Posted by When we try to define what a “digital organization” is, what first comes to mind are technological devices: employees toting laptops, permanently connected to a shared, real-time flow of information on virtual platforms, constantly communicating with customers or suppliers – people working from anywhere, with others they have never met in person.
Technological change isn’t just about technology: Insights from Mad Men
It is a fact: all major changes in the workplace happened through new technological devices. The American television series Mad Men illustrates some great examples. The show documents in an extremely precise way how office life evolved from the early 1960s through the mid-1970s. In season 2, a new device enters Sterling Cooper’s offices: a Xerox 914 copy machine, which became available on the US market in 1959. The secretaries all gather around the imposing machine. The office manager states it will significantly simplify their lives. She is also concerned about the size of the machine: “It’s much bigger than they said it was. I think it needs an office.”
In season 7, another iconic device arrives at Sterling Cooper’s: the IBM System/360 supercomputer. It is 1969, and the management of Sterling Cooper expects this investment to increase the value proposition for the client through data and analytics. This time it is not the secretaries’ work that is transformed, but the executives’. Their advice to the client should now be based on data analysis and not only on their creative intuition.
Innovation is never limited to a substitution of human labor for a machine. Each time, the content, the organization, the relationships between workers – the very meaning of work – are transformed. Mad Men‘s protagonist, the marketing genius Don Draper, is skeptical of the computer. He is keenly aware of what his creative art could lose in such a change. As for the secretaries, their number decreases gradually throughout the show, and by the last season the secretarial pool no longer exists. There is neither smug technological optimism nor critical pessimism in Mad Men. But what comes across clearly is the recognition that work is changing, and that skills and organizations have evolved in response to major social and technological changes that took place within a decade.
A major shift in workplaces, with upsides and downsides
Digitization represents the major evolution that the workplace will have to undergo in the 21st century. Like the changes that came before, it relies on technological devices: big data, cloud computing, 3-D printing, advanced robotics and the Internet of Things. But digitization is more than just a change of tools. Daily practices, offices’ organization, reporting relationships, information sharing, customer interaction, and even competition are also thereby transformed.
At the company level, it is quite clear that digital maturity is synonymous with stronger economic growth and a higher level of well-being for employees. In a study conducted jointly with Google Europe, Roland Berger assessed the digital maturity of French companies, looking into three distinct dimensions: equipment, practices and uses, and organization and skills. It appears that more digitally mature companies experience revenue growth six times higher than their less mature counterparts. Beyond the financial impact, employees feel more at ease in their company, with a 50% higher index of well-being at work.
Nevertheless, we should be careful not to overestimate the boon of digital transformation. At the micro-level, the most competitive companies, which attract the most qualified and highly adaptable employees, are also those that embrace the digital era with greater ease. Mature digital organizations are characterized by a flexible, less hierarchical culture where employees enjoy a real autonomy and the possibility to express their creativity. No wonder these workplaces are exciting and fulfilling!
But if we consider the macro-level, the picture is more nuanced. The possibilities opened up by connected, more efficient production and new business models are, for sure, highly promising. A study conducted by Roland Berger with the Bundesverband der Deutschen Industrie (Federation of German Industries, or BDI) found that, if Europe harnessed digitization, by 2025, the continent could see its manufacturing industry add gross value of 1.25 trillion euros. Yet the risks are equally dramatic: from missing out on digital transformation, European industries could suffer potential losses of up to 605 billion euros in the same period.
Effects of digitization on employment should not be underestimated. In 2013, Carl Benedikt Frey and Michael A. Osborne from Oxford University calculated that about 47% of American jobs could disappear by 2020 due to digitization. Roland Berger applied its methodology to the French labor market and estimated that 42% of French jobs could be at risk. Not surprisingly, low-skilled jobs are threatened, but even intermediate jobs could also be affected. These include administrative or middle management functions, which have historically provided jobs for the middle class. As with all major economic transformations, digitization creates winners and losers.
Taking the dividend of digitization, and sharing the costs
With digitization, our societies are on the verge of a radical transformation. And the workplace is, as always, a powerful “sounding box” of this transformation. Becoming a true digital organization is not just about becoming tech-savvy. It means embracing a new culture and mindset. A digital company is no longer a physical place that brings together hierarchically-organized workers. It is an ecosystem where talents are developed, where innovation is done through networks. It’s a long road ahead for many companies before they can adapt to this new game. But they must, as adapting has become crucial to success: digitization now lies at the heart of competitiveness.
But transforming our organizations into digital ones places additional responsibility on managers, in terms of anticipating changes in skills, adapting our training policies, and empowering our staff – in other words, ensuring that digitization makes, within our companies, more winners than losers. This is, of course, a major policy issue. But digitization won’t be possible without the awareness and determination of employers. Let us rise to the challenge.
About the author:
Charles-Edouard Bouée, is CEO of Roland Berger, and author of Light Footprint Management: Leadership in Times of Change (Bloomsbury 2013) and Confucius et les Automates (Grasset, 2014)
My hypothesis is that it is not “digital maturity” that drives six times higher revenue growth or a 50% higher index of well-being at work that the study found. Something more fundamental is almost certainly at play here.
I suspect these are organisations which anyway outperform their peers based on sound organisational health and good, human-centric management. These are the very qualities that also allow them to more quickly adopt and harness digitization. Correlation? Yes. Causality? No.
The conclusion then, is not that there’s a huge dividend of digitization, but a huge dividend of better, more human management. Which will allow organisations and society to benefit from digital technologies – or any other yet unknown future opportunity.
Curious to hear (or rather, read) other’s thoughts on this.