Navigating the Digital Transformation Dilemma by Dr.Karoline Frankenberger

Dr. Karoline Frankenberger, Director Institute of Management and Strategy, School of Management, University of St.Gallen

Have you ever wondered what separates an exceptional organization who manages to ride on one S curve to the next and an organization that perils because of ending up with one product and one service wonder? Dr. Karoline Frandkenberger also wonders the same in fact it took her 120 interviews with CEOs and CDOs over 2 years to share with us what she learned through her research that helps to explain the dilemma during Digital Transformation. Why does this matter for transformation, technology and people?

As we all know very well, companies need to transform...or they will die. The need to act is based on multiple factors such as:

  • New players disrupt established industries - Google and Facebook

  • New business models emerge - Netflix

  • Platforms increase in importance - Uber

The key question is the incremental change of the core business alone will no longer suffice and there is a need to fundamentally transform the core business to build and sustain competitive advantages.

Search the rate of digital transformation failure and you get data from 60% to over 80%. McKinsey and Co. reconfirms that more than 70% of transformation efforts fail. That brings us to the next question of why transformation is so challenging? Perhaps becoming successful in one S-Curve doesn’t guarantee the success of the next S-Curve. Therefore, an enterprise needs to understand how to transition from one S-Curve to the next or as Dr. Karoline calls it the ‘Digital Transformation Dilemma’. The phenomena brings us many business scenarios: i) organizations that excel in one S-Curve, and ii) organizations successfully transition from 1st to 2nd S-Curve.

Dr. Karoline explains the building blocks of successful 1st S-Curve when compared to 2nd S-Curve as follow:

The ‘Digital Transformation Engine’ is defined as critical building blocks behind the success of Digital Transformation. The engine can be divided into ‘Soft Factors’ and ‘Hard Factors’.

Institute the right talent & mindset- soft factors:

  • Leadership

  • People

  • Culture

Set up the right (infra-) structure - Hard Factors:

  • Organization

  • Technology

  • Processes

Due to the limited time of the session, Dr.Karoline will elaborate on these two points: Leadership and People which seem to be the most challenging one.

Leadership: What’s the dilemma?

In fact, what is important is what kind of leadership style and how much an organization is willing to let go of the old-style of leadership and embrace the new one, or even how an organization can integrate these two leadership styles. Obviously, an organization needs to deal with a lot of dilemmas with no exception to the leadership style.

Leadership - Dilemma between the two S-curves

  • How do you reconcile two vastly different leadership schools of thought in one firm?

  • How can you avoid the negative overtone of an ‘old school/uncool’ (1st S-curve) and ‘new world/cool’ (2nd S-Curve) dichotomy?

  • How can you reduce anxiety and fear of change for 1st S-Curve leaders?

  • How can you ensure a functioning (knowledge) exchange between both S-curves? It is not about having two businesses. You need to have this interaction.

Dr. Karoline then elaborates the shift in leadership qualities that often see in leading the 2nd S-Curve from her research includes:

The qualities of a leader

  1. Speak the language of and lead authentically on both S-curve

  2. Act as sparring partners

  3. Inspire and empower employees

  4. Welcome intelligent failures

  5. Be pragmatic

  6. Trust in the power of networks

  7. Demonstrate emotional intelligence

  8. Show adaptability

  9. Led by example and walk the talk

There are many best practices that we can learn when solving the leadership dilemma. She recommends to source an organization’s transformation leaders mostly from internal. An organization needs to test potential leaders ability to lead the business, others and themselves and should demonstrate leadership attributes. Also, the exchange process between 1st and 2nd S-Curve leaders is quite importance to ensure the transparency and knowledge transfer between each S-Curve.

People: What’s the dilemma?

People - Dilemma between the two S-curves:

  • How can you train 1st S-curve talents the skills they need on the 2nd S-curve and vice versa?

  • Do employees who can perform on both S-curves even exist? If yest, where can they be found?

  • What attributes does it take on the 1st vs. the 2nd S-curve?

  • How can this be arranged such that people from both sides mutual trust in and respect for each other?

As for the best practices to solve the people dilemma, she recommends an organization to look for talent with the courage to face the challenges posed by digital transformation and calibrate a mix of retraining, recruiting, renting and reconfiguring to source your digital talent. Lastly, an organizational design defines bridging the gap between 1st and 2nd S-curve employees.

The Digital Transformer’s Dilemma - a blueprint for a successful digital transformation

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