By Khengwah Koh, Principal Consultant, Askvisor
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Traditional vs Digital Organisations - Digital Transformation
The way innovative tech startups have been able to disrupt the market status quo of traditional incumbents across various industries has surprised many. These innovative, agile organisations have been able to ride the digital economy wave, harness digital technologies to create and deliver impactful products and services and implement a business model that enable them to scale internationally at a fast pace.
Regardless of whether one is a small-medium-sized enterprise (SME), a Fortune 500 multi-national corporation, a social enterprise or a nonprofit, it’s crucial for organisations to embrace digital transformation so as not be sidelined by new competition and to stay relevant to their clients.
Are there distinct differences between the way traditional organisations operate and organize themselves vs the innovative, fast growth, digital organisations? From our digital transformation consulting work with clients that range from traditional SMEs to tech startups and studying how some of the top performing startups from Silicon Valley and China operate, we are able observe some distinct differences.
Let’s examine some of these differences and discuss how traditional organisations can digital transform themselves so that they are well positioned to capitalize on emerging opportunities in today’s digital economy.
New Products/Services Development
Traditional organisations tend to create new products and services without sufficiently validating whether there is real demand for these products/services first and think they can “push” these products into the market through various aggressive marketing and sales tactics. Often such an approach is not scalable, and sales of such products diminished quickly after its initial hype.
Many successful digital organisations strive to validate product ideas before they invest in large-scale, high-cost product R&D efforts. They recognize that product ideas are hypothesis that need to be validate with actual market data, and not simply based product and business decisions on just internal management’s opinions.
Traditional companies often aim to launch new products with a long list of comprehensive features, which they spent large amount of resources and time to develop. Many of these features often offer little value to their users, doesn’t address any users’ pain-points and end up hardly being used at all.
On the other hand, digital companies adopt an agile, “beta culture”, aim to launch minimal-viable-product (MVP) with short time-to-market, and iterate new versions based on measuring real impact delivered and real customers’ feedbacks and data.
Many traditional companies adopt a long, time consuming “waterfall” product development methodology They define what they can develop around constraints of their own internal resources. On the contrary, digital companies go with agile, iterative methodology, and capitalize on partnerships, platform approach and API-enabled ecosystem to build products that goes beyond what their own internal resources could accomplish alone.
Organisational Structure
Organisational structure of traditional companies tends to be hierarchical, with a substantial middle-management layer, while digital companies commonly have flat organisational structure, which can minimize bureaucracy and maximize productivity of the teams.
In traditional organisations, it’s often a case of functional teams working in silos. Such traditional organisations often have standalone units/departments that define processes based on their own functions’ priorities rather than prioritizing serving the needs and deliver impact for the organisation’s clients. These silo departments often don’t spend sufficient time to understand the business needs of other units, especially the needs of frontline units serving the organisations’ clients.
Many digital organisations have cross-functional integrated teams, that have support functions like Finance and Marketing, working side-by-side with functions like R&D and Sales. This approach enables team members to develop an understanding of the nature and challenges of other functions and will be able to support the development of more efficient business processes, and delivering more impactful products/services for clients.
Digital teams use various digital collaboration tools to support them in efficient communication and alignment, such as Google Workspace, Microsoft Teams, Jira, Zoom, Slack, Trello and Whatsapp.
Many fast growth tech product companies organize themselves in a structure that resemble Agile Scrum team organization. Agile Scrum practices, such as sprint planning, daily standups and product backlog prioritization are useful in supporting the teams to stay aligned and focus on what are priorities from clients’ and key stakeholders’ perspective.
Decision making
Decision making is often bureaucratic and top-down in traditional organisations. Digital organisations rely on transparent, fast decision making to effectively manage risks, communicate and align teams behind decision made and to execute.
Management of traditional organisations often rely on their past experience for decision making. However, with the ever fast changing market environment, some of these past experiences might not be relevant nor good predictors of what can work anymore.
Digital organisations utilize various digital solutions, such as HRMS, CRM, Financial Management, eCommerce, ERP, MES systems to automate processes and collect data that will enable them to perform data analytic based decision making. Data driven methods, such as A/B testing of product feature hypothesis with consumers, are used to support better decision making. In sectors whereby big data are available, machine learning models can be trained to automate some of the decision making.
Some of the data analytic tools available for free or at affordable subscription fees include Facebook Insights/Business Suite, Google Analytics, HubSpot, Microsoft Power BI, Tableau, and Domo. Some of these tools come with big data datasets that are especially valuable to SMEs, who otherwise wouldn’t have the resources to collect sufficient data themselves.
Mindset
Traditional organisations’ mindset tend to be process and task orientated whilst digital organisations are result and user experience oriented.
One observation is employees working in traditional organisations often have a fixed mindset and resist changes. Digital organisations encourage employees to embrace a growth mindset, to view failures as lessons and opportunities for growth, to be agile and to be life-long learners.
Traditional organisations have employees who often have strong preference to stick to their familiar operating procedures and are resistance to changes being make to their job scope. Digital organisations employees are open to job-redesign for improved productivity and to be able to serve their clients better.
These are some of the distinct differences between the traditional and digital organisations. What can leaders of SMEs, social enterprises or nonprofits do to innovate and transform their organisations into modern, digital organisations? You can refer to a previous article I wrote on “The New Normal is Digital - what can SMEs do to prepare” for some pointers. Or get in contact with UOB-SMU Asian Enterprise Institute, which has various programmes that can support traditional organisations to embark on their digital transformation journey to become innovative and impactful digital organisations.
About Askvisor
Askvisor is a boutique management consultancy and software consultancy firm that provides family businesses, SMEs and non-profits with digital transformation consultancy - supporting the organisations to leverage digital solutions, innovate new products/services, adopt agile and lean management, and build a learning and innovative organisation culture, so that organisations can stay ahead in the Digital Economy. Find out more at askvisor.com
About the writer
Khengwah Koh is the founder of Askvisor. Seasoned practitioner of Design Thinking, Product Management, Agile Management and Lean Startup, he applies these methodologies to support clients' management teams in their transformation from traditional enterprises into agile digital enterprises.
He has 20+ years of international experience leading cross-functional teams, in innovation, product development and product management, that launched several technology products and solutions, that each generated multi-millions revenue. He teaches with an American university on their Practice Master in Digital Strategy, Leadership and Innovation program as an adjunct instructor. He is passionate about developing innovative solutions that deliver social impacts. Get in contact with Khengwah at: https://www.linkedin.com/in/khengwahkoh/