Digital Transformation

The digital transformation has been occupying companies for several years now. It is accompanied by changes in internal process and management structures. Digital transformation and its effects on management is a separate topic. This topic is described by the term Digital Leadership. It is a consequence of the realization that the introduction of digital corporate structures is not possible while retaining traditional hierarchies and management forms.

Digital entrepreneurial life is characterized by higher speed, greater mobility and new demands on communication within companies. These are prepared for these changes in different ways – horizontally and vertically. For some companies, digital leadership is becoming a major challenge. For example, if it is a matter of medium-sized companies with rather tight hierarchical structures as well as very large companies in which a large number of departments and employees have to communicate with each other across several locations and form teams, they are faced with extensive changes.

Due to the hierarchical structures, these are primarily implemented top-down and require a rethink in the executive floor. This is not just about abstract changes to the management structure in the company, but about changes that the individual manager must allow in his personal management style and in his attitude to the topic of leadership and digitization.

Digital Transformation and its Effects on Management Structures in Start-Ups

Start-ups are often at the forefront of the digital transformation of management structures. In principle, it is easier for them to practice digital leadership than for established companies. They do not have to overcome any resistance or ignorance of digital structures and possibilities in existing hierarchies, as they are already starting their business with the corresponding foundations of digital life.

It is therefore not surprising that some long-established companies have joined forces with start-ups to better understand and implement digital management structures in practice. Start-ups are pioneers and role models. All in all, this offers them a great opportunity to successfully establish themselves in an increasingly digital economy. And where rapprochement and cooperation seem impossible, they are often able to launch disruptive business models.

IT system houses and digital leadership

IT system houses are also often better prepared to implement digital management structures than traditional industrial companies. This is due to the fact that the IT sector has relied on flat hierarchies and digital forms of communication from the outset at a time when digital transformation was still in its infancy. In the IT sector, for example, communication at eye level between managers and employees has long been a reality in many companies.

There are exceptions to this rule, but IT projects are often not compatible with tight hierarchical management structures from top to bottom. Creativity and teamwork, which are the basis of creative IT solutions, demand a communicative and cooperative atmosphere. The latter is also an essential element of digital leadership. Even traditional companies with more classical structures have the advantage that they are aware of the need for further development.

Digital transformation and its effects on the management structures of industrial enterprises

Classic industrial companies have the hardest time when it comes to transferring digital transformation to leadership. Many of these companies still adhere to authoritarian hierarchical structures. In the course of the digital transformation, however, these companies find that these leadership structures hinder rather than promote successful digitization. For example, if decisions have to pass through multiple levels of leadership to be effective in the end, the speed with which digital life is shaped cannot be achieved.

Those who lead and manage employees who are scattered across the globe cannot generate themselves as unapproachable and authoritarian managers without losing contact with their employees. In addition to the multiple challenges associated with the introduction of digital governance, these changes also offer multiple opportunities for industrial companies. In addition to the necessary changes, it is also possible to put work processes to the test and become more effective and efficient. The potential of employees can also be exploited through digital leadership.

How can digital management structures be implemented?

Communication is at the center of the digital transformation of leadership. This applies both to the way in which communication takes place and to the inner attitude with which employees in the company are addressed. No company should think that such a change in the management structure can be achieved by simply introducing digital design tools.

The latter are only part of the necessary changes. In a digitalised company, the individual employee is often given greater freedom in the performance of his or her duties and, as a result, greater personal responsibility. Managers must take these elements into account.

Leadership in the digital age is developing away from “domination” to “coaching”. The manager becomes more and more the partner of the individual employee, who stands to this advisory and motivating aside. In the digital world, spatial and temporal distances often have to be bridged. Who cannot constantly come together at a place, must make sure that no misunderstandings creep in by unsatisfactory kommunikative processes, because the personal contact is missing.

People do not only communicate with the written or spoken word. Rather, non-verbal signals also play an important role in communication. Also these nonverbal signals must get an appropriate platform, in order to express themselves, so that humans know, where they are together. As a result, a video conference, for example, may be a better medium for communication than a mere telephone call, in which the conversation partners cannot see each other.

Digital transformation and its impact on leadership: use cases and best practices

Digital transformation requires leadership concepts other than classic leadership styles. Those who lead digitally must motivate and inspire their employees to think and work independently. In practice, this can be achieved, among other things, with the overriding element of a corresponding vision.

The manager develops an idea or a mission statement that supports the entire work and the company. The other employees align themselves with this vision. Examples of such a vision are, for example, excellent service or sustainability. It is not enough, however, to throw corresponding mission statements into the room as keywords; behind them should be an overall concept that can be implemented in practice and contains concrete instructions.

One of the best practices in the field of digital leadership is that management attaches even greater importance to personnel development than in traditional management structures. For example, the digital manager will develop new roles for employees on a project-by-project basis and carefully select and train the right employee.

A prominent example of the successful change of management structures (and the corporate culture as a whole) is the actions of the current CEO of Microsoft, Satya Nadella, whose changes at the beginning were not exclusively popular. Microsoft was in a rather uncomfortable situation. The connection to Apple and Google in the smartphone sector had been terribly missed and many had pessimistic thoughts about the future of the company.

In addition, there was a corporate culture of juxtaposition and juxtaposition – not exactly the state in which one likes to take the helm. Satya Nadella deliberately focused on a change in corporate culture and on breaking up vertical structures in favour of mutual support and increased teamwork.

Digital transformation and its impact on leadership now and in the future

Some advisors sum up the necessity of transformation in the context of digitization as follows: Digitalize or Drown! (Chapter title in Shaping the Digital Enterprise: Trends and Use Cases in Digital Innovation and Transformation edited by Gerhard Oswald and Michael Kleinemeier in 2017, Springer Verlag).

This pointed assessment also applies to the introduction of Digital Leadership. Digital transformation and its effects on leadership is a separate topic in the context of digitization. Those who want to lead digitally and introduce digitization must take classic analog elements such as the ability to make decisions and resolve conflicts with them into the digital age. In addition, however, new elements such as communication at eye level, the development of motivating visions, communication across spatial and temporal distances using digital media and flat, decisive hierarchies must also find their way into the digital age.

This demands not only the company itself, but above all the individual manager personality. If you are just beginning your managerial life, it is a bit easier, because you can build up appropriate structures right from the start or grow into them. However, those who have been involved for some time may find digitalisation very challenging.

Especially when they have to say goodbye to patterns of action that have proven their worth in the past. Nevertheless, no company that wants to become or remain fit for the future will be able to avoid implementing digital transformation with regard to internal management processes.

Do you work for a company that is currently facing up to this challenge or would like to do so? Our strategy consultants will be happy to support you in setting the course for your successful future.

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