The organizational structure for digitization

The digital transformation of the economy continues to gain momentum and the options are manifold. Online portals and e-commerce solutions continue to gain ground, and solutions with SAP Hybris in particular offer far-reaching opportunities here.

Supplier platforms such as SAP Ariba or ERP integration across company boundaries are digital approaches to connecting value chains.

The intelligent networking of manufacturing machines and far-reaching automation of production, even the use of Big Data-based, self-learning algorithms, are now common approaches to optimizing organizational processes or developing new business areas.

Companies that do not face up to the challenges ahead run the risk of losing market share and competitiveness.

The first step toward successful digitization is to define and prioritize the most important fields of action and objectives. Existing and new initiatives are systematically recorded, and resources and responsibilities are defined.

Rapid scaling of the team is required in order to quickly achieve initial results and successes. At this point, the question arises as to how the digitization team should best be integrated into the organization.

Three basic organizational forms can be distinguished when establishing a digitization team.

• First: Internal team ("incubator"). Digitization is driven by an internal team, e.g., a department, within existing structures of the organization.
• Second: External team ("start-up"). The digitization team is established outside the existing corporate structures, e.g. as a start-up, lab or joint venture.
• Third: Combined team ("hybrid"). Digitization is implemented both by teams within the core organization and by external teams. The teams are responsible for different and clearly defined areas of activity.

The organizational forms listed entail specific opportunities and risks. Start-ups can achieve a higher implementation speed due to leaner processes, but the separation from day-to-day business can lead to acceptance and integration problems.

Therefore, when determining the organization, other factors should be considered, in addition to opportunities and risks associated with the organizational form itself. Two essential areas are:

Disruptiveness", i.e. the extent to which the existing business model and organization are changed by the planned digitization initiatives. This can range from process adjustments and restructuring to the complete redesign of traditional business areas.

Digital readiness, i.e., how well the organization is prepared to master the challenges of digitization. Digital readiness encompasses both technical requirements, e.g., in the system and data areas, and the availability of skills and resources within the organization, as well as cultural aspects, e.g., the ability to innovate or the willingness to change.

In general, it can be said that external teams, e.g. start-up or spin-off, are better suited for digitization projects with high disruptiveness, especially if the organization has a rather low digital readiness.

Conversely, organizations with higher digital readiness can internally execute digitization initiatives that are low to medium disruptive.

The assessment of disruptiveness and digital readiness should be carried out by management individually for all fields of action in digitization, as the characteristics can vary.

For example, a machine manufacturer could come to the conclusion that it should carry out digitization projects to optimize production processes (Industry 4.0) internally, provided that digital readiness is high here and the organization already has experience with optimization projects in manufacturing.

The complete realignment of the service business to the increasing self-diagnostic capabilities of the machines, on the other hand, could be done by a newly established external team due to the high level of disruptiveness.

This example also illustrates the scope for hybrid organizational forms. These are particularly suitable for digitization initiatives whose main fields of action exhibit different degrees of disruptiveness and digital readiness.

Once the decision on the organizational form has been made, its implementation should proceed quickly. Regardless of the model chosen, many organizations benefit in this initialization phase from a mixed team composition of internal and external specialists as well as partnerships (also often referred to as an eco-system).

This approach accelerates scaling and quickly establishes the team's working capacity; it also allows different perspectives, experiences and competencies to be brought into the organization.