Managing Two Very Different Rule Sets
If you want to digitize and become digital—and we would argue that, in the long run, you have no choice—you’ll need to address the challenge of managing two different sets of rules. There are three things you can do to get started:
- Separate teams working on digital from teams working on digitization.
- Allow digital leaders to experiment with new rules by breaking old ones.
- Identify and coach new leaders.
Separate Digital Teams from Digitization Teams
One way to simultaneously manage for digitization and digital—and their respective platforms—is to clearly distinguish responsibilities for each. Companies like Schneider Electric, Royal Philips, and Toyota have all taken this approach. At PI Chile in 2018, the operational backbone was managed by the CIO while the digital platform was the responsibility of the Chief Digital Officer.
Funding of responsibilities for the two platforms is also distinct. People responsible for digitization can better pursue operational excellence when the operational backbone receives consistent investment, year after year, at the enterprise level. CIOs and process leaders can then define and address enterprise priorities. People responsible for digital innovation receive funding for short-term experiments that is easily increased or discontinued based on the results of early experiments. Early in a digital transformation, companies will need to specify a budget for digital experiments, but successful digital offerings can eventually “earn” their budget.
Because established companies must sustain their business success, they should initially put only a handful to a few dozen (not hundreds) of people on the task of experimenting with new digital offerings.
Allow Digital Leaders to Experiment with New Rules
We know of no company that feels it has nailed the challenge of developing new rules for digital teams. We do know that people within companies that are experiencing some success are breaking old rules and devising new ones. They “cheat” on performance evaluations of salespeople, to preserve commissions; they subvert traditional budget processes, to secure needed resources; they ignore conventional price lists, to experiment with value propositions; they circumvent established customer relationship management approaches, to co-create offerings; they ravage time-honored product development methods, to apply agile, iterative development approaches.
At PI Chile, the people in the DXLab who were developing their digital platform and new offerings were mostly permanent employees instead of contractors; they used agile methods and a continuous product management approach instead of running time-definite projects and handing over responsibility; they were equipped with powerful laptops and giant screens instead of the standard desktop computer package. They also could choose to advance via either a new technical career path or the existing managerial one.
What makes all this rule breaking manageable is that it is contained initially to a small part of the business—the part that is experimenting with new sources of revenues. In any company, digital leaders will need the support and understanding of senior leaders.
Identify and Coach New Leaders
Not all people who have successfully led traditional businesses are well-suited to digital business leadership. The idea of breaking rules to identify what works may feel terribly unnerving for some— even when they have been encouraged to experiment. For some, there will be a fear of failure or an
inability to function in such an uncertain environment. Others may believe very strongly in the rightness of the old rules.
Digital leaders strive to identify what needs to be done to help empowered teams achieve their goals. Langdon of PI Chile describes a digital leader’s new role at the company as clarifying and enabling each team’s mission rather than specifying and controlling detailed tasks:
What we say now is, “This is your domain, this is your playground, and this what you need to get done.” We just build the right culture, build the right team, enable them, delegate the decision making, and trust the people. And if they have friction, we resolve that friction! Resolving friction is the way I see my role.
Few companies already have leaders or team members who are comfortable crafting new rules. The others need to use coaching to develop these capabilities in leaders and teams or to hire new talent for their digital units. But companies like PI Chile, CarMax, Philips, DBS Bank, and Northwestern Mutual are finding they have lots of people on board who are anxious and able to make the shift.