A Closer Look at Transformation: Structural Change

This closer look at transformation now shifts to the enablers. By way of summary, we have covered the forcing function piece of the diagram below; those forces that drive leaders to invest in a future state. In the absence of a burning platform, one must turn to vision as a catalyst for change in what promises to be the most transformative period in history. Once the impetus for change is established, what are the enablers of change? Where do companies invest to move towards that future state? The enabler side of the visual identifies those facilitators of change that allow us to address the forcing functions and build a path towards the future. The next nine posts will address each of these individually, starting with structural change.

Blog - Part 6

Major structural change lies ahead. I simply can’t see traditional companies in their current form operating in the future the way the world needs them to operate. Increasingly, traditional companies understand that viability in the next decade drives the need to evolve. This realization could be the impetus behind a push towards a future state. The shift from product-oriented industrial age structures to a service orientation has a dramatic impact on the structure and operating models of modern day companies. Our companies are simply not structured to deal with a shifting economy that is increasingly powered by ideas, knowledge, creativity and design. Some of the other drivers behind the structural change enabler are:

  • The Blurring (collapse) of Industry boundaries creates the need for value ecosystems – the blurring lines between industries, the emergence of horizontal ecosystems, and the growing portfolio of relationships used to create value, all move the enterprise towards structural change (organization, policy, process, etc.)
  • The Digital DNA Imperative: operating in 2020 – so many of the characteristics required to successfully operate in 2020 are inhibited by our current structures. Perhaps the biggest imperative for change lies here, as it is the inability to address the speed, agility, and responsiveness requirements of the future that will be the undoing of long standing companies
  • Automation of knowledge work & automated closed loop systems – computers are increasingly capable of doing jobs that were once assumed to be the exclusive realm of humans. Said another way, computers can increasingly do many of the tasks that are now done by knowledge workers. The next transformative period focuses on idea production versus physical production, and knowledge work versus manual labor, and it plays a major role in driving structural change. As knowledge work is automated, so too are closed-loop systems. These systems leverage knowledge and insight to automate the action side of the insight-action equation. These systems will have a profound effect on enterprise structure
  • The new platform: Social, Mobile, Big Data, Analytics, and Cloud – as more companies begin to view these innovations as the next major platform, it will begin to drive structural change. As this convergence happens, companies will begin to re-imagine what they do, and how they do it
  • Advanced robotics – robotics is now seeing major advances that can make it practical to substitute machines for human labor in a growing number of applications. Advances in artificial intelligence, machine vision, sensors, motors, hydraulics, and materials that mimic sense of touch are leading the way. With the declining costs of robots, new forms of automation are possible, and with it comes the re-imagining of processes, supply chains, and other enterprise structures
  • Societal change and the virtualization of work – as described in a related post on forcing functions, Societal Change is a major driver of pending structural change. The virtualization of work changes traditional views of employment and drives the need to accomplish work in different ways. This is a major driver away from command and control structures and towards a collaborative paradigm
  • Business and IT convergence, Shadow IT – a very topical area of interest these days. The changing view of Enterprise IT, the broadening role of Marketing, the accelerated growth of Shadow IT, and the growing importance of technology to the business will ultimately lead to structural change

There are many indicators of structural change evident across industries. The CMO-CIO relationship discussion for example, is an early gauge of the organizational tension that ultimately leads to change. New executive roles (e.g. Chief Customer Officer, Chief Digital Officer, etc.) are emerging that likely lead to different ways of looking at organization functions, while Bring Your Own Device (BYOD) is an early indication of policy changes required in the digital age. As the Bring Your Own Application (BYOA) phenomenon broadens, it will accelerate policy and procedure change with an enabling platform formed by the convergence of innovation. For example, the emerging social ecosystem will enable new forms of organization that are only now coming into view, leveraging the collaboration, communication and coordination strength of social technology to serve as an enabler for restructuring.

Structural change is hard, as we have operated this way for many years. However, we are quickly moving to a place where real structural change is a business imperative. Some of the tactics that companies should pursue to enable structural change are:

Embrace business and operating model Innovation – companies that embrace business model innovation create a faster path to growth. Business model innovation can involve new ways to promote, package, produce, distribute, finance, or support offerings, while helping large companies reach markets that looked to be unprofitable in the past. This recent article on Business Innovation describes this form of innovation in depth. The other area of innovation focus is the operating model. An operating model represents how a company does business and the architecture it uses for creating, marketing, and delivering value.

Re-imagine organizational structures for a highly networked world – as value ecosystems emerge, traditional command and control models are rendered ineffective. Organization structures are likely to change significantly for the first time since the hierarchy first came into existence. Network organization structures that allow for the completion of tasks across multiple organizations are likely to be adopted. Functional silos and stand-alone functions that serve no purposes in a highly networked world will disappear. The organization models that we are all so familiar with will be disrupted as part of structural change initiatives

Re-imagine the role of management – we are heading towards a next generation of management. The area affected the most is the middle management layer. As we move closer towards edge-based companies, and multiple stakeholders are involved in value creation, command and control ceases to be effective. The traditional role of management must be re-imagined as part of the structural change program

Enable effective middle management within value ecosystems – related to re-imagining the role of management is the effective enablement of middle management to function in the context of value ecosystems. It is the middle of our organizations that must be enabled both through new systems of engagement and new ways of managing. Many middle managers will struggle with this transition

Shift from command and control to collaborative management – collaboration excellence is the cornerstone of future success. Instilling a collaborative management style based on influence, relationships, trust, transparency, values, shared purpose, openness and empowerment is not easy. Organizations must help employees develop traits (collaborative, communicative, creative and flexible) to excel in this type of environment. As controls loosen, there is a need for organizational values and a clear sense of purpose to guide decisions and actions. Companies will need to recalibrate controls as part of this structural change tactic

Re-imagine business process – we are moving from the days of reengineering process to an opportunity to re-imagine process. The ultimate convergence of innovation (Social, Mobile, Analytics, Big Data, Cloud and IoT) creates a platform for us to do things differently. Leveraging these innovations in the context of existing process does nothing to create next generation efficiencies or effectiveness. A big part of structural change programs will be a significant change in the way we do things

Change policies and procedures to enable digital enterprise characteristics – we are hindered by existing policies and procedures that were developed for a different time. We can’t hire creative and innovative people and then place them in an environment that renders them ineffective. We must first create an enabling environment if we are to enable our employees and other stakeholders

Structure around the customer – it is one thing to talk about customer-centricity and personalization; it’s another to structure around the customer. As the customer blurs the lines between existing organizational functions, one has to question why we hang on to those structures. To put the customer in the center means something structurally. How many companies have made the structural change?

Evaluate business services as an evolution from shared services – the Corporate Executive Board has been describing an evolution of shared services to something they have called business services. This organization model has the potential to enable many of the digital enterprise characteristics described through this Blog. A movement towards a business services paradigm may address the current issues associated with enterprise functions by viewing everything as a service, and organizing accordingly

That’s a look at the first enabler. For a review of the forcing functions, here are the links to each of the prior posts:

Part 1: Growth

Part 2: Effectiveness and Efficiency

Part 3: Differentiation

Part 4: Societal Change

Part 5: Digital DNA

22 thoughts on “A Closer Look at Transformation: Structural Change

  1. First off I want to say wonderful blog! I had a quick question which I’d like to ask
    if you do not mind. I was curious to know how you center yourself and clear your thoughts prior to writing.
    I have had a difficult time clearing my mind in getting my ideas
    out. I truly do enjoy writing but it just seems like the first
    10 to 15 minutes tend to be lost simply just trying to figure out
    how to begin. Any suggestions or hints? Cheers!

    Liked by 1 person

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