This closer look at transformation continues with part five focused on Digital DNA; the sixth forcing function. My perspective on Digital DNA is based on a view of the business environment that is likely to exist in 2020. Enterprise DNA must reflect those characteristics that enable success in the digital world likely to exist in seven years. Business speed in the next decade and the rapid rate of change makes Digital DNA critical to future success. Today, Internet companies like Facebook, Twitter, Amazon, Apple, Google and others have fairly high Digital DNA quotients. Start-ups are born with much more Digital DNA than traditional companies, and the rate and ease at which start-ups are entering the market will continue to create a competitive environment where traditional companies are disadvantaged. Since most companies are traditional companies, the majority will enter business transformation from a challenging legacy position.

The enterprise characteristics that represent Digital DNA are as follows:

In traditional companies, enshrined organizational policies, practices, systems, processes and structures can work against Digital DNA, thereby inhibiting digital enterprise evolution. In most companies, a complex tension exists between the traditional need to be stable and secure, and the critical need to be agile, flexible, fast, adaptive and responsive. The difference between success and failure hinges on how this tension is resolved in the coming decade.

As we look at the forcing functions that drive change, and the likely areas of investment in the next decade, creating Digital DNA is likely the safest bet. Here are the drivers behind the Digital DNA forcing function:

• Future growth relies on creativity, innovation and other enabling characteristics

• Working within value ecosystems requires a different set of characteristics to be effective

• Traditional company structures and characteristics are obstacles to successfully operating in a future that requires speed, responsiveness, agility, flexibility and several other characteristics

• This emerging business environment dictates that traditional companies exhibit these enabling characteristics

• Engagement, differentiation and next generation experiences will rely on these characteristics

• Start-ups and Internet Companies are better equipped to operate in this emerging environment – and can use that for competitive advantage

While determining the next innovation and technology investment is difficult at best, it is not difficult to see the need to enable digital enterprise characteristics. Therefore, investing in the enablers of these characteristics is likely the safest bet in the next decade. The other side of the visual above represents the key enablers that with investment create a path towards realizing the digital enterprise vision. Here are some of the other initiatives and tactics that belong in Digital DNA programs:

• Develop a road map to enable digital enterprise characteristics – this road map should contain the nine enablers depicted in the visual above. It should be CEO driven and governed by an executive governance board. This forcing function sits at the heart of future viability and should therefore be of significant interest to enterprise leaders. Functional silos and entrenched views and positions are major inhibitors to realizing many of these characteristics and should be addressed as part of the road map

• Develop a holistic strategy that moves away from isolated initiatives – as digital innovations converge, they create a platform for enabling Digital DNA. But far too many companies manage digital as a series of isolated initiatives across functional areas and lines of business. This will work against the move towards Digital DNA, as isolated initiatives likely create more silos. A holistic strategy that is iterative and informed by insight is critical to realizing the enabling characteristics

• Become an edge-based organization – an edge-based organization has a flexible networked structure. With this organizational structure, executives and their teams are empowered at the edge of an organization, where the firm interacts with the market. Edge-based companies have an ability to self-organize and distribute decision-making to quickly adapt to market changes. With this structure, situational awareness enables action, and shared values and trust empower the edge to take action. But this model puts intense pressure on a company’s analytic prowess, requires a culture that is more collaborative than command and control, and puts pressure on the long standing reliance on core applications

• Move to a collaborative management paradigm – speaking of collaboration, a paradigm shift is critical. In looking at the list of digital enterprise characteristics, it is clear that command and control models work against us. The need for speed, agility, adaptability and responsiveness, coupled with the expansion in the number of relationships required to create value, will move us from current models to a more collaborative paradigm. Companies will need to be flatter, driven by shared values and trust. This is not an easy piece of the road map, but one that is core to leading in 2020

• Broaden and deepen digital literacy – Wikipedia defines digital literacy as the ability to effectively and critically navigate, evaluate and create information using a range of digital technologies. I broaden that definition to address the bigger digital immigrant problem. Operating in the digital world of 2020 requires a shift in thinking, new types of skills, employee traits, management approaches, relationships, and characteristics. The Digital DNA road map must address the broadening and deepening of all of these things and more (digital literacy)

• Re-imagine systems, processes, policies, procedures, organization structures, and operating models – the key word in this decade is “re-imagine”. The biggest obstacle to exhibiting digital enterprise characteristics is the current enterprise environment. At the core of creating Digital DNA is re-imagining that environment. As mentioned several times on this Blog, the long standing enterprise structures that we grew up with are likely to change

• Deploy systems of engagement and enable effectiveness – effectiveness is to the next decade what efficiency was to the previous two. It is at the top of the list of enabling characteristics. As described in a recent post on Effectiveness, holistic systems of engagement are a major piece of the effectiveness road map. The convergence of Mobile, Social, Big Data, Analytics, The Internet of Things, and Cloud Computing provide a platform for effectiveness. Collectively, the platform delivers the core elements of the effectiveness road map, and will be increasingly described as systems of engagement

That wraps up this look at the forcing function side of transformation. The next series of posts will focus on transformation enablers. By way of summary, here is a link to each of the previous posts on forcing functions:

Part 1: Growth

Part 2: Effectiveness and Efficiency

Part 3: Differentiation

Part 4: Societal Change