With the rise of digitalization and fourth industrial revolution, businesses across different sectors are striving to getting on the fabled road to digital transformation. 44% of firms around the world have already started to develop digital technologies and capabilities and 32% have matured the digital transformation by scaling up new tools across their organizations’ products, services and processes, as well as acquiring talent and even generating new business models.
However, for many, it is still unclear where to begin their journey. In the past few years and through my numerous interactions with businesses in finance, telecom, energy, and manufacturing industries, the most recurring question, either explicitly or implicitly is, “how do we begin digitalization?” To answer, I employ the analogy of going on an adventure in nature. What is generally required is a GPS showing where you are right now, a roadmap depicting the journey ahead, a compass providing the correct direction, a sufficient knowledge of obstacles along the way, and a backpack filled with all the necessary resources to get to the destination.
The first natural step in the process of digitalization is then, developing a clear and concise picture of a company’s current status; the maturity level regarding digitalization. To help businesses in doing so, over the past few years I have been developing a measurement tool that gauges firms’ digitalization maturity across several key dimensions. The tool has been used by companies and has been constantly augmented, revised and developed along the way. It measures companies’ digital maturity across dimensions of “infrastructure”, “strategy and leadership”, “organization”, “capabilities”, “human resources”, and “innovation climate.” The tool, called “digital readiness critical resources” (DIRECTOR) Map, is essentially a comprehensive survey comprising sets of questions regarding each of the key dimensions and is completed by firms’ managers of varying ranks, from line managers, to middle, to C-level executives. DIRECTOR shows companies their current status in each of the main dimensions of digitalization indicating specific dimensions in which they are lacking behind and need to invest further, as well as specific dimensions in which they are rating high and have to cherish them more.
Although quantitative insights from the survey are quite useful in depicting an average picture of an organization’s digital maturity, such insights have to be enriched by further qualitative interviews with managers, inquiring deeper into how they rate the digital maturity of their organization and why. Without a deeper understanding of the managers’ perspective on the root-cause of their evaluation, the implication of quantitative results for further steps of the digitalization journey will be very limited. That’s why most of the existing maturity measurement tools stop at this first stage and fail to provide actionable guidelines for the following steps of the journey. Therefore, DIRECTOR encompasses both quantitative and qualitative investigation of digital maturity of firms, in order to provide not only a snapshot of current status but also a clear plan of what needs to be done next to go forward.
Recently, in collaboration with a half-billion euros Dutch insurer and care provider, the DIRECTOR tool was conducted with 11 middle to top managers of the firm. Results highlighted that among all digital maturity dimensions “Human Resources” (HR) was lagging behind most. Therefore, a more focused investigation of HR aspects relevant to digital maturity followed. After analyzing interviews and synthesizing ideas a key theme emerged from most of the conversations. Beyond the findings that highlighted shortcomings in areas such as individual and organizational learning, performance management, and recruitment, we identified a deeper root of the challenge: the paradox of ambidexterity.
“Ambidexterity” is a well-theorized concept in management science categorizing organizational activities in two main groups of “exploration” and “exploitation”. Exploration refers to activities aimed at exploring new opportunities (e.g. developing new products for previously ignored market segments). Exploitation, on the other hand, refers to activities that aim to incrementally improve current offerings (e.g. increasing productivity by redesigning production processes). Both exploration and exploitation are essential for firms to keep their competitive advantage in dynamic industries. Firms that perform well in both dimensions are called “ambidextrous.” However, organizations usually encounter a significant challenge of doing both competently, due to constraints in resources (financial, human, cognitive, attention, etc.).
The findings of the DIRECTOR map for the company in question highlighted a less-theorized type of “cultural” ambidexterity paradox. The company has a long history and unparalleled reputation of providing impeccable service to its clients. Over time, this reputation has nurtured and reinforced a ubiquitous organizational culture of perfectionism. Naturally, such a culture does not welcome very much “exploration” of, for example, new digital technologies, new work routines, and new digital offerings, posing a grave challenge to the “digital transformation” of the organization. With our rich quantitative and qualitative analyses and results, we documented the cultural ambidexterity challenge, its causes, and reinforcing processes, followed by a set of detailed and science-based managerial recommendations for the company.
Based on the proposed recommendations, the company has already initiated actions at varying organizational levels, from reformulating strategic vision and mission, to redefining leadership styles, to revising performance management, learning programs and recruitment processes. For example, the HR department has already started to revamp the recruitment process in order to attract new hires who can bring in cultural change for embracing more experimentation, learning from failure, and “exploration”; people who are curious about novel technologies, willing to experiment with different tools, and early-adopters of new work routines, but also inspiring other colleagues and helping them to join the transformation.
As an active member of Techruption community, one of the roles of BISS is to closely collaborate with business partners helping them envision their specific digital transformation journeys, identifying the challenges ahead, and devising plans and guidelines to tackle the challenges and to develop required resources along the way. Tools like the “digital readiness critical resources” (DIRECTOR) Map, developed at BISS, are a key part of this.
Mahdi holds a PhD in innovation management and strategy from Bocconi University (Milan, IT). In the past three years, after joining Maastricht University as an assistant professor of Digital Innovation he has been studying the challenges of organizations in their digital transformation journey. Specifically, his research provides insights and guidelines for “human resource management”, “organization design”, “leadership”, “culture” and “organizational change” to help organizations in their digital transformation journey.
 “Accelerating Digital Innovation Inside and Out,” MIT Sloan Management Review, 2019