A conversation with the Policy People for their Thought Leadership Review Sententia. Published in July 2023.
In 1993, I took an evening shift at the university's computer centre where I was studying. It came with the privilege of accessing the Internet. It was the early days; Yahoo! was a few pages of links, Amazon was a small bookshop, and Google did not exist yet. I immediately saw the potential and never looked back. I focused my entire career on the digital revolution that was unfolding.
The choice of employment industry was pretty evident then; I went straight for professional services in specialist digital agencies and then more mainstream consultancies when digital started catching on
The challenge was pretty simple for organisations, and I am taking the metaphor of opening some Russian Dolls to explain it (see Figure 1, below).
Figure 1 - Digital Transformation viewed through the lenses of Delivery
The outer doll - Digital is about technology
On the surface, digital is about developing an arsenal of new technologies. Back then, Businesses needed a website, eCommerce and eServicing, an App, and a social presence.
Then, the goalpost moved to big data, DevOps, Cloud, Cyber, and more immersive experiences driven by personalisation. Now, AI (Artificial Intelligence) is making the headlines. While IT executives try to keep up with the pace, business executives feel like the constant need to spend is distracting from the core of the business. Therefore, quite naturally, technology investments are treated as a business constraint.
The next doll - Getting better at delivering technologyAs with every constraint, especially ones getting more hungry for resources, keeping the costs in check and sticking to budgets is a prime focus. The idea of Agile, and the (flawed) view of doing twice as much in half the time, became very attractive. It explains the ambitious transformation programmes attempted in most enterprises. If we take the Manifesto as the reference point of Agile inception, it is now 22 years old. And it is hard to see how traditional organisations have made substantial leaps in their agility with digital technology during this time. They may have adopted some practices, but the "friction" of progressing digital work is still high and successful projects often rely on heroic efforts to go Live. When working at the grass-roots, the quality challenges are stark (often referred to as "Tech debt"), and much still has to be addressed to progress to flawless delivery.
Evidence suggests that leadership of traditional businesses struggle to get stuck in with the "Digital Revolution".
The next doll - Sourcing expertise and skills
As digital was non-core, organisations have not focused on building in-house expertise. Instead, turning to partners to source the capabilities was more convenient. It made the golden years/decades of outsourcing, especially when offering access to farther/cheaper shores. And organisations have grown misaligned with their digital engineering needs. Their digital ambitions are uninspiring, technology is of the past decade instead of the next, work pressures are unsustainable, and salary bands for engineers have not evolved with the market baseline. All this makes it very difficult to attract talent. As a result, such companies depend heavily on supplier arrangements to maintain a footprint of engineering capabilities to keep their digital lights on.
The penultimate doll - Leadership
From the above unpacking, it is evident that the leadership of traditional businesses (as opposed to technology-oriented businesses) have struggled to get stuck in with the more profound changes coming with digital, the so-called "Digital Revolution". Of course, they provisioned IT with funding for technology projects, but their engagement has been transactional rather than strictly strategic.
Also, even if technology is progressing to the C- Suite, often with a CIO (Chief Information Officer) and accessorily with CDO (Chief Digital Officer) or CTO (Chief Technology Officer), those roles are often positioned more operationally to assure delivery than strategically.
The core doll - Consulting
Given the context, it is unsurprising that Consulting has been at the heart of digital transformations. The demand has exploded faster than organisations could react, and urgent assistance was needed. Consultancies and outsourcers to the rescue! Professional services have expanded dramatically, from specialist expertise to technology delivery and access to capacity on cheaper shores. As a result, consulting has operated as the "engine room" of digital change, and executives conveniently outsourced the work and the responsibility with it.
Digital change can be summarised as Digital = (Business + Technology) * (working together)
Reframing digital transformations
Though the assistance was necessary not to be left behind, we can also question how far it has created inertia for organisations to take the adequate measure of digital and operate the more profound changes.
Organisations are also starting to wake up to the economic cost of relying on outsourcing their digital efforts. Outsourcing brings a premium on the talents, and suppliers are effectively sitting on the payroll as the needs are ongoing.
For some time, the cost arbitrage of accessing near and off-shore geographies allowed offsetting the impact. But the advantage is drying out as salary inflation in those geographies progresses rapidly. And the demand for collaboration is quite challenged when there are only a few hours of overlap between time zones. As the environmental conditions evolve, the case for a rethink is starting to build up.
Digital change can be summarised into a simple equation:
Digital = (Business + Technology) * (working together)
Digital is about integrating technology into business services and product value chains. It goes beyond delivering technology improvements; it is becoming a core part of doing business.
The organisations that do not recognise it are open to disruption. As we sketched in Figure 2 (below)., a classic digital disruption pattern has been about disintermediation from customers. Pure digital companies have often created services that interstice between the customers and the traditional industry players, relegating the latter into commodities (a space with no differentiation and little margins).
Aggregators in the insurance industry are a classic example. People go to them instead of going direct to the insurance providers because they get better service, more choice and a better price. As a result, it has eroded loyalty to the providers, thanks to the ease of finding a new deal. The same has happened in the travel and hospitality industry, taxi hailing, food delivery, retail and many others, and it is only the start.
On the other hand, Big Tech companies (1) such as Apple are developing captive ecosystems. Their products and services are so well integrated that they keep the intermediation with their customers defending their position. And, when in such a position, the platform effect creates a gravitational pull for other services (e.g. AppStore), provides leverage on sales, and preserves margins.
Resetting the game
Organisations must reset the game to develop fitness in an increasingly digital economy. Acquiring technology from suppliers has helped to keep afloat with their digital presence, but it is not a sustainable position. They cannot initiate action from observed opportunities or respond effectively to identified threats fast enough. It has exposed them to start-ups and Big Tech entering their space with new business models.
For different outcomes, it requires untangling and reconsidering the whole value chain of digital change; let's play those Russian Dolls in reverse!
And we shall start by reframing the context: Digital is not so much about technology, but about stimulating collaboration of people that put it together for business advantage.
Putting systemic leadership at the heart of it
It is time to put leadership back at the heart of digital transformation. By leadership, we do not mean the classic idea of layering another Director or C-Suite executive in charge of it (and many organisations already have one of those), but instead:
Getting the traditional business leaders to take an active part in realigning their organisation system, putting in direct collaboration business and technology people in their respective business value chains,
Igniting leadership in everyone. I have not met any executives that wouldn't wish for more engagement and initiative from their people. The challenge, however, is that most system dynamics are overwhelmingly organised to execute, not to emerge free thinking.
If digital is an integral part of any business, leadership must evolve accordingly at the top of the organisation and in every layer of it.
Using coaching to drive ownership of change from the inside
Progressing such a new perspective on organisations and leadership has to engage a profound rethink, and such a rethink does not happen if all that people can pay attention to is organising the next delivery. If you find that there is never time to think, only to do, it is definitely time to stop and reflect.
And beyond a reflection on organising, it is a reflection on identity:
Who do you want to be as an organisation?
What kind of leadership do you need to become?
Those questions are deeper than asking what new practices or methods to adopt. It is shifting the debate from the doing to the being. It won't happen from the traditional services partners on which organisations have leant so far. The new help can only come from a new breed of partners. It is where a coaching partnership, a genuine one, helps.
It is difficult to see it because coaching is an overused term. Many influences have distorted it: Advisors and consultants call themselves coaches, and Agile coaches rarely have any coaching competencies.
The term "professional coach" is now emerging to distinguish those with genuine qualifications and following core ethics and competencies of the profession. At the heart of professional coaching is empowering ownership of the recipient (team or individual) and working from the context rather than driving set methods or agendas. It allows this space to reflect (for leaders, teams or systems) and progress the more profound, challenging, meaningful changes.
Generating systemic collaboration
As mentioned earlier, I am being purposefully controversial in saying that digital is not so much about technology as it is about people. Peter Drucker coined the term "knowledge worker" (2) to describe people working with theoretical and analytical knowledge.
Digital is 100% knowledge work on a large scale. Information and knowledge are distributed in people's heads across the system, and controlling and organising it all centrally is overwhelming and impossible. So instead, we look to distribute the decision-making at the points of knowledge while equipping people with an understanding of the systemic coherence so they make good choices.
From a leadership perspective, it is not about directing and controlling but about intentionally creating moments of collaboration in and across teams so that conversation and action happen from the people that know. Of course, everybody will be familiar with bringing people together around planning, but this is not quite enough. Other moments should be considered, such as frequent synchronisation, teamwork relationship coaching events, collaboration over quality improvements and continuous stimulation of the strategy.
Sometimes it may go as far as reconsidering the organisation as the landscape evolves. Of course, it is highly complex, unique to every organisation and won't happen in the usual functional constructs of hierarchies.
For some time, organisations have built many layers of governance between their business and IT sides, intending to assure delivery against allocated budgets. It means that the people we aim to bring into collaboration have often only ever worked at arm's length of each other.
There is much untangling and reconnecting to operate; it is not trivial. It helps if there is a clear direction to align to. The Flow System (3) usefully informs such alignment to customer value first. It should be unequivocal; the customers of the services or products define the value and, with it, the prime alignment of the organisation. It leads to the concept of a value stream and how the organisation's value chain aligns practically to deliver value and continually improve it.
Of course, the idea of an end-to-end alignment is often more conceptual than structural, and organisations need to compose with consolidated services for economies of scale, legacy estate, and other changing focuses. The authors of Team Topologies (4) inform us how to bring the concepts into reality very well, defining a typology of teams, balancing the cognitive load and arranging them into topologies from patterns of interaction modes.
More importantly, it is not about determining the ideal blueprint but keeping the inside-out capability aligned with the outside-in customer needs in balance. It is not a one-off reorganisation but a continual adaptation of the organisation to develop a better understanding and response to the changing landscape.
Flow in business
Eventually, the organisation progresses to this state of flow where value happens and continually happens despite continuous challenges. It is the state where digital organisations should be with technology after decades of transformation. And beyond digital, it is the type of leadership needed for the future challenges of sustainability and responsibility.
Rather than focusing on the destination, let's restart digital change from better foundations, taking the accurate measure of the challenge of rewiring organisations and rethinking leadership. Digital is not as much about technology as it is about the collaboration of the knowledge workers that develop new business potential with it. This profound reframing is a reflection that organisations need to do for themselves. The pivot will happen when they call on the help of coaches to slow down and facilitate a meaningful rethink rather than bring the consultants to catch up on lost time.
Published in collaboration with the Policy People
ICF PCC and ACTC - ORSC-C
Change and Performance Coach in Business
Director of Thought Leadership in UK ICF