Navigating Digital Transformation: Organizational Structure Choices and Effectiveness in Swiss Enterprises
Companies undergoing digital transformation need to adapt their organisational structures. We looked at how Swiss companies go through the decision-making process.
Topic
Digital transformation is a topic of enormous relevance and importance worldwide, both in academia and in practice. Switzerland is ranked 5th in the IMD World Digital Competitiveness Ranking, which confirms its importance for the country.
Organisations undergoing digital transformation need to adapt their organisational structures, and this Master's thesis explores the decision-making processes behind organisational structure choices and the methods for evaluating their effectiveness in the context of digital transformation in Swiss companies. It examines why organisations decide to maintain or change their existing structures, and assesses the effectiveness of these decisions in achieving their intended outcomes.
Relevance
The topic is highly relevant for managers responsible for digital transformation, as it provides insight into the dimensions to consider when making or preparing decisions and provides concrete guidance on the choice of organisational form, including models, structures and frameworks. Understanding these factors is crucial for managers to make informed decisions that can increase agility and improve stakeholder satisfaction. It also suggests approaches to succeed in proposing radical change.
Results
We have identified several key factors influencing organizational structure decisions during Digital Transformation and built a conceptual model with it. The key decision process dimensions observed and built in the model includes top-down reasons, stakeholder-driven reasons, and decision influencers.
Top-down reasons are particularly relevant when implementing changes to the organisational model. We found that hierarchical models are often maintained for top-down reasons. Various adaptations are used to make them more agile. For example, using agile frameworks, creating subsidiaries or delaying the hierarchy. In addition to, or sometimes as an alternative to, changes in organisational form, agility is also pursued at a cultural level by encouraging cross-functional collaboration and cultural initiatives. Companies measure the effectiveness of these structures primarily through qualitative assessments such as customer and employee satisfaction, project milestones and subjective evaluations.
Implications for Practitioners
Our insights can help the manager in charge of Digital Transformation to add a new focus when evaluating and proposing different alternatives. Trying to change the organizational model is a challenging task because it touches on the beliefs and risk-taking of the owners and the CEO. We suggest how to get around this resistance, by proposing organizational changes that are effective but do not touch on these critical dimensions. Example of those workaround are:
- External business units: Proposing change through external business units can be effective and meet with minimal resistance.
- Agile frameworks: The use of agile frameworks such as Scrum or scaled agile frameworks such as SAFe, which are widely available, can facilitate change without compromising critical dimensions.
- Cultural change: Suggesting cultural changes can help achieve transformation without directly affecting the core beliefs of the owners and CEO.
If a more radical model change is required, such as moving from a hierarchy to a holacracy-based organisational model, we suggest first building the credibility of the model. A good way to do this is to start with a proof of concept (PoC) in one part of the organisation.
- A successful PoC can increase the likelihood of gaining support from key stakeholder
We also propose effective ways to measure organisational performance by focusing on customer and employee satisfaction, which are key to the success of digital transformation, rather than focusing solely on digital efficiency measures.
Methods
The methodology includes qualitative, exploratory research with semi-structured interviews conducted with managers from 16 Swiss companies across various industries. The data was analyzed using Gioia's inductive methodology, starting with open coding to identify relevant concepts and themes. These were then aggregated into higher-order categories and dimensions. The study focused on understanding the reasons behind organizational structure choices and the methods used to assess their effectiveness during Digital Transformation.