(Part 2) Digital Transformation Maturity Framework (Operational Excellence and Organizational Culture)

The Podcast on Organizational Excellence - Digital Business Best Practices

What’s the role of operational excellence in an organization’s digital transformation journey? How important is the role of organizational culture in that journey? What are the elements of organizational culture that are linked to an organization’s digital transformation efforts?

In today’s episode, we will continue our discussion on the digital maturity framework. In part 1 we covered the first three elements of the digital maturity framework, which are innovation, market alignment, and customer centricity. In today’s part 2 of the episode, we will cover the remaining two, yet important elements, which have to do with operational excellence and organizational culture. So, let’s dive into both of those.

Operational Excellence

The fourth but critical facet about achieving digital maturity is that of achieving operational excellence.

Before jumping in to discuss how digital can help an organization achieve operational excellence, let’s first define the term and understand its impact on the overall performance of an organization. Operational excellence refers to successful execution of an organization’s strategy through lower operational costs and controlling various types of risks while delivering maximum possible value in terms of revenue and overall performance. So, from this definition, we can see that while the choice of an organization’s strategy ensures that an organization is heading in the right direction, operational excellence ensures that successful execution of that strategy results in maximum performance and value for the organization and its shareholders.

To get a better understanding of operational excellence, it would be better to review specific scenarios on how organizations work to achieve operational excellence as part of their digital transformation strategies.

1. Operational excellence involves a redesign of an organizations’ business processes. As digital is enabling organizations to scale their business processes to handle more volume of transactions, growth in customers, online reach to varied audiences, and more, organizations work to redesign their business processes to scale and meet the growing needs of organizations
2. Operational excellence is about process improvement. To increase efficiency and minimize waste, increase effectiveness, and overall value, organizations engage in various continuous improvement initiatives and attempt to instill that culture throughout the organization and its processes. Organizations are also looking holistically at all their business processes and finding opportunities where processes can be designed more effectively by bringing down silos and making the overall delivery process more agile.
3. Operational excellence is about maximizing the effectiveness of an organization’s delivery pipeline. This involves establishing a project and program management culture, practices and processes, which ensure that an organization’s initiatives and projects are aligned to an organization’s strategy, that the right projects are selected for execution maximizing an organization’s investments, and maximizing the returns on projects that are selected for execution.
4. Operational excellence is about optimizing an organization’s resources. Here organizations ensure that their resource allocation across the organization are optimized and result in the most bang for the dollars that they invest in resources.
5. Operational excellence is about managing digital transformation and change effectively within the organization. As digitalization of organizations involves a major change within organizations, operational excellence practices ensure that these changes are well managed throughout their lifecycle.
6. Organizations scoring high on Operational excellence measures have a strong and modernized technology platform. Such organizations are investing in digital technologies and modernizing their systems to help them become customer centric, reduce costs, increase revenue, and improve on other aspects impacting their overall performance.
7. Operational excellence practices rely on a strong data and analytics Organizations that score high on operational excellence are increasingly investing in data analytics and Artificial Intelligence technologies to accelerate process enhancements and delivering more efficient operational results. The insights and intelligence derived from these analytics and artificial intelligence programs act as the driver to improve an organization’s overall performance.

These are some of the facets that organizations can work on to achieve operational excellence. In future episodes at DigiBizCentral we will cover more on the specific steps that organizations can take to achieve operational excellence.

Organizational Culture

The fifth and last facet about achieving digital transformation maturity has to do with an organization’s culture. Organizational culture is an important dimension that underlies the success of an organization’s digital transformation journey.

So what is organizational culture? Organizational culture can be regarded as a set of shared values, beliefs, and practices across an organization and its employees.

Organizational culture is regarded as a key determinant in influencing an organization’s overall performance including its transformation of any type. And the same applies for the case of digital transformation. In fact, an organization’s digital transformation journey can’t be regarded as a success unless organizations are able to bring an overall culture change across the organization. In one of the research conducted by McKinsey, they clearly stated that culture is the most significant self-reported barrier to digital effectiveness. This was followed by other factors such as lack of understanding of digital trends, lack of talents related to digital and others.

And that’s something that the leadership of the organization must fully understand before taking their organizations on a digital transformation journey. It’s for this reason that organizational culture is an important dimension to measure an organization’s digital transformation maturity.

Culturally, organizations usually have to cross two hurdles when embarking on digital transformation initiatives. In the first case, we have organizations that try to make the digital transformation journey all about the technology itself. As we have discussed on other episodes of this show, the road to digitalization is not just technological in nature but rather involves major changes in an organization’s business processes, new organizational structures, reskilling and retooling of the organization, changes in work practices, collaboration, and more. So, imagine an organization trying to digitalize its processes and systems while facing internal resistance from its employees? The fact is that no matter what technological changes are made within the organization, a successful transformation can’t occur effectively without making a change in people’s mindsets, beliefs, and values, which essentially shapes an overall organizational culture. So, if the people are not on board with the overall transformation and with them learning the new ways of doing things in the digital world, then the transformation won’t be successful or would face hurdles and difficulties.

In the second case, although organizations understand the necessity of influencing a positive culture change, they don’t know how to make that change. The truth is that inculcating organization wide changes of any type are not easy and changes related to culture are even all the more challenging. And it’s here where strong leadership and leadership commitment is needed to make the change stick. It’s a well-known fact that cultural changes can’t be dictated through policies alone and nor can an organization’s leadership wait for the change to happen organically over time. Instead, an organization’s leadership must take charge of the change and drive a deliberate cultural change with specific goals in mind. This means recognizing the gaps that they see in their culture and then coming up with a plan to work those gaps. When senior leaders communicate the need for such changes and live through their principles on a daily basis embracing the associated language and behaviors, an organization can notice a ripple effect throughout their organization.

Once an organization understands the need for the cultural change and its close association with an organization’s digital transformation journey, it must define the specific elements that will shape that culture. As this can vary within each organization depending on its current cultural practices and the transformation that it’s seeking, each organization should define those elements for itself along with a roadmap to inculcate those elements within itself. Here I will review some of the common elements and attributes that embody an organizational cultural change.

Risk taking – A culture of risk taking enables an organization to push the limits and gaze in the unknown. This is what has led to a majority of the breakthroughs for organizations in terms of new innovations and discoveries. Organizations can limit the impact of the risks by encouraging smart risk taking as it allows employees to take risks within certain limits and keep things under control. An organization with a risk averse culture that tries to play it safe will rarely break from its current mode and venture into the bigger and better market opportunities.

Innovation and Experimentation – One of the cultural elements discussed in the context of digital transformation is that of innovation and experimentation. We know that the fast pace of new technological inventions and discoveries are putting pressures on organizations to apply those technologies in their businesses. This isn’t possible unless an organization has a culture of innovation and experimentation, which would allow organizations to find the right solutions for their business processes. Also, an organization averse to new technological innovations will find it difficult to move at the right pace to be able to experiment and adopt new technologies. So, an organization, which doesn’t support innovation and can’t tolerate failures associated with such experimentations will have difficulty in adopting digital trends that will help shape its future.

Agility – We have known for a while now the importance of inculcating agility values and behaviors in the new digital age. We know for example that organizations need to have agile processes to be able to respond to market changes and customer needs. Not doing so will leave the organization far behind its competition. But imagine an organization trying to implement agile processes in a culture where decision making is slow. It’s easy to see that despite the good intentions that an organization may have in making its change, it won’t be able to succeed unless it gets to the root and make cultural changes pertaining to how it thinks, decides, and acts. These cultural changes will help it become more agile and responsive to the market needs and pressures.

Decisions – This refers to a number of things, which include how the organization’s leadership makes decisions and also the extent to which an organization’s employees are empowered to make decisions. As digital is making it easier to provide access to the needed information, digital transformation can have an impact on how an organization makes decisions at all levels of the organization. Instant information access can enable an organization to make faster decisions and at different levels of the organization – something that can greatly contribute to an organization’s overall agility goals. An organization whose culture is not used to empowering various levels of the organizations to make decisions may find it hard to embrace these changes.

Other cultural elements and attributes include transparency, accountability, empowerment, employee engagement, and others. In future episodes at DigiBizCentral, we will cover in more detail specific steps an organization can take to embed the cultural changes important for digital transformation initiatives to succeed.

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