingly, 75% of transformation initiatives fail to achieve their goals. The number one reason is “Lacking the correct mindset. CEOs and CIOs need to step up to the plate to spearhead, sell and support the project.“⁴

“Everything has changed, except management”⁵ — Aaron Dignan

Change is the new normal

The digital age has brought unprecedented levels of disruption to various industries, and companies must be prepared to adapt and evolve to remain competitive. At the turn of the century, many firms were caught off-guard by these changes. But today, organizations are proactively seeking ways to respond to the challenges of disruption. To succeed in this fast-paced, ever-changing landscape, companies must develop into agile, scalable, and innovative entities that can compete with their rivals. The following questions are essential to consider when creating a company capable of thriving in the digital age:

1. How can we stay ahead of the curve in this rapidly-changing world?
2. What behaviors and processes need to be transformed to meet the demands of the digital age?
3. How can we maintain speed and efficiency while continuing to grow?
4. How can we leverage cutting-edge technologies to gain a competitive advantage?
5. What metrics should we use to measure and track our progress and success?

By considering these factors, companies can build an organization as adaptive and creative as those who work within it, poised to thrive in the digital age. Companies can develop a dynamic and productive workplace by being mindful of these components. One perfectly equipped to excel in the digital era. Such an organization will be propelled by the creativity and flexibility of its employees.

Navigating the Digital Age

Digital Literacy refers to the understanding and proficiency in using digital technologies and tools for communication and accessing information. However, it is important to note that technology is just one aspect of digital transformation. The true essence of digital transformation lies in the intersection of people, automation, data-driven decision-making, and delivering value to customers quickly.

With digital disruption disrupting traditional business models and creating new market entrants, organizations must comprehensively evaluate their operations and strategies.

To stay ahead of the curve, organizations must ask themselves:

1. How might a startup disrupt our market and business model?
2. How can we prepare for and respond to the threat of digital disruption?
3. Do we have a comprehensive digital strategy in place?

For established organizations, embracing digital transformation can be daunting. They may have to let go of traditional practices and embrace new ways of working, sometimes called organizational debt. Organizations must be willing to invest in new and innovative solutions, even if they may be perceived as risky or unproven.

Ultimately, digital transformation requires a commitment of senior leadership to unlearning old practices and embracing new ways of working. It’s about shifting focus from what has worked in the past and embracing new technologies, processes, and approaches to drive success in the digital age.

The advantage of startups lies in their ability to leverage the latest tools and technologies without the constraints of traditional practices, leading to increased competition for established organizations.

The success and competitiveness of a company are directly linked to the digital transformation literacy and leadership capabilities of its executives, board members, and stakeholders. Today’s rapidly-changing digital landscape requires leaders who understand the importance of undergoing a fundamental transformation to thrive.

Organizations with the vision, willingness, and support to drive change from the top can gain a significant competitive edge. Executives, board members, and stakeholders who prioritize digital transformation can help their companies navigate the challenges of the digital age and emerge as leaders in their respective industries.

Become obsessed

Startups can push new code constantly, every day. We must spend only a short time developing new enhancements or products to compete. We must adopt ways to shave the time it takes to go from a great idea to a high-quality, stable, and secure working production code that brings value to our customers and organization.

Modern Software Delivery

I created the following Modern Software Delivery Pyramid to represent the essential elements required to compete today. The top 7 layers are the practices we have adopted and developed as a team in our journey. Each layer builds upon the previous. The bottom two layers and foundation are related to senior leadership’s initial responsibilities.

• Is your organization implementing changes to compete with today’s disruptors?
• Are they introducing new collaborative ways of working like agile, lean, and DevOps?
• Are you facing organizational obstacles from culture, metrics, planning and budgeting, delivery, and sign-off processes?

Your top leaders and board members may need help to shift their understanding. Why is it hard for some senior leaders to unlearn mental models, ways of working, strategies, and mindsets from the past?

Leading the Charge: Navigating the Challenges of Digital Transformation

Organizations that aim to succeed in the digital age must embrace change and adopt new ways of working. The path to digital transformation can take many forms, whether from the top-down or the bottom-up, but it must take root in the organization’s core.

To drive successful transformation, organizations must have the right talent in place. This includes senior leaders and decision-makers who possess knowledge and experience in digital transformation and are willing to learn and adapt continuously. The cost of misalignment between leadership and the rest of the organization can be high, as outdated strategies and practices may hinder progress and limit the organization’s ability to remain competitive.

When transitioning to an agile approach, organizations may encounter various challenges. Common obstacles include a lack of leadership buy-in, inadequate understanding or training, inflexible processes, resistance to change, and poorly defined roles and responsibilities. Organizations must build a culture of collaboration and continuous improvement to overcome these hurdles, provide adequate training and support, and clearly define roles and responsibilities. By doing so, organizations can adopt agile practices and position themselves for success in the digital age.

The rise of digital technologies and the changing nature of work have challenged traditional business practices and performance metrics. The cost of misalignment between these old ways of working and the new digital landscape can fail in transformation.

Organizations must undergo a significant transformation of management and leadership to thrive in this new era, which involves reimagining leadership as a discipline, including a shift in values, assumptions, and performance metrics.

The challenge for established organizations is to reduce friction and gain alignment between leaders and practitioners to drive this transformation. Startups and transformed organizations, however, face different challenges, as they do not have the burden of outdated practices and mental models.

Organizations must make a concerted effort to align their leadership and practices with succeeding in the digital age and overcoming the challenges of digital transformation.

Leading the Mindset Shift: Understanding Digital Literacy and Experience

Ask:

• What is the mindset of the organization?
• What is the organization’s level of digital literacy and experience?

An organization’s mindset sets the tone for its culture and can greatly impact the success of digital transformation initiatives. The buy-in of senior leadership is crucial, as it requires a shift from old habits and a willingness to embrace new ways of working, optimization, and productivity metrics. This can be a difficult request, as it challenges traditional approaches to software delivery, productivity measurement, and outcome prediction.

To gain a comprehensive insight into an organization's digital literacy and expertise, it is essential to evaluate expectations from multiple levels: board members, executives, senior leaders, middle managers, and contributors.

Assessing the understanding, internalization, and adoption of agile ways of working, philosophies, and practices can provide valuable insights into an organization’s readiness for digital transformation.

Can smaller beat bigger?

Over the past two decades, barriers to entry and technology have been significantly reduced. Today, there are more and more digitally native organizations popping up. The number of established organizations implementing their digital transformation strategy continues to increase.

Following practices from the past generation, it can become increasingly difficult to adapt to changing market conditions as organizations get larger.

Questions:

• As we scale, will our organization and its teams be able to function, quickly adapt to market changes, and pivot as needed?
• Who is in charge of our strategy? To what degree is our leadership aligned with the choice of practices?
• Can our established organization become extraordinary at competing in today’s delivery environment? What can we glean from the examples and case studies available as evidence?
• How will technology and information create a unique and sustainable advantage and business model?
• How much is planned, driven, and supported by the executive leadership?

“Your fate is to be either the disruptor or the disrupted. There is no middle ground.” ~ author unknown

Established organizations can evolve

Almost everything has changed. But for the most part, not management. Information flows up. Decisions flow down. A place for everyone, and everyone in their place.6 — Aaron Dignan

Evolutionary organizations: If established organizations embrace digital transformation practices, the future looks bright for two reasons.

1. Metcalfe’s Law: Networks grow in value as the participants increase⁷, and Data Network Effect: A Data Network Effect is a property of a product that improves with the more data it has available.⁸

Organizations that have been around for a long time stand to benefit from a similar paradigm regarding data. Upstart competitors tend to have less data than established companies. The business’s competitive advantage because of large amounts of proprietary data sets will be established by established organizations if they can digitally transform. Competitors can be discouraged from easily entering their industries.

1. Established large companies can exploit digital transformation because they have access to substantial capital. Digital transformation offers attractive investment opportunities. However, they are dependent upon leadership strategies.

While some established organizations began their transformation journey from the bottom up, like our own story, most fail with this approach. Many believe survival and success ultimately depend upon the level of engagement and understanding from the top.

The Problems We’re Trying to Solve:

• Senior business leaders need to understand the technology function, and it is often delegated to technology leaders.
• Senior leaders and backers need to gain experience or re-skill to drive product and technology organizations in today’s environment.
• Technology no longer serves the business. Technology is the business.
• Technology and business are colleagues serving the external customer. Everyone must know when automation and technology are fully integrated into all strategies and operations. This can create exceptional business outcomes.

Leadership development: Leadership plays a significant role

We need leadership coaching and training about language, continuous improvement, modern ways of working, team design, measuring progress, and how leaders can work as a cohort. Most leaders today needed to be trained to work in this new environment. Like myself, they mastered work in the previous ways of working, metrics, and practices. This previous way of managing and measuring performance can create significant friction. Some leaders will feel vulnerable as they let go of old mastery and need to unlearn, relearn, and rethink their understanding.

Final thoughts

The key to the successful digital transformation of established organizations lies in the mindset and knowledge of incumbent leaders. While technology plays a role, the people within an organization ultimately drive change. The next step is to create opportunities for leaders to learn and adapt to digital transformation; this includes unlearning old ways of working, relearning new practices, and rethinking their understanding of the digital landscape.

Investing in digital transformation can bring significant benefits, but only if executive leadership is fully committed and has the necessary knowledge and skills. The level of digital literacy and mindset within an organization must be understood to ensure success in the digital age.

Leaders must adopt a growth mindset and be open to change to drive transformation and achieve a competitive advantage. The willingness of the leadership team to embrace a growth mindset will be a crucial factor in determining the success of digital transformation initiatives.

Digital transformation presents challenges, but it also offers significant opportunities for growth and competitiveness. Organizations must assess their digital literacy, leadership style, and readiness for change to succeed in the digital age.

References

1. Schwartz, Mark. War and Peace and IT (p. 151). IT Revolution Press. Kindle Edition.
2. Forsgren PhD, Nicole; Humble, Jez; Kim, Gene. Accelerate (p. 234). IT Revolution Press. Kindle Edition.
3. Forsgren PhD, Nicole; Humble, Jez; Kim, Gene. Accelerate (p. 130). IT Revolution Press. Kindle Edition.
4. Mekhala Roy’s TechTarget “Why digital transformations fail: Top 6 reasons“, 22 Mar 2021 article
5. Dignan, Aaron. Brave New Work (p. 7). Penguin Publishing Group. Kindle Edition.
6. Dignan, Aaron. Brave New Work (p. 8). Penguin Publishing Group. Kindle Edition.
7. Fisk, Peter. Metcalfe’s Law explains how the value of networks grows exponentially … peterfisk.com. 17 February 2020 article.
8. Nora von Ingersleben-Selp, What Are Data Network Effects and What Is Their Impact on Market Competition?, medium.com, 29 February 2020 article

The article was originally published on December 31, 2021.

rethinkyourunderstanding.com