When Renewing your Organization, Integrate the Old and the New


When Renewing your Organization, Integrate the Old and the New

When Renewing your Organization, Integrate the Old and the New
Organizations are systems typically designed to repeatedly reproduce a specific type of competence. They tend to rely on familiar routines, roles, cultural expectations, and identities to enable consistent performance of usual tasks. These stable structures allow organizations to reduce their dependence on specific individuals, while retaining what has been learned over time. In essence, organizations are designed to stay the same. Some scholars argue organizations are more likely to die than undergo a major transformation.

Yet, organizational leaders often understand that in the face of significant disruptions like globalization and digitization, major organizational transformations and strategic renewal are essential. These leaders are very familiar with the positive tension associated with doing business as it is (exploitation) and innovating (exploration). However, their awareness of the power of this tension is often not enough to actually achieve a combination of both in practice — to allow their organizations to be ambidextrous.

Approaches for Ambidexterity

There are four approaches to achieving ambidexterity in organizations:

  1. Create, or acquire, a separate stand-alone unit focused on exploratory activities.
  2. Allocate a special time for exploration (e.g., a day a month).
  3. Designate people within the unit to work on exploratory tasks.
  4. Create a culture in which everybody is exploring and feels empowered to challenge existing ways of working to discover new value.

Organizational leaders should consider each of these approaches and see which ones fit best. For example, if an organization does not have a strong learning and experimentation-focused culture, structural separation approaches — such as creating a stand-alone unit — may work out better. A new unit would allow for innovative ideas to flourish before the pressures to generate revenues and profits overpower novel ideas.

When dealing with digital disruption, creating a separate business unit or acquiring a startup in the related space may be particularly fruitful. This is because digitally enabled business models often threaten current employees by replacing human labor with automation as well as by questioning employee expertise by introducing external experts through crowd-sourcing and predictive analytics. Such initiates are likely to encounter significant resistance.

Creating and growing an internal digital experiment is an approach to digital transformation that I have seen enacted in many organizations. The challenges, however, arise when top leadership decides that a digitally enabled model needs to replace the traditional ways of working. How does someone approach this major transformation? One answer is to completely shut down the traditional organization. However, with this approach, it is likely that some valuable competencies and existing relationships will be lost in the process. I propose a three-pronged approach that should help organizations integrate the best of the old and the new when it comes to scaling digital transformation experiments into daily business processes. I will focus on the kind of digital experiment that transforms organizational decision-making and innovation-focused processes.

The three-pronged approach

I start with this premise: Deep down, organizational beliefs and attitudes toward producing the best insights into a problem, or designing innovative products and services, are pervasive, and organizational actors are strongly committed to these beliefs and attitudes. Therefore, the first step toward increasing the likelihood of retaining some relevant part of organizational competence during the renewal process is to engage in digital experiments that do not violate these deep-seated beliefs and attitudes. While digitally enabled processes will look very different from traditional ones, they can still be consistent with these beliefs. To uncover these beliefs, leaders need to engage in a reflective exercise with their groups to learn the collective attitudes of organization members toward producing knowledge, and how those members judge what is valid or not.

Second, when integrating the old and the new, it is important to realize that new hybrid organizational structures need to be created; adjustments need to be made to the more explorative set of practices so that these new practices start becoming more efficient and scalable. To build this new hybrid organization, it is important to put together a transition team that (a) includes members from both old and new organizations and (b) can negotiate reasonable tradeoffs. It is likely that the members of the old organization will resist the new practices. One way of overcoming their resistance is to allow them to practice in a new way on some tasks, so they see the value of these new approaches. If they develop buy-in, they will help evangelize the new practice among their colleagues.

Of course, all of this is easier said than done. A crucial, third part of the approach is the role of CEO and other senior leaders in communicating a clear vision and commitment to change, allocate resources to enable change, and adjust metrics that reward learning new practices. Clear communication from the executive suite of its vision for the transformation will not by itself make it a reality. But this communication will serve as useful fuel to address daily struggles.

This article by Natlia Levina is part of a publication with thought leadership pieces by 11 other authors from the CrossKnowledge Faculty.

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