Unexpected Benefits of Digital Transformation 01-22

Digital tools can be used in many different “right” — and surprising — ways to add value to an organization.

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 Image credit : Shyam's Imagination Library 

                                                                                                                                                           Many different fields of study — such as psychology, human-computer interaction, and ecology —
have employed the concept of “affordances.” The term refers to the different possible actions that someone can take with an object in a particular environment. For example, someone can interact with a beach ball by batting it in the air, letting it float in water, sitting on it, or popping it. The importance of affordances is the shift in focus from the characteristics of the object to what one can do with an object in a particular situation.

The concept of affordances can be particularly useful when applied to digital technologies in organizations. It overcomes many of the key mistakes companies make when trying to update their organizations to compete in an increasingly digital environment.

Having the Technology Is Not Enough

Perhaps the most fundamental implication introduced by the concept of affordances is the shift from the characteristics of the technology itself to what your company can actually do with it. Digital technologies only enable possible actions for people and organizations to engage in; they do not make those actions happen on their own. Simply owning or implementing digital technologies is not enough to derive business value from it.

This insight may sound obvious, but it is stunning how often managers forget this simple fact in practice. They either believe that the mere adoption of the latest technology will improve their business prospects, or they focus all of their efforts on implementation without applying the time or resources to make the types of organizational changes needed to benefit from the possibilities the technologies offer.

For example, one company adopted Twitter in order to be more responsive to customers, but it kept existing processes in place — processes that required multiple approvals before publicly responding on behalf of the company. This negated the benefit of Twitter because it limited the way the technology could be used to respond quickly to customers. This example may be egregious, but it is common for companies to adopt digital technologies without considering how work needs to change to take advantage of the benefits they enable.

There Are Many Different ‘Right’ Ways to Use Digital Technologies

Just as a beach ball can be used in a number of different ways, so can digital technologies enable a number of different possible actions within organizations. One of Twitter’s greatest strengths (and a reason many people and companies find it confusing) is the multiple possible actions it can enable. Some companies — many of the major media outlets, for example — use Twitter as a means of broadening the reach of their content. Others, such as Delta, JetBlue, and KLM, use Twitter as an effective customer service tool, enabling them to support customers in a very fluid service environment. Still others use Twitter as a business intelligence tool. Companies such as Kaiser Permanente used data generated by companies on Twitter to identify areas of improvement in business operations, and T-Mobile used it to identify competitors’ weaknesses to inform their business strategy. The concept of affordances brings the question of how a particular technology will be used within an organization to the forefront.

The Most Valuable Applications Aren’t Always Known in Advance

The affordance literature also introduces the concept of “hidden” affordances, which describes possible actions enabled that are not necessarily known in advance, which is also true of digital technologies in organizations. For example, one company adopted an expertise identification tool to help determine who in the organization needed knowledge. The tool analyzed digital content generated by employees and automatically generated knowledge profiles for them. Although the intention of the technology was to make others in the organization aware of what knowledge employees possessed, the greater impact was in helping employees understand what knowledge they possessed that was most valuable to others. This often differed considerably from their formal roles or how the employees thought they were most valuable. In another organization, the same technology had a very different unanticipated impact, helping improve the performance of women, lower-rank, and newer employees. The technology democratized access to knowledge in the company, access that had previously been controlled through the social networks of senior male employees. Recognition of hidden affordances helps keep managers aware of unexpected or unanticipated benefits of digital technologies that may not have been considered in advance.

A Digital Organization-Affordance Cycle

The final benefit of an affordance view of digital technologies in organizations is the recognition of a mutually dependent relationship between the organization and its digital technologies. Digital technologies can change the organizational environment of which they are a part, creating the

possibility of a new set of affordances. Organizations can also implement or emphasize new features in the digital technologies, as the most valuable affordances they enable become more apparent. An affordance perspective suggests that digital transformation, rather than a linear progression, is a recursive process in which technologies and the organizational environment mutually influence one another over time. Digital technology creates new opportunities to work differently, and working differently creates new opportunities to infuse technology into the work process.

Shifting toward an affordance view requires managers to shift from thinking about digital tools themselves to a focus on what the tools help companies do differently. As managers think about whether these changes in how work happens will add value to an organization, they will be able to more easily consider what legacy technologies fulfill similar tasks, and whether these different systems will complement or compete with one another. 



Reproduced from MIT Sloan Management Review















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Managing Tensions Between New and Existing Business Models05-25

The search for new business models forces established companies to experiment with organizational designs — and leads to tensions that should be anticipated and carefully managed.

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Exploring new business models is a recognized way for mature companies to renew their competitive advantage. Companies explore new value propositions, deploy value propositions in new segments, change the value chain, or experiment with alternative revenue models — all in a search for a different logic for value creation and capture. Sometimes this exploration goes far beyond the existing business model and requires the creation of a new business unit.

A sometimes unexpected consequence is the difficulty of fitting this new business unit into the existing organizational structure. While business model experimentation may be the raison d’être of many startup ventures, established companies typically face strong organizational rigidities that lead to tensions. Predicting these tensions and being open to experimentation with organizational structure can be the keys to a smoother business model exploration process. In this article, we report on a study of the European postal industry, in which we examined the organizational challenges that affect incumbent organizations in mature industries as they react to disruptive changes in their environment by seeking new business models.

Although the Romans had a type of postal service, the European postal industry as we know it today has existed for the past 500 years or so — one of the oldest, in Portugal, traces its history to 1520. For close to two centuries, established operators have been using essentially the same business model, pioneered in 1837 in the United Kingdom. In that model, senders pay a postal operator (usually through the purchase of a stamp) to bring a piece of mail or a parcel from A to B, with pricing dependent on some combination of distance, size, and weight. However, the postal industry has recently faced a rapid decline in physical mail as a result of digital substitution, while regulatory liberalization has boosted the level of competition in postal markets. Many postal operators have reacted by exploring new opportunities in the digital marketplace.

By interviewing managers and reviewing relevant information, we studied Danish, Portuguese, and Swiss postal operators to find out how they have dealt with the challenge of exploring new business models since the turn of the millennium. The organizations we studied strived to maintain their core business while at the same time incubating new ventures. Managers at all of the organizations felt there were potential new business models that they could benefit from developing, but when exploring the building blocks of these business models, they found that tensions emerged in their organizations. It required a separate process of organizational experimentation to find out how to organize for business model exploration.

Managing the Tensions

Our research points to three key areas of tension almost any existing business will face if it attempts to discover entirely new business models. Whether management succeeds in handling those tensions will determine their success in identifying and implementing new business models.

1. Don’t settle too quickly on structure. Top management is typically trained to see organizational structure as a means of executing strategy. As the business historian Alfred D. Chandler put it, “structure follows strategy.” In the case of business model exploration, however, our research suggests it’s a mistake for management to settle too quickly on a strategy and structure for the new business. In 2006, the Danish postal service, Post Danmark A/S, acquired Strålfors, an information logistics company, and subsequently positioned some of the company’s other innovative ventures within this subsidiary. It was thought there were possible synergies in merging products, but the fit was less than perfect, and as one manager put it, ultimately the business units “moved a bit around over the years.” The Danish and Swedish posts subsequently merged to form a new company, now called PostNord AB. PostNord at one point signaled to the market that Strålfors was for sale but then, in the fall of 2015, announced that it would retain ownership of Strålfors, after all. A manager from another postal operator offered a similar account of the struggle with how to fit a new venture into an old company, pointing out how that operator had to “constantly learn and modify … how we organize ourselves.”

The lesson for any organization wanting to explore new business models is to not settle too quickly on a structure for the new business. In fact, the organizational structure can more usefully be thought of as one of the essential building blocks of the business model — that is, as an aspect of the new business that needs to be fully explored and experimented with before you can learn what works best.

2. Balance top management support and experimentation. Exploring new business models is a strategic decision aimed at adapting the company’s activities to an evolving business landscape and discovering new revenue streams. At the postal operators we studied, this involved numerous initiatives. For example, the Swiss Post decided there might be an opportunity to expand its partnerships with online retail businesses beyond picking up and delivering parcels. The Swiss Post could leverage its established, trusted brand by selling secure sockets layer (SSL) certificates, digital signature solutions, and email certificates to online retailers and other businesses. However, setting up the new business unit involved the creation of new capabilities, both on the IT and the sales sides. It was recognized that this new business unit would be very different from the organization’s existing core business. The solution involved acquiring a startup that had developed some core solutions in this space and then building the business with a mix of management and staff hired from outside as well as transferred from the core business.

Management clearly identified a need to protect the fledgling business from above. The new business unit was a strategic initiative and as such needed to be shepherded by top management. As one manager told us, “We really managed to make sure that from the top … these organizations were protected. You need to have ownership by the CEO; otherwise, this is destroyed extremely quickly.” However, it was also gradually recognized that top management should not try to steer the new business unit. As one manager said, “It is clearly an advantage if people [in the new business unit] are a little bit remote of the headquarters. The headquarters has an existing way of doing business … you develop much more successfully if you give these people space and distance to the core.” This implies a balancing act for top management between protecting and coaching, on the one hand, and leaving the new business unit to experiment, on the other.

3. Expect a power struggle for resources. Any new business model has to grow and coexist with existing business models that may be stagnating but still provide the lion’s share of revenues for the company. Managers of such existing business models can be powerful and may have turf to protect in the internal struggle for resources. They and their employees may feel threatened if the new business unit becomes too successful. Furthermore, the new business model may not be profitable for a long time, leading to the risk that needed investments are diverted from more profitable parts of the business. One manager told us that this “has perhaps been the biggest barrier — that we are competing and working to get access to the same IT resources within the company.”

Top management needs to manage this potential competition for resources between the new business and the old core business. One way to achieve this is to accept multiple business logics, as well as multiple performance management and measurement systems. As one manager explained, “We quite successfully managed to convince the internal management that, for the moment, revenue streams shall not be the most important performance indicator.” Alternative metrics could include the estimated market potential, for example.

A point to consider is the importance of communicating across the company why it is engaging in business model exploration and how this will benefit the company in the long term. Conflicts for scarce resources within the organization cannot be avoided completely, but they can be softened if employees across business units build a shared understanding of the objectives of the business model exploration.

The Organizational Dimension

The business model canvas framework developed by Alexander Osterwalder and Yves Pigneur has become a very popular way to understand the potential building blocks of business models. The canvas highlights nine such building blocks: customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships, and cost structure. However, organizational designs and the associated organizational tensions that emerge during the process of business model exploration are not well addressed by the existing tools. Companies exploring new business models may not fully recognize that these tensions will almost inevitably emerge and thus may be ill-prepared to manage them.

Understanding these tensions should help in managing the challenges of concurrent business models.
The tensions we highlight imply that the design of an organizational structure that accommodates both new and older business models needs to be considered an intricate part of business model innovation. Organizational design has to be questioned and experimented with as part of the exploration. A top management team that is prepared for such exploration and aware of the organizational dimension of business model exploration may well be more likely to succeed at business model innovation.

About the Author

Kristian J. Sund is an associate professor of strategy and organization at Roskilde University in Roskilde, Denmark. Marcel Bogers is an associate professor of innovation and entrepreneurship at the University of Copenhagen in Denmark. J. Andrei Villarroel is a professor of innovation and entrepreneurship at the School of Management Fribourg in Fribourg, Switzerland. Nicolai J. Foss is a professor of strategy and organization at Copenhagen Business School in Denmark.

Tags: Business Model Innovation, Change Management, Competitive Strategy, Organizational Change

Reproduced from MIT Sloan Management Review

Equipping the Sustainability Insurgency.04-21

Equipping the Sustainability Insurgency.

An environmentalist and an MBA team up to develop a network of sustainability champions.
Sustainability World Wildlife Foundation.

Image Credit : Shyam's Imagination Library


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As this series has documented, Sustainability Insurgents are professional insiders driven by a higher purpose. While loyally serving their employers, they also pursue a higher ideal: aligning their organizations with a global vision of a peaceful, prosperous, and sustainable world. This article explores how two insurgents, working for dramatically different organizations, partnered to save the planet — and in doing so spread the sustainability insurgency to thousands of individuals and dozens of organizations.

The unlikely duo is Frances Edmonds, an environmental scientist, and Adrienne Lo, an MBA. They hail from the conservation non-profit WWF and the tech leader HP Canada. But, in a twist increasingly common to the insurgency, the environmentalist works for the business, and the MBA works for the non-profit.

What brought this odd couple together? A shared belief that saving the planet depends on engaging and rallying as many people as possible to action. Their target audience: Nascent Sustainability Insurgents, whom they call “champions,” in companies around the globe. Champions are employees who see opportunities for positive change, but aren’t tasked by their company’s official CSR function to act.

Their model of change is peer-to-peer engagement, which they see as the most effective way to support champions and encourage them to take actions that can foster new sustainable norms at work.

Edmonds and Lo knew from experience that champions operate on a volunteer basis, stepping up to the challenge largely because it makes their job more meaningful and personally fulfilling. This intrinsic motivation is vital because insurgents swim against the organizational current. They get told “no” often.

It’s not that the companies don’t want to improve their sustainability performance: No executive gets up in the morning and asks, “How can I destroy the planet today?” But, according to Lo, established corporate processes, systems, and policies are difficult to change — and often, no single person or department has the power to act alone. Corralling and convincing all the needed people requires unique skills and organizational knowledge that are not readily available, nor taught in traditional management programs.

This is where our duo steps in. They wanted a way to provide the know-how and tools champions need to advance the sustainability insurgency in their organizations. But more important, they knew that a supportive peer network of like-minded insurgents would empower champions and give them the courage to persist in the face of inevitable resistance.

The result of their vision is a web-enabled system launched by WWF Canada called Living Planet @ Work, a free, one-stop-shop that provides insurgents with the resources, inspiration, and support they need to become sustainability champions in their company. The website also works to overcome the dismal rate of charitable giving to environmental causes, which is less than 5% in Canada, by encouraging users to support important WWF campaigns like Arctic conservation (see the video).

Living Planet @ Work’s online tools include how-to guides for reducing the workplace environmental footprint and advice on engaging colleagues around sustainability. But beyond information, the site fosters an engaged, peer-to-peer network where members support each other in navigating the organizational obstacle course. As Frances puts it, “There is nothing more motivating than knowing that you’re not alone.”

Since Living Planet @ Work launched 5 years ago, more than 1,200 champions have joined. The website documents examples of insurgents making their offices more energy efficient, reducing the landfill waste, organizing e-waste drives, and more. While these tangible outcomes are important, it is the growing organizational capacity to act on sustainability that ultimately counts. With each successful initiative, champions demonstrate to themselves, their peers, and company executives how corporate social responsibility can have an impact on important managerial issues like employee engagement, operational efficiency, and corporate purpose.

Living Planet @ Work website captures the vision this way: “We know that meaningful change comes from within an organization, and the more help you can get to build support across teams and employees, the better.” This is where change begins, but the end game of these bottom-up victories must be an executive embrace of sustainability and a commitment to embedding corporate responsibility into every function of the organization. Luckily, with champions like these populating the company, executives will find an established network ready and willing to support a coherent and compelling sustainability strategy.