The two faces of digital transformation

by eskokilpi

Have you ever wondered why you don’t see anyone reading a book when you visit companies? We associate reading with finding information and learning, but we also include qualities such as contemplation, solitude and mental privacy when we think about books.

There is a mental framework that is used when dealing with books, and another distinct mental framework regarding information-related practices in the corporate world. Basically, you are not allowed to read a book, but you can read a document.

Documents and word processing are part of the framework of management today. Documents were born from the needs of a hierarchical, systemic approach to management. Top-down information was in the form of PowerPoint slide decks containing vision statements, Excel sheets with goals and Word documents explaining corporate procedures. Bottom-up information was used mainly to provide reports and data for managers, helping them to keep their employees accountable and to ensure the smooth operation of the business process.

Computerized word processing is associated with terms such as information flows and the sharing of information. This is not something you normally talk about when discussing a book. While a book provides a view of the contemplative mind, documents create a view of controlled content.

Are you still asking why you can read a document but you are not allowed to use Facebook?

Instead of predictive process flows, creative work follows a different logic. Work is about community-based cognitive presence. But cognition is just part of the answer. Work tomorrow will be even more about social presence. To work and to manage is to participate in live conversations. A dramatic shift is needed in the mental framework of information, communication and work. Without this changing mindset, no efficient digital transformations can be made in the corporate world. Work is communication. Conversations and narratives are the new documents.

The first face of digital transformation is about new ways to be present and new ways to communicate

You cannot design live interaction. Conversations cannot be controlled. The only way to influence conversations is to take part in them. You cannot plan in the traditional sense of specifying a structure or a process and then implementing it. As many have experienced, communities seldom grow beyond the group that initiated the conversation, because they fail to attract enough participants. Many business communities also fall apart soon after their launch because they don’t have the energy to sustain themselves.

Communities, unlike business units need to continuously invite the interaction that makes them alive.

Community design is closer to iterative, creative learning than to traditional organizational design. Live communities reflect and redesign themselves throughout their life cycle. This is why design should always start with very light structures and very few elements.

What is also different is that a good community architecture invites many kinds of participation. We used to think that we should encourage all the community members to participate equally. Now we know that a large number of the network members are, and should be, peripheral. In a traditional meeting we would consider this type of participation half-hearted, but in a network a large percentage of the members are always peripheral and rarely contribute. Because the boundaries of a live community are always fluid, even those on the outer edges can become involved for a time as the focus shifts to their area of particular interest.

Because conversations and communities need to be alive to create value, we need an approach to management that appreciates passion, relationships and voluntary participation. Rather than focusing on accountability, community design should concentrate on energizing, enriching participation.

The new structures and new designs are about communities continuously organizing themselves around shared contexts, meaning shared interests and shared practices. The focus of industrial management was on the division of labor and the design of vertical/horizontal communication channels. The focus should now be on cooperation and emergent interaction based on transparency, interdependence and responsiveness.

The really big objective of the social side of digital transformation is to reconfigure agency in a way that brings relationships into the center. Success today is increasingly a result of skilful participation: it is about how we are present and how we communicate. Through new technologies, applications and ubiquitous connectivity, we have totally new opportunities for participation and communication – potentially changing the way we work together.

The customer of the industrial age was seen as a recipient of value, or a consumer of value. Enterprises also viewed customers through the lens of a fairly uniform set of features, leading to customers being seen as having relatively uniform needs. But even commodity products are always a bundle of use contexts, buying patterns, complementary goods and delivery options. Just because a product is a commodity doesn’t mean that customers can’t be diverse in the ways they use the product. Different customers use products that are manufactured in the same way, with the same product features, differently. This is why customers are today understood to be active contributors to value creation. Without their part, the value of the product could not exist.

Companies used to have no mechanisms for connecting with the end users in order to understand and influence what was going on. Digital technologies are now changing this. When a customer teaches a firm what she wants or how she wants it, the customer and the firm are also cooperating on the sale of a product, changing the industrial approach to sales and marketing. The marketing and sales departments used to be the customer’s proxy, with the exclusive role of interpreting changing customer needs. Internet-based business necessarily transforms the marketing function and sales specialists by formally integrating the customer into every part of the organization. The customer of tomorrow will interact with, and should influence, every process.

As the goal is to create more value together, a critically important new element is embedded computing, the integrated intelligence that is attached to the “things”, the offerings, the products.

It is about creating new software code. It is about two new digital layers for all products: (1) an algorithmic layer, which can mean sensors or location and usage data allowing totally new kinds of data analytics and (2) a network layer.

As the customer’s need set is expanded beyond the pre-set features of the physical offering through software, the definition of the product changes and becomes more complex. The more complex the product, the more opportunities there are for the company to learn something that will later make a difference.

The value of the code may determine the value potential of a product more than the physical product itself. The effectiveness of an offering is related to how well it packages the learning from past activities and how it increases the users options for value creation. A product or a service should be pictured as a node in a network with links to other use cases, supplementary services and complementary features surrounding the product. The more relevant the links are considered to be, the richer the product will become. The task today is to visualize the product in the broadest sense possible.

The study of isolated parts offers little help in understanding how connected parts work in combination and what emerges as the result of network connections. What new relational technologies are making possible for manufacturing industries is a much, much richer repertoire of potential futures than what we were used to in a traditional industrial firm.

The ability to create value in a remarkably more efficient and resource-wise way corresponds to possibilities for interaction with other relevant parts and actors. If interdependent links are few, poor, or constraining, the activity and value potential will be limited.

Interestingly, the same principle applies both to things and to human beings!

.

More: The product is the medium.