The term “digital transformation” is in vogue as many organizations turn to digital technologies to re-invent their customer experiences, improve internal operations, or build new businesses. Leaders must consider new options for how to organize, as well as how to operate or what to produce, to truly maximize the benefits of their digital tools and capabilities.
Digital initiatives to improve business operations or the customer experience, for example, can trigger major organizational design changes, such as reorganizing departments and assigning new responsibilities. And, while jobs can be replaced, and new skills can be acquired, these efforts are neither fast nor easy. Moreover, as technologies continue to advance, leaders may find themselves in the same predicament one year or even one month after adopting new technologies, needing to adjust organizational design repeatedly to meet strategic goals.
Long-lasting digital transformation advantages come only from developing the dexterity to rapidly and continuously self-organize apace with advancing digital technologies.
Developing Dexterity to Compete in a Digital Age
Digital dexterity is the sustained organizational capability to fluidly and dynamically reconfigure and deploy both human and digital resources at the speed of rapidly changing technological and market conditions. Digital dexterity comes not just from technology, but from people using digital technologies to think, act, and organize themselves in new and productive ways.
Digital dexterity comes not just from technology, but from people using digital technologies to think, act, and organize themselves in new and productive ways.
Most large companies are not known for being nimble and agile. So how can these organizations develop the digital dexterity to compete in this age? Alongside my colleagues at MIT, we conducted a multi-method study to investigate the experience of digital transformation from an organizational perspective. As part of this research, we surveyed 299 professionals, managers and higher-level representatives in 146 organizations operating in multiple industries and in over 30 countries. This research revealed not one single practice, but rather four interrelated characteristics, that position organizations to respond with digital dexterity to successive waves of future innovation over the long term.
1. A Digital Mindset
A digital mindset is an attitude reflecting a tendency to seek out digital solutions, use technology as a tool for competitive advantage, and approach enterprise data in a systematic fashion for customers, partners, and employees. When employees and managers instinctively turn to their digital tools and data to improve processes or create new products, they reap the benefits of speed and connectedness more often.
Our survey results showed that the presence of a digital mindset is significantly and positively associated with digital dexterity. Organizations in our dataset with the highest levels of digital dexterity exhibited, on average, measures of digital mindsets that were 12% higher than organizations with average levels of digital dexterity, and 30% higher than organizations displaying the lowest level of digital dexterity.
People with digital mindsets aspire to innovate with technology, believe their aspirations are attainable, and actively experiment with digital solutions. As they experience and publicize success with these solutions, favorable attitudes start to cascade through the larger organization. New mindsets inform subsequent decisions and practices.
For instance, leaders may invest more in data quality or in gathering additional data. They also may try to develop stronger analytical capabilities or expand their workforce with specialized or complementary skillsets.
2. Key Digital Practices
Many organizations are starting to digitize their operations. But what really makes a difference regarding digital dexterity is the degree to which organizations subsequently engage in collaborative learning and data-driven decision-making.
- Collaborative learning involves teamwork and partnering without regard to discipline, geography, ownership or other traditional parameters, and ensures that insights and solutions move rapidly and readily across boundaries.
- Data-driven decision-making means consistently using data – rather than intuition or the highest paid person’s opinion (“HiPPO”) — to guide decisions.
From our survey, we found both data-driven decision-making and collaborative learning are positively associated with digital dexterity. Organizations in our dataset with the highest levels of digital dexterity recorded, on average, collaborative learning measures that were 17% higher than organizations with average levels of digital dexterity and 46% higher than organizations displaying the lowest level of digital dexterity. Similarly, high dexterity organizations showed data-driven decision-making measures that were 18% higher than average dexterity organizations and 50% higher than the lowest dexterity organizations.
Our case research points to the valuable role of collaborative learning in helping traditional companies cultivate favorable attitudes and beliefs about digital transformation throughout their organizations. Once in place, these shared mindsets, along with shared norms of using data and dispersing knowledge, facilitate receptiveness to flexible and fluid ways of working—unhindered by differences in expertise, role, status or affiliation.
3. An Entrepreneurial and Engaged Workforce
As routine and well-bounded tasks become automated, the remaining roles for the workforce become more creative, open-ended and non-routine. Our survey found that key success characteristics of this workforce include technology experience, and digital skills, but particularly high engagement. Engagement is evident in competence, motivation and self-direction.
Our survey revealed that many organizations believe they have the necessary technical experience. However, organizations with high levels of digital dexterity are far ahead on digital skills (24% higher than average dexterity organizations; 54% higher than lowest level dexterity organizations) and engagement (16% and 36% higher than average- or low-dexterity organizations, respectively).
The combination of collaborative learning norms and an entrepreneurial, engaged workforce is crucial for developing digital dexterity. Collaborative learning can support all workers in building skills, competence, and the perspective to guide entrepreneurial effort. Organizational leaders can help by setting clear goals, encouraging boundary-spanning collaboration, providing liberal access to relevant information, and then trusting their workers to bring the best expertise to bear for each challenge.
4. Data and Tools
Unsurprisingly, the fourth support for digital dexterity comprises assets such as digital tools and data. When skills, competence and engagement are established, the easy availability of data and communication tools complement performance-related outcomes.
In our dataset, organizations with high levels of digital dexterity stood out from those with average or low levels of digital dexterity on measures of data availability (16% higher than average; 33% higher than lowest dexterity organizations) and collaborative tools (20% higher than average; 51% higher than lowest dexterity organizations).
Access to quality data (i.e. timely, accurate, and complete data) is central to digital transformation. Accurate and timely data aids workers in improving internal business operations and responding effectively to customer demands. As workers realize the benefits of data-driven outcomes, they use data-driven approaches more consistently, creating a virtuous cycle.
Access to effective communication, collaboration, and coordination tools are also crucial for facilitating the key practices of collaborative learning and decision-making, and supporting the social connections that build engagement.
Digital Dexterity: The Leader’s Role
Astute digital leaders try to embed these elements in their organizations, to support and optimize their digital investments. However, leaders cannot mandate the development of values and norms such as collaboration, self-organization, and entrepreneurial engagement. Instead, leaders must cultivate the conditions that encourage new mindsets and practices:
- Foster a digital mindset through leading by example.
- Build consensus about responsibilities without regard to traditional boundaries and roles.
- Model and encourage collaborative interaction and continuous learning.
- Visibly practice and require data-driven decision-making.
- Provide access to key digital resources and publicly acknowledge their effective use.
In sum, strong top-down leadership is important but should be exercised with a subtle hand.