Why 90% of Organisations would NOT Survive a Digital Disruption
Really? 90%? Well let me qualify that and say that that 90% includes those organisations that also try to take advantage of a digital disruption opportunity and are not successful. Nevertheless it’s still a big number, so here is how we are justifying it. We provide some compelling ‘reality data mining’ analysis to support our case.
Surviving a Digital Disruption will require a major change in the way organisations currently work
Not as controversial? Well let’s look at how Organisational Change guru and Harvard Professor John Kotter sees it in his recent book XLR8. He bemoans the fact that some 70% of major organisational change initiatives fail (so that is 70% already right?). Kotter introduces the concept of the ‘Dual Operating System’ where he places the informal Organisational Network right up there side by side with the formal Hierarchy and Business Processes:
Kotter’s claim is that to successfully achieve an organisational transformation we must now appreciate the power of the informal network to resist change, and therefore, it is appropriate to acknowledge the important role it plays in transformational change. In fact it should not be a competition, but a confluence of the formal and informal, if successful transformation is to be achieved.
Now just a ‘little bit’ of science
Those of you who have been following our activities at Optimice will know that we are passionately focused on relationships and the networks that they form; in essence the ‘network’ side of Kotter’s dual operating system. However, we also pay homage to the formal structures by identifying, through our analytics, how networks transcend the formal hierarchy. In fact this is where our clients get the majority of their value from our work. Hence, as you can imagine, Kotter bringing the dual operating system to the attention of the business community was music to our ears.
Recently we studied the interaction habits of a mid-sized specialist consulting firm with over 700 staff spread between offices in each of the major Australian cities and several others throughout Asia and the UK. As well as surveying them to identify the people that they had met face to face with over the preceding month, we also analysed the connection patterns contained within their Email (Outlook), instant messaging (Lync) and Social networking (Yammer), and their timesheet records on client project tasks that they shared with each other. We were therefore able to build a very rich picture of how this organisation collaborates over both business/geographic, as well as core discipline lines. Below are the summarized results for all relationship channels for cross- Location (business unit in this case as well) and Discipline:
The bars show how many relationships between colleagues the various channels have created. The lines show the proportion of these relationships that are formed between people from across Location/BU and Discipline.
The bars show that e-mail is still by far the most dominant digital channel that connects the highest number of people. However, when we look at each channel for the % of staff that are connecting with a colleague outside their own home business unit/location (red line), there is a clear trend. As one would expect, the physical face to face is heavily influenced by location, as this organisation’s lines of business match their geographic location, so only about 5% of face to face interactions happened with staff outside that location/business unit during the month. About 16% of staff recorded time against a task belonging to another business unit. For Email and Lync the number grows to around 32%, but close to 70% for Yammer.
When we look at the cross discipline interactions we can see the percentages for outside the core discipline are higher, but Yammer is still the highest at 65%. Email is close to this, probably reflecting the cross discipline nature of the projects being undertaken. Note that Enterprise Social Networking is often used to help organisations deepen their connections across disciplines, through establishing discipline specific groups. In this case perhaps the Yammer diversity across disciplines may not be a good thing, if strengthening disciplines is an objective.
So what is going on here? Our assessment in the context of Kotter’s dual operating system, is that only one of these channels is supporting the ‘Networking’ side and that is Yammer. It is also the least used channel currently. For Email and Lync, we believe they are mostly reinforcing the formal interactions represented on the formal Hierarchy/Process side.
We then decided to explore the overlap between the different channels e.g. for say the Email channel how many of the staff connected by Email are also connected by Yammer; or how many of the staff who have indicated a face to face connection are also connecting via Lync of Email? To be able to achieve a fair comparison we decided to use a common minimum set of participants for the digital channels. In this case that set was the 171 staff interacting in Yammer (the smallest network), during the selected period. The chart below show the raw number of overlapping relationships for the different channels. We use a network correlation technique to remove the effects of the different sizes of the networks. Coloring is used to provide a “heat map” effect:
We can see that Email is the dominant communication channel by far, which created 4,250 relationships. Intersections with the Email network will therefore be far greater. One can clearly see that the Yammer connections are differentiated from the other channels by its lower correlations.
We can also see that the higher correlations between Face-to-Face, Email, Lync and Timesheet suggest that these channels are reinforcing each other. Timesheet data represents customer facing projects, so clearly this is formal, business transactional. This is reinforced by Face-to-Face, Email and Lync; strengthening the ‘formal’ Hierarchy side of the business. We were able to confirm Thomas Allen’s surprising results, where he found that the drop off in communications with physical distance is also mimicked in the same predictable way in electronic communications. Using a subset of some 80 staff co-located on a single floor, we were able to assess how close the different communication channels followed the Allen Curve.
Incredibly some 53% of email interactions with co-located staff were to people sitting within 6 metres of each other. For that same 6 meter separation, nominated face-to-face contacts were a comparable 56%. The Allen curve was less evident with Lync (31% to those within 6 metres) and not evident at all with the Yammer data.
So what does this mean for the Business and Digital Disruption?
We have a framework we use to identify performance in a networked organisation. Essentially we look at two dimensions; Depth (cohesion) and Breadth (diversity). Ideally for maximum performance we expect an equal balance between the two. Kotter has a similar framework with equivalent axes that he labels “Ability to Innovate” (Our Diversity dimension) and “Ability to Execute” (Our Cohesion dimension).
In general we can accept that for radical innovation, e.g. a response to a digital disruption, we need diversity. To get things done efficiently, we need cohesive networks, where we know what each other is doing in some detail.
The challenging quadrant on the top right is where we try to balance diversity and cohesion. But here is where we get maximum performance. This is where there is a sufficient critical mass of diverse thought to combat the ‘group think’ around ‘Business As Usual’ (BAU) operations alone. This balance is what we need to exploit digital disruptions, as opposed to being run over by them.
This is a significant challenge for most organisations. As our study identifies, most organisations will have the majority of their attention on BAU tasks. This is actually reinforced by the digital channels of email and instant messaging and likely file share systems like Sharepoint as well. In addition to the channels analysed, the vast majority of business analytics provided by ERP providers are about “activities” related BAU, and not the relationships that distinguish the network.
We can plot our 5 communication channels on our performance matrix:
This chart plots each channel’s Diversity as %External (to location/business unit) against the Cohesion or Density of each network (number of connections as a % of all possible connections). The relative size of the bubble indicates the number of connections.
Currently Email, through its sheer volume, is the channel providing most connectivity, but mostly within the formal lines of business. We can see that Yammer stands alone in terms of diversity, but is still very immature and lacking a density of connections, as well as actual numbers of participants.
From Lync, Timesheets and Face-to-Face, using the equivalent Kotter chart, we could say that Yammer provides a ‘high ability to innovate’ channel, but at this stage, little ability to execute on this potential.
In other words, at this point in time, for this case, any ideas emerging from the Yammer channel is likely to be swamped by the BAU channels. So the balance is clearly in favour of the formal Hierarchy/Process side. A 90% bias is probably conservative when we take all evidence into account. Yet unless an organisation’s Network/ Hierarchy imbalance is effectively addressed they will not survive a digital disruption.
So what can be done to redress the imbalance?
The good news is that there are a lot of resources and support out there for helping organisations work more ‘as a network’. Frederic Laloux’s recent book on “Reinventing Organisations” provides an in depth coverage of structures, practices and philosophies for working holistically as a network, covering everyday issues like how decisions are made, how budgets are set, even how salaries are decided on. Zappo is a company moving rapidly toward self-organisation. Their CEO recently recommended Laloux’s book as recommended reading for all staff and controversially added that the company would offer a generous severance payout for anyone who was not comfortable working in a holacracy. Holacracy is now a management theme promoting “anti-hierarchy”. While both of these resources provide practical help in establishing a self-organising organisation, for most of us it will be more about achieving a balance between the ‘Network’ and the ‘Hierarchy’, rather than a complete takeover bid.
One of Laloux’s key findings was that each successful case study he reported on had a passionate founder/leader who could ‘protect the space’ of self-organisation. This may be a little beyond reach for many organisations, but what we are seeing in the market place today is clear evidence that leaders of large hierarchical organisations have now conceded the value by allowing the ‘network’ to build within their organisations, if not yet wholly embracing it. The sales of Enterprise Social Networking (ESN) platforms have been accelerating along with the acquisition or development of ESN offerings from the major IT vendors like Microsoft, IBM, Oracle and Salesforce. It is our belief that it’s now up to the individual staff to embrace this opportunity and take the initiative to create a workplace that they can truly engage with. The alternative will be to fall back to hierarchical control and all the negatives that go with this.
Some specific things that you can do to not only survive, but thrive in a digital disruption
There are many things that you as an individual can do to help build your network presence, and therefore your organisation as a whole’s network presence:
- Start working out loud – This doesn’t mean you have to blog about everything you are doing. It does mean however that you should aim to make your work more visible and then engage in conversation about ways to make it better. It could be as simple a posting a question on a forum about a challenge you are facing at work, through to posting your own hints and tips on things that may have worked well for you.
- Think twice about private messaging – You have seen from our analysis that Email and Instant Messaging (Lync) are Hierarchy reinforcing channels, rather than Network enhancing. It doesn’t have to be that way. Both channels have the facility to message to multiple people; and when done appropriately, does not result in spamming. In my knowledge management days at BHP and Computer Sciences Corp., two of the most successful knowledge sharing systems was simple ‘Request for assistance’ sites set up using simple email lists. Today the ESNs play that role, but if your organisation hasn’t yet acquired an ESN, start using the group features to help you ‘work out loud’.
- Use your ESN or lose it – Those organisations that have invested in ESN platforms regularly are challenged with adoption rates and needing to report on value achieved. The non-adopters often quote a ‘lack of time’. As you can see from our analysis, much of that ‘time’ is spent using the digital tools to enhance our BAU tasks. While this may be a good short-term use of your time, one should always be looking out to the future. A digital disruption has the power to make your BAU job redundant in the blink of an eye.
- Use your video channel to network – Many of us in our home lives have used Skype to connect with friends and family online and around the world. My own daughter has been living on the other side of the world for nearly a decade, but our weekly Skype calls have contributed substantially to bridging that distance. We don’t set an agenda for our Skype calls. We don’t ask ourselves what we need to achieve on the next call. While we may have a regular but flexible time to call, the time we spend conversing is quite flexible, depending on what we have on at the time. Well guess what? Microsoft now owns Skype, and those ‘free’ calls are most likely coming to an organisation like yours! And no doubt the competition will quickly follow. So why not start to use your video channels to network, rather than to just execute BAU work? Turn it on in your coffee/lunch breaks and share some networking time with your colleagues elsewhere in the world.
- Get help if you need it – It may sound strange that we might need help to do what should come naturally, and that is to network. What is hard however is balancing our organisational networking with the demands of the organisational hierarchy. Recall from our performance matrix, that this is where maximum organisational value can be gained. And this is where Social Business Consultants earn their living.