Organisational structures for digital transformation: 4 archetypes emerge

As companies work to digitally transform themselves, a number of distinct organisational models they have adopted to get the job done are beginning to emerge.

Research group IDC has identified four archetypes relating to digital transformation efforts: The Digital Transformation Special Projects Team, The Office of Digital Transformation, The Embedded Digital Business and The Digital Business Unit.

“Your organisational approach is going to affect how well you can really execute on your digital strategy. You can have a great vision but if you really can’t get that thing executed across the whole enterprise you get stuck,” IDC’s senior vice president, IT executive, software, services and industry research Meredith Whalen told CIO Australia.

“If we were looking at any functional area – finance, HR – it’s pretty universal, it’s pretty standard the way organisations organise themselves. But when it comes to digital transformation, it’s such a new area that there are many different approaches organisations are taking in terms of how they’re bringing their people together.”

But which is best for your business?

Speaking at the CIO Summit in Sydney last week, Whalen outlined the four archetypes and their advantages and disadvantages.

The Digital Transformation Special Projects Team

Best for: Discovering digital transformation

Objective: Define the digital transformation mission

“Mainly we see this in organisations that are just starting on their digital transformation. What they do is they put a group in place, it’s usually pretty high up in the organisation reporting mainly to the CEO,” Whalen explained.

“Their whole role is to really define the digital mission for their company. They’re doing a lot of research – they’re very into innovation labs and ideation retreats and anything else they can think of – to try to figure out how they take one culture and one way of doing something and start to switch that to a more digital culture. How they start to jumpstart that,” she added.

“This is really a good model for when you first try to discover digital transformation.”

In the Asia Pacific region, IDC research indicates 22 per cent of companies take this approach, compared to 26 per cent in the US and 17 per cent in Western Europe.

The Office of Digital Transformation

Best for: Establishing digital transformation governance

Objective: Establishing the digital priorities for enterprise

“What we saw in organisations that were a little more mature, that had already defined what they’re digital mission was, but needed some type of governance, we find that they would put in place some kind of office,” Whalen said.

“It’s some type of group – again a central group reporting pretty high in the organisation – and that group would work closely with lines of business to either uncover what it is that could be digitally transformed or work out what it is that they’re already doing and try to bring that together under some type of governance.

“It’s purpose is to figure out what should our priorities be for the organisation and bring some kind of coordination together.”

The ‘Office of’ model was the most common approach at present within businesses in the region, and identified in half of Asia Pacific companies. This figure is similar to the US (46 per cent) and Europe (56 per cent).

The Embedded Digital Business

Best for: Accelerating digital transformation

Objective: Implement digital transformation across enterprise

“In this model we start to see the shift away from a central group and into putting more of the resources into the lines of business. That doesn’t mean the central group goes away, in some cases you still see the central group, but it’s much more lightweight. The central group mainly is the expertise centre for digital for the company, they may do some targeted experimentation,” Whalen said.

“The point of this one is that people start to own digital. Digi starts to become part of the way business is done.”

This archetype has been identified by IDC as the optimum model for businesses going through a digital transformation.

“Maybe you do have to march through these various steps in order to get there. But this is where we think business need to get to. We need to get digital away from being a special project we’re working on and into something that is just business as usual,” Whalen said.

It is also one of the most difficult to achieve.

“You’re moving from a centralised group that is collaborating with the business groups to actually now saying digital is going to be part of all of our business, it’s just how we do business. And to do that you really have to get all of the various lines of business in order,” Whalen added.

“That’s a matrixed organisation. You can’t just hand it out and tell the organisation ‘ok, go and behave digitally’. You still need some coordination activity to go on. And so you run into: how do you do that quickly? How do you assign financial targets so business units take ownership? How do you make sure you have one cohesive strategy across the organisation? If you’re really going to move, the whole business has to be marching to one common strategy.”

In this advanced archetype, Asia Pacific businesses are somewhat behind their global counterparts. Only 14 per cent of APAC companies were identified as having this model compared with 20 per cent in Europe and 25 per cent in the US.

The Digital Business Unit

Best for: Creating innovative offerings

Objective: Create a disruptive business

“This fourth model really doesn’t have much to do with the first three models. They don’t happen too often,” Whalen explained.

“Some companies – often they’re very large – they’ve set up a seperate digital business unit. The unit often has its own real estate, they’ve hired in their own leader. And usually it becomes a magnet for attracting digital talent. And they’re not really so concerned with transforming the organisation, this group is more concerned with: how do I create a disruptive business or offering?”

The archetype emerges, Whalen says, because the ‘parent’ company is so big and bureaucratic, and full of so many legacy systems, it is more effective to “cleave off” and start a separate unit to focus on digital.

The archetype is more common in APAC than elsewhere. Some 13 per cent of companies in the region are taking this approach, compared with only 7 per cent in Europe and 3 per cent in the US.

Despite being good at coming up with new products and working more closely with customers, IDC are not recommending the model – yet.

“It is a very effective model in getting things done and getting them done quickly. The question in our mind is – and then what happens? When the group grows up and you’ve got the mothership that’s doing its own thing. How are we going to bring them back together again? We haven’t seen the end game here,” Whalen said.