The Capability-Based Digital Transformation

Digitization opens a new door and connects within department silos, across the walls, across the streets, across the seas, and across the planet. When things connect in this way, any organization wishing to negotiate a successful journey has to understand what the implications of this degree of connectivity mean to them and which impact could digital make for leapfrogging of their business. From an ecological perspective, in order for an organization to be sustainable, it must be compatible with its environment.  The enterprise is structurally coupled to that larger environment, such that the enterprise and its environment influence each other. The enterprise should build a set of both necessary and differentiated capabilities to make a seamless digital transformation.


Building a set of digital capabilities is the preparatory steps in Digital Strategy Management:  Now, for various reasons such as VUCA factors (Volatility, Uncertainty, Complexity and Ambiguity), both the organization and the environment change over time and change is a given. This is the new normal of the digital era, within this context; the organization must stay compatible and evolve in a compatible manner with its environment, the basic business functionality for the business’s survival is no longer sufficient for building a sustainable digital organization. In fact, there may be many elements of digital capabilities that are foundational to almost any foreseeable digital strategy so implementing them could be viewed as a valid preparatory first step in readiness for a strategic opportunity when it is recognized. The operational capabilities keep the lights on, but the differentiated capabilities enable the radical business changes and digital transformation.  The focus is on why companies focus on evolution (perhaps, digitally-enabled extensions of existing operational capabilities) vs. disruption (tear up the road map.) It's tough to plan for disruption because what's disruptive is inherently unexpected. It's very much like positioning yourself for playing a game. You can get caught playing for one move when your opponent makes a different one. Thus, the digital capabilities are more dynamic, nonlinear with the recombinant nature, with the goal to lead a capability-based digital transformation. Creative collaboration via integrative diversity can overcome silos and amplify the collective digital capability: There is a key difference between digital and industrial organizations. In industrial organizations, the structure is rigid and hard to change, and traditional management style is top-down and bureaucratic. Hence, the business capabilities in those traditional organizations are often static, linear, built to last, are difficult to tune up for improving its maturity. In a digital business environment where change is constantly happening, that handicaps the organization. Hence, in the emerging digital organizations, the business leverage digital technologies and tools in enforcing holistic thinking, cross-functional collaboration and dynamic processes management to build, scale, and improve business capabilities systematically. The business is always on with the new characteristics such as hyper-connectivity, hyper-competition, and hyper-complexity. The least effective culture at fostering a digital workplace is traditional command and control environments. Digital technology is enabling a change in the workforce and how people work. Fostering collaboration is the key to creating a seamless organization when in pursuit of the digital capability-based strategy. Consequently, an organization can try to make its environment friendlier in order to meet the strategies that it sees fit.
The digital capability is also about optimizing complexity, and improving business maturity: The digital world is seen from an 'outside-in,' whole-of-extended-enterprise perspective. The digital ecosystem expands when the business community broadens its scope and consumes all sorts of resources. A digital organization is an organic system. It will be organized as an organic system, with cells that have a function, an infrastructure for input and output and for signaling, a “brain” to process information, generate ideas, and make decisions. It keeps changing and growing. Change can be an opportunity, but at the end of the day, it needs to be all about moving the business numbers upwards and taking the logical steps for achieving calculable results. Therefore, the digital capability is about adapting, optimizing, innovating, and improving business maturity. Although living in the digital sea, you have to change with the "tide," but you also have to follow the well-defined principles which would guide you in decisions and how you relate to others, with which speed can you swim in the uncharted water, what capabilities you should craft, and how to laser focus on the destination without getting lost. To put simply, organizations have to proactively craft a set of capabilities and build the core business competency.  Alternatively, you can choose a conservative position that should allow you to react and respond to a number of different moves and still get beaten. So if the organization can actively influence its environment, it means that it can actively promote in its environment contains dynamics/realities and attenuates others.
The digital capability is modular, dynamic and nonlinear, having many visible and invisible business elements, for improving organizational competency and enabling business strategy. The right set of scalable, coherent and impactful capabilities directly contribute to the business maturity and success for both gaining the short term benefits and the long-term winning proposition. Follow us at: @Pearl_Zhu