Source: IDC Global DX Leaders Survey. Europe, n = 405. June, 2018
One of the fundamental challenges of digital transformation is the need to change legacy culture and processes, which is embedded in the organizational structure. In many organizations, political silos centered around lines of business have rooted themselves in the organization and remain deeply committed to their current systems, processes and incentive plans.
Organizations are trying a multitude of approaches to evolve their culture. Some have employed “silo busters”, who with the backing of the CEO, work across the entire organization to align resources and digital efforts. Others are working within the established structure, hoping to change from within each line of business. And some avoid the conflict all together by establishing separate digital business units.
A recent study by IDC illuminates not only a pattern to the organizational approaches, but also reveals a logical progression that needs to be taken to keep digitally transforming the organization. IDC categorizes DX organizational structures into four groups:
- Digital Special Projects Team. For those organizations that are just beginning their digital journey, we see a “digital special projects team”. This team is a central group that typically reports to the CEO and is exploring digital for the company in a structured and formal way. Their immediate goal is to define a digital mission for the company and to jump start the innovation process. This group is focused on learning about the science of digital disruption and employing tactics that help change the overall culture of the enterprise. We see this model occur in 35% of western Europe organizations.
- The Office of Digital Transformation. For those organizations that are ready to move their digital strategy to the next phase, they put together a more formal centralized group that IDC refers to as the “office of digital transformation”. This team is a central group that typically reports to the CEO. It is focused on providing governance around the digital strategy. To that end, the DX Office runs the process that determines the strategic priorities and which digital programs the enterprise will fund. We see this model occur in 30% of Western Europe organizations.
- The Embedded Digital Business. This model embeds digital resources into the various lines of business that are digitally transforming. There typically is still a central “digital” group that orchestrates digital for the company and provides common core platforms and digital expertise. With digital embedded in the business, the various functional areas and lines of business feel a greater sense of ownership around the digital strategy. We see this model occur in 27% of Western Europe organizations.
- The Digital Business Unit. The fourth model stands apart from the first three. It is not focused on transforming the organization. Rather, it is focused on creating disruptive and innovative offering. This model is most often deployed at large organizations who are too burdened by their legacy processes and culture to embed digital into the existing enterprise. Instead, in this model, the organization elects to create a separate business unit. The separate unit typically has its own real estate, talent that is hired in from the outside, and its new business processes. We see this model occur in 5% of Western Europe organizations.
Ultimately, organizations need to evolve to the embedded digital business model. This model gets an organization closest to the end state – where digital is “business as usual”. Today, one third of Western Europe organizations are still using a version of the “Office of Digital Transformation” approach, which keeps organizations treating digital as “someone else’s job”