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    Knowledge creation on China, from proven China experts.

  • Faculty & Research

    Knowledge creation on China, from proven China experts.

Wednesday, July 15, 2020

Five Digital Capabilities That Companies Must Have

By Katherine Xin

Time has put both companies and individuals into the torrents of the digital age. Digital technologies are transforming our activities at an astonishing speed and in ways that we could never have imagined. This trend has been further accelerated by COVID-19, the pandemic which has forced companies to meet with new challenges of digitalisation. It goes without saying that organisational capabilities are essential to future competitiveness or even survival of companies, and this is especially true in the digital era. Though many companies have been attempting on digitised management, many are still at a loss as to how to build their own organisational capabilities in the fast changing time.

Digital Leadership

Leaders play an indispensable role in the process of organisational digitisation. Digitisation of a company is a dramatic transformation that involves not only technical changes, but also a deep understanding of the impact of digital age including strategic focus, organisational configuration and people’s mind-set.

Firstly, leaders should be visionary for a digitised future and must be aware of the fact that digital organisational capabilities are essential for companies to compete in the long term. Digital management should therefore be given greater emphasis to enable continuous improvement of business performance.

Secondly, leaders should keep on learning to stay abreast of the digital revolution and digital intelligence. A Leader must have a sound understanding of digital technologies and digitally enabled operations and management, so as to lead the company to develop a new organisational culture and structure and to build up appropriate business and management processes. Furthermore, a digital management team needs to be established to cultivate talent needed for digitised operations.

Thirdly, leaders need to develop a new set of leadership skills required to implement digital transformation. These skill set is different from those required by traditional models. For example, traditional means of communication, incentives, recognitions, and assessments may now be accomplished through digital ways and forms. For this, leaders need to be agile and act with an open mind, willing to change the way they think, to embrace the initial discomfort what a digitalised management processes may bring, and change their fundamental management philosophies and assumptions.

Digital Organisational Structure

With the arrival of the digital age, profound changes are quietly taking place in the way organisations are run and organised - both with business and functional departments. Establishing an independent digital department – such as an online sales department – has become an outdated practice. Organisational structure set up to support the complete organisational and business digitisation has become the norm, and many new business models are being created.

In order to support these new business models in digital era, organisations need to act with speed and agility with the change of their organisational structure. Many companies have realised that they must enhance their middle office (middle level platform) management to streamline inter-departmental co-ordination and improve operational efficiency. To achieve this, traditional organisational structures must be transformed and in many cases replaced with new ways of organising that emphasises cross departmental coordination for speed, agility and efficiency. Digitisation should be incorporated into the design of organisational structures, processes and systems. Since digitisation enhances inter-departmental co-ordination, the design and subsequent adjustment of organisational structures should be oriented towards facilitating, speeding up and more efficiently managing coordination across functions and business units.

Digital Teams

The application of digital technologies can affect work patterns within an organisation, especially interactions among people. With organisational structures becoming flatter and more agile, digitalisation will greatly speed up the use of virtual teams. Digital technology will allow team members to cooperate anytime and anywhere, and will enable team members with different background and expertise to generate many more sparks of innovation. However, the organisational characteristics of virtual teams will pose greater challenges to traditional team management and leadership.

For an organisation to achieve both high efficiency and sound management in its virtual teams, it must effectively use digital means to “granulise” their interactions and performance in order to balance the diversity and autonomy required by each team to achieve systematic coherence at the organisational level. Organisations may, for example, use a hybrid time management model – combining flexible individual working hours with fixed co-working time – in order to give more play to individuals’ self-motivation, while safeguarding organisational coherence and efficiency. Easy access to video conferencing could further promote trust and teamwork within teams.

While promoting individual within team autonomy, companies also need to pay attention to the coupling among different teams and design effective incentive mechanisms to encourage inter-departmental (team) coordination and communication. This can generate synergy amongst team members, making collaboration more efficient leading to higher level of job satisfaction and sense of belongings among team members.

Digital Talent

Digital talent is indispensable for the digitised operation of companies. A deeper understanding of the significance of digitisation for operational and management efficiency and the mastery of core digital technology are key requirements for talent in the age of digital intelligence.

Some companies put great emphasis on attracting IT-savvy talent, but fall short in giving equal importance to improving the digital management skills of general staff members. In the process of digital transformation, not only operational staff need to improve their digital skills, members from functional departments also need to develop their own guidelines and skills for digital management. Amongst all functional departments, HR departments should be among the first to digitise. Only a digitalised HR department can allow the recruitment, retention, incentives and assessment to meet with the requirements of the digital age.

In addition, to promote self-motivation employees should be empowered in the context of digital operation. Staff who possess the ability and the mind-set to think and work in a digitalised way can they work more diligently and efficiently to achieve the goals of the organisation. In short, top level executives and HR departments should make cultivation of digital talent one of their top priorities.

Digital Organisational Culture

In order to keep pace with the digital age, organisations are adopting brand new ways of working. Digitised mechanisms of management and operation are reshaping organisational culture, which in turn helps promote the digitised management of organisations. Organisational cultures vary, and each company has its unique culture just as each person has his or her own personality. Organisations in digital era all share the common spirit and values of altruism, empowerment, collaboration, and win-win orientation.

It is not easy to change transform organisational cultures, and new digital cultures need to be internalised and embraced by all members of the organisation. One way to achieve this is to promote best practices, recognise the right behaviour and reward new models of success and high performance.

The key challenge in creating and transforming an organisational culture in the digital age lies in the balancing between control and autonomy, flexibility and standardisation, and between satisfying needs of different stakeholders, such as employees vs. customers. An altruistic organisational culture in the digital age calls for empathy, inclusiveness, and empowerment from top management teams.

In short, digital transformation is an inevitable choice for companies today. Organisational capabilities in the digital age serve as the foundation of a company’s competitiveness in the long run. The key lever lies in organisational development and people. At the organisational level, companies need to design decentralised structures, and cultivate organisational cultures centred on altruism and win-win co-operation. Leaders need to act with empathy, speed, and agility. When companies make efforts in the above-mentioned five dimensions, it is possible for companies to find a faster track towards building their digital organisational capabilities.

This originally appeared in Harvard Business Review China here (in Chinese). Katherine Xin is Associate Dean (Europe), Director of the Hospitality EMBA (HEMBA) programme and a Professor of Management at CEIBS. For more on her teaching and research interests, please visit her faculty profile here.