Organizational Structures and Leadership in Times of Digital Disruption
The number of studies that substantiate Germany’s digital deficit is striking. Depending on the population parameter, Germany’s rank varies from 11th place (EU Commission) to 17th (Innovation Indicator 2017), or it is generally claimed – as by Edventure recently – that Germany's digital transformation is slow and inflexible.
On the other hand there are others, including Hermann Simon and Friederike Welker (both recently in the FAZ), who believe that German industry is well-prepared; while the much-maligned automobile industry is also rushing to regain lost ground. The picture, therefore, is nuanced, and we could argue all day about the accuracy of statistics or statements. Ultimately, though, no one can deny that there is a widespread hesitancy to adopt groundbreaking software technologies, be it for big data, IoT or artificial intelligence. Either way, we can hardly claim to be trailblazers in application fields like driverless cars, smart cities, quantified self, electronic payment or digital public administrations.
In its core businesses, German industry is highly innovative and frequently the market leader: the export surpluses speak for themselves. And the manufacturing champions are certainly making an effort to deploy modern software technologies as drivers for modern products, processes and business models. But there is still too often a lack of courage to embrace fast, perhaps even risky, technological change. The question, therefore, is: What is the connection between technological leadership on the one hand and organizational structure and management culture on the other? My response would be: It appears that there is an urgent need to carefully examine the internal company structures and management principles with regard to their performance in these times of digital hyperventilation.
Making Structures More Flexible
Sociologists are aware of the inertia of organizations. The larger the company, the more complex and cumbersome their organizational structures – a phenomenon clear to many a visitor who has marvelled at often long and cryptic doorplates. Lou Gerstner, CEO at IBM during the 90s, eloquently described how difficult it is to “get an elephant to dance”. In SMEs and family-owned companies, this inertia often derives from tradition or the sometimes static worldview of the owners.
Structure is, of course, essential as it governs interaction within the company and forms the basis according to which responsibilities, in other words rights and duties are defined. But rigid job descriptions, silo mentality and cemented processes are problematic in an era of exponential technical development and knowledge-based added value. What is needed is more flexibility within the organization, so that opportunities and potentials can be translated faster into commercial success. It is a matter of dynamically re-configuring all available resources. Successful companies understand how to enhance their stable core with mechanisms to strategically develop their talents and amplify freedom for their teams to contribute to the future of business.
These very general comments, however, do not tell us how much agility is specifically needed, how many guide rails are necessary and how to deal with battles over responsibility for issues and resources. Without a universally unifying corporate culture, without a “we spirit” and a shared target system flexibility might cause more trouble than advantages. In the same way that companies experiment with technology, they must also work through agile organizational structures – with all the pain this may entail.
New Roles Shape Change
Jobs have always been shaped and transformed – or destroyed – by technology. This was the case when the railways replaced horses and again when electricity made steam engines redundant. It equally applies today to the digitization and ubiquity of algorithms in all aspects of our lives. One of the nobler corporate responsibilities ought to be to equip staff with skills that will arm them against job loss.
At the same time, however, entirely new tasks are constantly emerging which are key for business. There was much discussion in the late 80s about whether a CIO should be included in shaping destinies at the executive level. Today, 20% of DAX-listed companies have a Chief Digital Officer (and a further 20 % have created a comparable role), who works alongside the CIO and CTO, and should be a key adviser to the CEO. Regarding their vulnerability to malware, it seems to me that companies should also consider the value of a Chief Security Officer. It goes without saying that the traditional C-suite (along with their teams) – in particular, the Chief Financial Officer, the Chief Marketing Officer and the Chief Operating Officer – should open their silos and acquire deeper digital skills.
When data and algorithms are increasingly critical to the success of a business, it is no wonder that experts in analytics and artificial intelligence, data quality and data governance are needed. Innovative companies these days are putting together teams of data experts and engineers to devise strategies for data generation, storage and analysis at the production level. We see experts for social media analytics, search engine optimization and much more besides. The need for integration, processing and data exchange is transforming companies. We need more courage to experiment – and space for knowledge workers.
Leadership for Innovation
While management works on ensuring that the processes run smoothly, leadership must develop a concept of the future they desire and align the organization’s central resources accordingly. Management and leadership are not a contradiction of each other; they are two sides of a successful company. Against the backdrop of the digital challenge, a new look should be taken at leadership. We need a leadership culture that involves digital knowledge workers in “smashing the silos” to form a business that is profitable for the long term. Top-down management is a thing of the past.
Quick use of the technology lever and the resulting increased digital maturity of the business models are becoming more and more crucial to the company’s success. At the same time, a lot of IT doesn’t necessarily mean a lot of success. Improved flexibility is indispensable within the organization, particularly with regard to close cooperation between all company departments, investment in innovative roles and teams, and an understanding of leadership that focuses on a persuasive communication of the company’s goals, more creative space and a collaborative partnership. There is a good reason why countless companies experiment with start-up cultures. External dynamics will have profound internal consequences for the way in which we achieve success in the future - and internal innovation will significantly advance the implementation of ground-breaking software. Both perspectives deserve our consideration more than ever.
About the Author – Dr. Norbert Jesse
Jesse is co-founder and managing partner of QuinScape GmbH. QuinScape is a leading IT service provider for Talend, Jaspersoft/Spotfire, Kony and Intrexx. With today 120 employees QuinScape is partner of large corporations and internationally operating SMEs.
Jesse studied Social Sciences with emphasis on economics and statistics at Ruhr-Universität Bochum. He received his Ph.D. with a work on analytics for multi-dimensional spatial data.
Jesse has been organizer and co-organizer of numerous international conferences (Fuzzy Days, FIRA World Congresses, CIRAS, Enterprise 2.0 etc.). He is lecturer at TU Vienna and Visiting Professor at University of Business and Technology, Pristina. Furthermore, Jesse is author or co-author of more than 55 conference papers and co-editor of 6 books.