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Winning in the 21st century – digital is not enough

Organisations have not changed sufficiently from 20th century operating models – but successful companies have developed a new outlook

Businesses and government agencies have sleepwalked into the 21st century with 20th century business models, organisation structures, strategies, skills, leadership styles and infrastructures.

Companies still look mostly how they did in the past century – fixed organisational structures, a perspective centred on physical assets, business models based on static sources of information and top-down leadership paradigms, for example.

They are built for stasis and, although many purport to be customer/citizen-centric, they are structured around their products and processes.

Leaders of these organisations regard such things as unquestionable wisdom laid down in the mists of time – “Every company must have a CEO, CFO, CIO”; “Organisations must be structured in hierarchies”; “Value should be measured by net present value (NPV)” – as if anything different violates some natural law.

Yet the digital world is growing apace. It’s not just the amount of data storage, volume of internet traffic, number of people with smart devices, number of devices per person, and proportion of income spent on digital stuff; there are exciting technology innovations that will have deep impacts on businesses, governments and communities.

Consider advances in the user interface – such as virtual reality, augmented reality and mixed reality, wearable devices and gesture-based interfaces – in machine intelligence and learning, and in what’s available in the cloud.

Consider, too, how the dark side is evolving, and how people are becoming so accepting of and comfortable with digital channels.

In short, almost everything is changing, from the very macro to the very micro, in the face of digital opportunities and threats – except our organisations.

21st century organisations will win by doing six things differently

A 21st century organisation (21CO) needs to be built to survive and thrive in the increasingly digital world, where a 20th century organisation (20CO) is no longer fit for purpose.

At LEF, we have identified six important ways in which 21COs are different from the past century’s models, as shown in the table below (with a little exaggeration and caricature to clarify the differences).

 

20th century organisations

21st century organisations

Sensing

20COs are bad at sensing. They don’t listen well to what’s going on in the world. They typically have small, underfunded, disconnected research and development functions writing reports that no one in the rest of the business reads.

21COs devote significant effort to proactive, haptic or experience-based sensing. They invest in a broad range of technology, societal, competitive, ecosystem, regulatory and risk areas through experimental learning, involving a large group of individuals, diffusing the learning and acting on it.

Identity

20COs equate strategy with planning. Their strategy involves updating the short-, medium- and long-term Gantt charts, with a strong emphasis on the short term, little attention to different scenarios and weak articulation of identity (who we are, where we play, how we win).

21COs look at strategy primarily as identity. They ask: What do we mean in the 21st century narrative? Are we attractive to customers, partners, current and potential talent?

Assets and capabilities

20COs take an inside-out approach, building and owning physical, tangible assets and capabilities (money, inventory, physical plant and staff, for example.) They don’t treat information, customers and ecosystems as true assets.

 

21COs use an outside-in mindset to plan the evolution of their assets and capabilities, and value intangible assets such as talent, information, customer relationships and their ecosystem appropriately.

Portfolio

20COs take a shallow, non-invasive approach to digitising the value proposition and the customer experience. “Digital” to them means digital marketing and e-commerce.

21COs are continually reimagining their value propositions, products and services, based on evolution of the digital possibilities and customers’ needs and attitudes.

Adaptivity

20COs have fixed, siloed structures designed for ease of management rather than value creation. Projects are run in a waterfall fashion. Collaboration is difficult. The environment is hostile to experimentation and innovation.

21COs fight to ensure structures and metrics never get in the way of information, collaboration, experimentation and value creation.

Value

20COs have weak, value-based leadership. They make decisions based on momentum, politics and charisma. Their management accounting models are overly simplistic, based exclusively on ROI/NPV, for example. They focus very little on benefits realisation.

21CIOs keep improving their ways of choosing, executing and reaping the value of operations and investments in a complex, uncertain, evolving world.

 This six-part framework is shown in the figure below, where they form a kind of flow: sensing feeds strategy; strategy focuses capabilities; capabilities define products; execution creates and supports products; and leadership makes the whole thing work.

They are all mutually supportive and interacting. Improvements in any one area create new possibilities in the others.

The 21st century organisation

Using this framework, LEF has created a 36-point capability model for winning in the 21st century. Companies and public sector agencies need to understand their strengths, weaknesses and needs to thrive in the next decade.

Read more from the Leading Edge Forum

This was last published in February 2017

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