Four steps to digital transformation: Structure

23 March 2018

As executive search digital specialists we get access to some tremendously exciting and progressive businesses – those just embarking on the digital journey, and those well down that road. Through our conversations with CEOs and other Exec Team members, we have identified four essential ingredients for digital transformation. In this article we address the importance of organisational structure, and in subsequent pieces we go on to consider culture, people and leadership.

One Team is Best (usually)
Essentially, companies should begin by determining what content they want to provide and through which customer touch points. If this can be done in an integrated, one-team way, the advantages usually outweigh the downsides. So, whilst it can be tempting to have separate online and offline teams, according to a Managing Director at Google, “By having a separate digital function, it reduces the synergies that can be gained”.

That said, Google itself does establish specialist sprint teams whose role is to incubate fast and deliver learnings. However the duration of these teams is limited to a maximum of two years, after which they are dismantled. A senior digital leader at Burberry concurs: “It is always best to establish the digital function as quickly as possible, and then push it back into the business”. And obviously once a mature digital channel is established it should become part of business-as-usual, rather than belonging to a specialised digital team.

Further, the type and lifecycle of the business is important. If digital is an embryonic or minority channel, it is potentially exposed as a ‘naked baby’. Here, the leadership team needs to put its arms around digital and ensure it gets sufficient attention, resources and support. A number of structural solutions can be created to provide this top-cover, and smart ideas include ensuring digital is closely associated with one or more of the established big-hitters in the business, deploying relevant KPIs that highlight early wins (and not just costs), and positioning the digital journey as a fundamentally customer-led initiative. The organisation also needs to be clear about the ambition and pace of change it is looking to deliver – is there Board level digital representation, for example?

Think it through
Many organisations recognise the need to become “more digital”. Too often in our experience, however, these plans are insufficiently thought-through. Indeed, in some cases there is little planning beyond hiring experienced digital executives from other leading organisations, or making digital acquisitions to bolt-on to the existing organisation. Some of these initiatives work and some fail, but in our view all such moves would benefit from taking a little time (even if only a few days) to consider the extent to which digital can enhance overall business performance. From this analysis, a new target operating model often emerges, greatly increasing both the likelihood and the scale of subsequent success. In short, failure is quite possible where an overarching digital strategy has not been defined, articulated and disseminated throughout the organisation.

Show me the money
Organisations can be structured in many different ways, but there are some common themes, one of which is internal competition for resources. This is perfectly understandable – we task people to do their best for the business, and they set about this with everything at their disposal. In this competitive world, the loudest voices often (not always) come from the Sales function, and/or the Finance function. So the question becomes – how do we position and structure digital to complement and benefit these functions in particular, or at least to begin with? Of course, this is not to say that digital will not afford considerable benefit to Operations, or HR, or Supply Chain. However, early on in digital’s inception a wise leadership team might want to position it such that the benefits are visible in terms of additional revenues and cost-savings, with the credit going to the mega functions.

Get started, then change gear
According to a Board level executive at Auto Trader UK, there are two phases to becoming digital 1) becoming “more digital” by driving through transformation from traditional to digital, and 2) becoming “truly digital”, where digital becomes the standard way of working. At Auto Trader UK, the challenge was in balancing the varying demands of Product & Technology, Sales, and Finance functions. In such situations it is crucial to have representatives of all key functions at the top table, and to first establish common purpose and trust, and then to allow rigorous debate and challenge. Only if digital truly surfaces as a business need (as opposed to an IT need, a Sales need, or whatever) will there be a sufficient platform for downstream success.

Interestingly, the same people and structures do not work for both phases. That is, you need a different mentality to compete in a pure digital world: enhanced collaboration, and the best people working on the best opportunities to deliver exceptional performance. This is where the transformation becomes cultural, a theme we pick up in our next article.

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