How the paradigm shift towards digital transformation can be initiated

The digital transformation in the sense of the Fourth Industrial Revolution is not comparable to the digitalization that characterized the Third Industrial Revolution. Although the two terms are sometimes used synonymously in everyday use, digital transformation, in contrast to digitalization, means a higher rate of change, a broader extent of change and a greater impact of change. This is not least due to the fact that technological breakthroughs in artificial intelligence, smart data, the Internet of Things and cloud services make unseen and far-reaching automation possible.

Megatrends such as digital transformation reinforce the VUCA world

In addition to the digital transformation, further megatrends are leading to a strengthening of the so-called VUCA world, which is characterized by higher volatility, uncertainty, complexity and ambiguity. For example, the global balance of power is shifting as populous countries such as China and India become increasingly attractive for companies and investors. Demographic change also has a major impact on the dynamics of change as the population ages. This creates completely new customer needs, and lifelong learning becomes a necessity. Demographic change is also accompanied by urbanization, which is leading to larger urbanisation. This is creating new challenges both in cities and in rural areas, and new (customer) needs are a result. A fifth megatrend that accelerates the VUCA world is resource scarcity and climate change. In all industries, solutions must be found to this problem, which means that existing production and product strategies must be questioned.

Agility as the basis for the ability to act in a VUCA world

As the digital transformation accentuates the VUCA world, organizations must be agile. Agility doesn’t just mean experimenting with agile practices like Scrum, which are now everywhere. Rather, it is about the basic ability of people and organizations to change in a dynamic and complex environment. This ability becomes all the more important the more processes that can be automated have been digitized and the more complex tasks remain for the employees.

HR must support the organization in the radical paradigm shift

For organizations to become more agile, however, a fundamental paradigm shift is needed. While in the „traditional world“ organisations put the shareholder at the centre and tried to increase efficiency through (hierarchical) control, in the „agile world“ the customer is the focus. Thus, agile organizations shift the focus from efficiency to effectiveness in order to adequately respond to dynamic customer needs (see Figure 1). This customer focus also applies in particular to HR organizations, which are perceived by many companies to be ineffective. This increased customer focus is all the more important for HR because it has the elementary role of promoting the ability of employees and the organization to change. In other words, accompanying agile transformation becomes a basic task for every HR department.

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Figure 1: Necessary paradigm shift to agility

The paradigm shift succeeds through a cultural transformation

A paradigm shift in organizations as a basis for agile transformation means at its core a cultural transformation. Culture in the sense of „how we do things around here“ is a product of effective systemic changes. In agile transformation there are three drivers that can support such a paradigm shift and thus contribute to an „agile culture“:

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Figure 2: Drivers of agile transformation (Krapf, 2018, 2017)

 

The drivers of agile transformation at a glance

Agile Structure & Governance focus on the systemic framework conditions that influence the behavior of employees and thus shape the agile culture. Elements to be considered here are, for example, the organizational structure, the composition of teams or agile leadership principles.

Agile practices & processes contain those aspects that are currently widely understood as agility per se. This is the way teams and employees work in organizations. Tools like Scrum, Design Thinking or Kanban help to be more agile.

Agile values & competencies are the prerequisite for people to contribute to organisational agility. In addition to the corresponding values resulting from the paradigm shift, employees must also have the appropriate competencies to be productive in the new environment.

Agile Culture Check as the first step towards cultural development

I have developed a short self-check for practioners: the Agile Culture Check, is an initial assessment of the current situation regarding the maturity level of agile culture. For culture to develop, however, elementary collectivized behavior must change that is compatible with the new paradigm. I have described a possible approach to this here. In a lecture at the BVD, I also went into more detail about cultural development in general.

 

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