Becoming a Digital Organization: A Three-Phase Journey

There are three main phases to becoming a digital organization: digitization, digital engagement, and digital transformation. This post offers a lay oriented description and assessment of these phases. The objective is to help leaders who are digital rookies develop a conceptual foundation for understanding where their organizations have been, where they are, and – most importantly – where they need to think about taking them.

Organizational leaders and other senior professionals are increasingly aware that they need to give more serious consideration to all this “digital technology stuff,” but as digital rookies they’re generally stymied by what that means. For many of them, in fact, their digital literacy is so low they lack both the terminology and the conceptual foundation to effectively contemplate and discuss the applications and implications of social and digital technologies for their organizations and key stakeholders, both internal and external.

These leaders don’t have to be technology savants, but they do need to understand that their organizations are (and have been) on a digital transformation journey for decades, and that in many respects that journey has only just begun. The impact of computer technology on work life since the late Twentieth century has been profound, but the kinds of changes organizations are now primed to experience are potentially much more powerful and pervasive.

Virtually every organization is destined to become a digital organization. It doesn’t matter how big or old the organization is, what sector or industry it operates in, whether it’s for-profit or non-profit, resource-rich or resource-poor. Digital transformation is inevitable. That doesn’t mean every organization is going to become a technology firm or a digital business. It also doesn’t mean that the changes have to be revolutionary or driven by a reaction to some kind of technological disruption.

For most, the transition to becoming a digital organization will be evolutionary – and with effective leadership, it will also be proactive, strategic, holistic, integrated, and mindful. And the transformation will generally take time. The process of becoming a digital organization is a marathon, not a sprint, and generally requires a crawl-walk-run approach to produce optimum results.

There are three main phases to becoming a digital organization: digitization, digital engagement, and digital transformation. Each phase lays the foundation for the next – and although necessary, neither of the first two is sufficient to becoming fully digitally transformed. Every organization should strive to get to the third phase, but that doesn’t mean that digital transformation or being a digital organization will be the same for all of them. There is no single outcome to strive for.

In the sections that follow, I offer a lay oriented description and assessment of the phases to becoming a digital organization. My objective is to help leaders who are digital rookies develop a conceptual foundation for understanding where their organizations have been, where they are, and – most importantly – where they need to think about taking them.

Digitization

Digitization is the first step to becoming a digital organization, and one that most organizations have already taken – at least to some degree. Externally, this basically involves having a website and converting forms of one-way communication (e.g., customer newsletters) to their digital equivalents (i.e., email blasts). It can also include the shift from newspaper and magazine ads to search engine and other forms of digital advertising.

Internally, in addition to automating operations (e.g., accounting, payroll) through a variety of software programs and systems, digitization manifests itself in the conversion of paper-based documents, one-way communications, and administrative processes to their digital equivalents. Examples include:

• Implementing some kind of document management system, using either a shared drive or a software system.
• Putting policies and procedures, as well as benefit plan descriptions and other employee-related material, on an intranet.
• Converting employee newsletters from paper to email, and using the intranet to deliver announcements and other news.
• Digitizing forms, such as new hire paperwork, benefits enrollment, requests for time off, purchase orders, and expense reimbursement. This can also include the digitization of the related administrative processes (e.g., approvals).
• Offering e-learning programs via pre-recorded video and written materials.

Two things to keep in mind about digitization:

• It continues to evolve and expand. Although organizations have been digitizing their operations for decades, we’re still in the beginning stages of what technology can and will do. New digitization applications include things like biometric devices (e.g., thumbprint and eye scanners) that can be used for things like security, timekeeping, and other purposes. Digitization also increasingly involves the integration of other new technologies like advancing robotics, drones, the internet of things, and 3D printing.
• It requires a commitment to continuous improvement. Because new technologies get introduced and older ones improve, it’s important for organizations to be vigilant and constantly seek to optimize their digitization efforts. There are no “fix it and forget it” solutions. That means that websites need to be continuously reviewed and upgraded, browsers and operating systems will periodically have to be replaced, and internal systems (both technical and human) will have to be modified to adapt to changing technologies.

Digital Engagement

The next phase in the journey to becoming a digital organization is digital engagement. Obviously, email is the grandaddy of digital engagement for both external and internal communication and collaboration, and it’s a technology that virtually all organizations have adopted (even if it’s a technology they love to hate).

For most organizations, more advanced forms of digital engagement begin with an external focus, emphasizing marketing, branding, sales, public relations and customer service. Moving beyond the one-way communications of traditional websites and email blasts, it typically involves things like setting up some form of e-commerce, creating and managing a blog, and establishing a presence on social media channels like LinkedIn, Twitter, Facebook, YouTube, Pinterest, etc. Depending on the organization, it can also involve creating and implementing some kind of mobile app that facilitates customer transactions and engagement.

Internally, digital engagement manifests itself in the implementation or upgrading of an organization’s intranet using a software solution that incorporates more social features (aka, a social intranet, or intranet 2.0). These features would include things like user-generated profiles, the ability for employees to form internal networks and groups, internal blogs, status updates, chatting or instant messaging, etc. The basic idea is to provide more sophisticated tools that improve both the efficiency and effectiveness of internal communication and collaboration.

Digital engagement can also enhance communication and collaboration on the boundary between an organization and its key stakeholders. Leveraging what I refer to as private digital networks or digital work spaces, organizations can work on long-term projects with customers, facilitate joint ventures, enhance supply chain processes, etc. As with internal systems, these approaches to inter-organizational communication and collaboration are far more efficient and effective than more traditional approaches, including (and especially!) email.

Even for early adopters (e.g., the federal government, large consumer-oriented enterprises), digital engagement is still in its infancy. The underlying technologies – both on the public platforms and in proprietary solutions – are still evolving rapidly, and the companies that offer digital engagement solutions are constantly refining their offerings and business models. Frankly, that’s hard to keep up with! In addition, organizations are hampered by underdeveloped and inadequate governance systems for managing digital engagement, both internally and externally. And – as they are becoming perhaps painfully aware – the intended users of these technologies lack the digital competencies they need to leverage them effectively, and they have not been adequately prepared to adapt to new ways of working.

Digital Transformation

In many respects and for most organizations, digital transformation addresses the challenges inherent in suboptimized approaches to digital engagement. Digital transformation reflects the full integration of social and digital technologies into an organization’s operations in ways that make the most sense given an organization’s goals and objectives. Among other things, this means that:

• Digital engagement activities are no longer siloed into specific functional areas (e.g., marketing, customer service, communications); rather, they’re deployed cross-functionally
• Social and digital technologies are not “owned” by specific groups (e.g., marketing or IT); rather, they’re managed by integrated teams of representative users
• Strong governance systems are developed, implemented, and vigilantly maintained; the purpose of the resulting standards and controls is not to restrict or stifle behavior unnecessarily, but to liberate people to interact with each other using social and digital technology more efficiently and effectively
• Leadership is digitally literate, understanding technology trends and their applications and implications at a level necessary to provide the necessary strategic direction and allocate required resources adequately
• The workforce has the knowledge, skills and abilities they need to leverage new work tools appropriately, and digital competencies are prioritized in the organization’s human capital management practices
• The organizational culture (i.e., its values, beliefs, and norms) reflects a strong appreciation for the strategic and tactical value of digital tools and technologies to achieve its objectives

For some organization’s, digital transformation also involves changes in strategic direction. The need for dramatic changes is evident in industries like music, publishing, newspapers, and retail – all of which have been significantly disrupted by changing technology and companies with competence-challenging business models. But for many others, evolving technologies present competence-enhancing and competence-extending opportunities. For example:

• Many large management consulting firms (e.g., IBM, Capgemini, Deloitte, McKinsey, and Accenture) have created business units focused on digital transformation
• A number of boutique consulting firms (e.g., Altimeter Group and Dachis – and mine!) are primarily focused on the applications and implications of social and digital technologies
• Some law firms (e.g., Mayer Brown, Holland & Knight) have grown their technology-related practices and established themselves as leaders in the field
• The services of most communications consulting companies (The ROC Group) have evolved from being primarily paper-driven to primarily digital
• Various vendors and service providers have developed digital equivalents of their traditional offerings; recognition companies like Globoforce and MTM Recognition, for example, now provide social recognition software solutions

A digitally-focused shift in strategic direction may not make sense for many organizations, but the possibilities are still worth exploring. At first blush, for example, it may not seem that a company like WasteManagement could incorporate digital technologies into its business model, but what if they could take some of the recyclable material they receive and use that as the raw material to establish their own 3D printing operations – or perhaps to supply the operations of others? In many cases, the limits to digital transformation of an organization’s strategy are likely to be self imposed – but why leave that money on the table?

Learning More

For more on the topic of digital transformation, check out the Conceptual Guidance section of our SMART Resources. As always, I welcome your comments and questions.

Original post on the Denovati SMART Blog.