If companies want to be successful in the Digital Age, they have to become networks themselves and move away from purely hierarchical structures.
Networks instead of hierarchies
Most of the current CIOs of larger companies are probably between the ages of 40 and 60, since it takes time to rise through the ranks in hierarchical organisations and become a C-level executive. Therefore, these CIOs were born in the 1960s or 1970s and went to school mostly during the 1970s and 1980s, when they were taught by teachers probably born in the 1940s using teaching materials from the 1950s. Our school time has an immense effect on our views, beliefs and values and shapes us for the rest of our live. These CIOs studied during the previous millennium, when teaching was heavily influenced by the methods and beliefs of the Industrial Age.
During the Industrial Age, the dominating organisational pattern was the hierarchical structure, adopted from military organisations, whose underlying principle consisted of separating the “thinking” from the “doing”. The individual tasks assigned to workers were clearly separated from one another, such that every worker knew exactly what to do and how his/her performance would be measured. Information was shared only on a need-to-know basis, meaning that most employees had very little information about what was going on in other parts of the company. Managers kept information to themselves, because knowledge is power. The higher you rose in the company, the more information you had access to, but you had to keep it secret. This was also one of the key principles of Taylorism, with its focus on separation of tasks, extreme specialisation and measurability. In essence, hierarchical structures were introduced in order to separate people. Because our education was mostly dominated by the paradigms of the Industrial Age and Taylorism, which was widely accepted at the time, our generation has been conditioned accordingly.
The younger generation, however, is growing up in the Digital Age. When I observe my daughter doing homework, I realise how completely different this is from the time when I went to school. During my school years (remember the 1970s and 1980s?), we did our homework on our own and kept it hidden from others, because we wanted to be better than our classmates. The environment was competitive, and the dominant paradigm was, “The more I know and keep to myself, the better I am compared to my peers, so I can beat them”: knowledge is power.
When my daughter does homework, she works on a topic, produces a first draft (an MVP so to say) and then publishes it to her classmates through Instagram, their WhatsApp group or some other social media tool. Within a few hours, half of her classmates will have enhanced or improved the MVP in several iterations and then share it using the social media tool until it reaches a level of maturity and quality that none of them individually would ever have been able to achieve in such a short period of time. The younger generation does homework through crowd-sourcing, something that didn’t exist when I went to school. This generation is growing up in a world marked by the sharing economy, crowd-sourcing and crowd-funding, by Wikipedia, open source, etc., and its mindset is, “The more I share, the more my network benefits and with it all of us, including myself”. What a different paradigm and mindset that is from the knowledge-is-power paradigm that I and probably most of you grew up with.
Now, let's guess what paradigm and mindset prevail in large enterprises, where most of the senior executives went through their education during the Industrial Age. Digital transformation is about exploring new business models and therefore cuts through the well-established hierarchical organisational silos that still dominate most of today's large companies. This is one of the main reasons why digital transformation initiatives fail: managers at the top of the company want to preserve their silos, power and influence that they have built up and fortified for so many years. Digitalisation and virtualisation of physical products within the current business models and processes also cut through the organisational silos and question many established roles, jobs and organisational units.
The Digital Age, however, calls for a different way of structuring and organising companies and for different rules on how we work together. It is not primarily hierarchical structures, reporting lines, size of the budget, number of FTEs you manage, etc. that are essential but rather the added value that one brings and the impact that she/he can make, regardless of “whose” resources in the company contribute to achieving it. What is relevant is not individual targets but the contribution to the company’s purpose and goal, which often is not just a financial one but increasingly a combined “triple bottom line”, consisting of financial, social and environmental contributions.
If companies want to be successful in the Digital Age, they have to become networks themselves and move away from purely hierarchical structures. If they want to attract and retain talent from the younger generation, they have to offer them a purpose, environment and company culture that matches their values, and this probably involves the sharing paradigm of networks more than the hierarchical structures and paradigms of Taylorism and the Industrial Age.
As I have shown in the previous chapter, IT expertise is increasingly spread throughout companies and is no longer concentrated in one centralised IT organisation. CIOs can lead the way to a new paradigm for their companies, since such a way of working is already well established in IT with agile methods, DevOps, iterative product development, crowd-sourcing, open source, etc. This constitutes a huge opportunity for CIOs to help their companies move into the Digital Age.
