How to Graft Digital Transformation and HR? > Insight

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Era of Digital Transformation

How long did it take for the technologies and services we commonly use in our daily lives such as transportation and communications to obtain 50 million users worldwide? It took 50 years for the phone, and the TV shortened it to 22 years. Following the 14 years of the PC and the 12 years of mobile phones, the Internet reached it in seven years. YouTube, Facebook, and Twitter, which are the representative recent SNS tools and the backbone of social networks, exceeded 50 million users in 4, 3, and 2 years, respectively.

The growth speed of new technology companies is increasing at an unpredictable level. Fortune 500 list of companies, based on market cap, reached USD 1 trillion in market value in an average of about 20 years. On the other hand, giant tech companies, so-called Unicorns, have become industry giants in four years on average. Even though Google took 8 years for becoming a 1 trillion company, Uber and Airbnb arrive at the 1 trillion goal in 4 and 3 years, respectively. 

As a result, the atmosphere of companies has changed. In 2001, the companies with the highest market value in the world were GE, Microsoft, Exxon Mobile, Citigroup, and Walmart. However, in 2016, 15 years later, Apple, Alphabet (Google), Microsoft, Amazon, and Facebook have replaced their positions.

Digital innovation is the source of this change. The emergence and interconnection of new technologies such as the Internet, mobile, social media, 3D printing, cloud, artificial intelligence, and augmented reality have been changing our daily lives as well as the corporate ecosystem. It connects organizations, people, and physical assets in new ways and generates a lot of data in real-time. New customer needs emerge accordingly and it in turn accelerates the pace of innovation.

Millennial Generation, Accelerating Digital Innovation  

One thing we shall not overlook to understand digital-oriented change is the emergence of a new generation. The millennial generation is the driving force of it – millennials are born after 1980 and are responsible for more than one-third of the economically active population. This generation has been exposed to the media from a young age, is familiar with the latest technology, and has different experiences and capabilities than the previous generation. The generation has used computers since they were young and came into contact with virtual worlds through games. They are familiar with building and maintaining relationships through social media as well as the Internet, email, and messenger. The millennial generation, who learns, plays, and works online, is not only sensuously flexible but also not hesitant to accept new things. 

This generation, often referred to as “Digital Native”, is promoting the need for digital innovation in the workplace. They are accustomed to sharing and communication, are favorable to new things, and prefer immediate responses. Moreover, they put emphasis on their own values rather than common notions. Even in the workplace, they are more interested in personal career than blind dedication to the organization, and they value the meaning and fun of work. They prefer feedback on nurturing and recognition because they have a strong desire for horizontal and free communication. Therefore, they have a strong tendency to pursue flexibility in the place, time, and method of conducting work. Moreover, “Generation Z”, the newer generation born after 1995, will fill the workplace. 

 

Digital transformation can be defined as activities that fundamentally transform business models and strategies, processes and operation methods, organizations and communications, and systems through digitized tools and technologies.

The first is a change in the business model itself. Kodak Film was replaced by digital applications. Nokia was disrupted by smartphones including Apple. Uber and Airbnb have become the mainstream for transportation and accommodation. GE, a traditional manufacturing powerhouse, declared to be transformed as a digital industrial and increased investment in engineering to 5% of sales. GE, which used to maintain approximately 250 people in the Software Research Center in 2011, has now 28,000 professionals specialized in digital. Goldman Sachs, which used to be a leading investment bank, now calls itself a technology company and has replaced about 40% of its total employees with tech experts. Through this effort, they protect the competitiveness of existing key business sectors, and they attempt to expand and replace products and services based on digital. 

The second is a fundamental transformation in the method of approaching customers. The keys are the digital experience, a new experience, rather than the product and service itself, extremely personalized services rather than large-scale services, and the shift from customer-own-based services to sharing and access-based services. All of them rely on digital-based technologies.

Lastly, it is an innovation in the organizational operation method. It is to build an environment where people can conduct work processes quickly and easily and can work anytime and anywhere by using digital tools. Through this, it makes a collaboration system that expands the scope of communication, increases the speed of it, and shares information effectively. The more transparent the work environment is, the higher quality of data is secured and the higher quality of decision making it becomes.

However, it seems it is unlikely to turn these changes to successes just by introducing digital technologies and applying them to the organization. “Leading Digital”, published in 2014 and showing insights on digital transformation, revealed that the companies (Fashionistas) with high digital capabilities but lacking operational leadership for effectively managing them showed a growth rate (+6%) above the industry average but a worsened profitability (-11%). On the other hand, companies accompanied by leadership (Digital Masters) have noticeably improved profitability (+26%) as well as the growth rate (+9%). One of the key digital leaderships is ultimately linked to how to change the organization and HR.

How Should HR be Changed in the Era of Digital Transformation? 

Creating a culture matching the digital age

There is a wide range of conditions leading to a successful digital transformation. Particularly, it is necessary to prepare appropriate conditions and overcome the inertial DNA inherent in existing organizations and members in order to lead sustainable changes. First of all, we need to have a culture that focuses on value and excellence. Until now, the survival of companies has been determined by the structural characteristics of the industry or by information and technology monopoly, but the boundary is now fading. “Disruption”, which means more abrupt severance and collapse than “Evolution”, has become a term representing the digital age. It is essential to have culture and corporate values that do not hesitate to accept the needs and changes of markets and consumers. In order to achieve this goal, members shall be able to make voices and participate in the organization freely, and the culture respecting individuals shall be emphasized. As in society, collective intelligence and reflective thinking are great tools for connecting the inside of a company with the outside of it.

A horizontal organization is needed if you want to move fast.

When transforming an invisible culture into a visible system, it becomes an operational structure of an organization. Organizations in the digital age need to be composed in the aspect of missions, markets, and customers, rather than in the aspect of organizational functions. An organization shall share information and feedback seamlessly based on transparent common goals and agreed on operational practices. As a result, hierarchical and multilevel decision-making lines are replaced by more horizontal network organizations. It is to eliminate obstacles that hinder the speed of decision-making and execution and transform into a structure that can work independently until the completion of works. The prerequisite for this is capable members and a leader as a domain expert.

Examine the standards and perspective of evaluating talents

Digital innovation changes the capabilities and skills that have been asked to individuals. The mainstreams in the future will be things that humans can do quicker than digital tools, things that are harder to be replaced by digital tools, or that shall be conducted by the cooperation of humans and digital tools. Consequently, it is necessary to spread the new standards and perspectives regarding human talents.

Competencies related to the way of thinking, such as innovation, creativity, problem-solving thinking, curiosity, and adaptability, must be emphasized continuously. The value of teamwork and cooperation is more important than ever in the way of working. As the environment is digitized more, it is getting harder to improve the value of work alone and eventually it is more necessary to find new values through collaboration. The ability to work with a digital tool of working is also needed. “Digital Literacy” for understanding and using information and technology is essential.

Need for an embracing leader who is not afraid of new things

Leadership is the area that is challenged the most whenever the needs of the times are changed. When the success recipe in the digital age is simply summarized, it is ① to capture quickly, ② to execute speedily, and, yet, ③ to make decisions based on sufficient information. Just quickly capturing and executing can easily lead to careless failure, and quick execution based on a lot of information can go in the wrong direction. Of course, seeking enough information for a new opportunity can slow you down and make you lose the opportunity.

When you think about where the risk of leadership failure is hiding, it is easy to see the leaders needed for digital transformation. A leader, a decision-maker, shall understand the new digital vision and culture and shall not hesitate in learning the digital business language. “Learning Agility”, a virtue, is getting more important to leaders than ever before. It not only allows people to capture opportunities quickly, but also provides the basis for them to make timely decisions. Additionally, catholicity based on conversation and control abilities is required for effectively managing and operating organizations built on a horizontal network. The ability to understand and empathize with the individualized needs of talents can speed up the execution of an organization and become a starting point for sustainable changes.

HR tools and services suitable for new workplace environments 

The conventional work environment is no longer efficient since the current workplace experiences more frequent collaboration between members, more abundant interaction with external markets, and faster information flow and speed. The traditional office is tailored for the hierarchical structure, and it is not easy to collaborate in that environment. As a result, the inefficiency of numerous meetings and communication is now pointed out. The Silicon Valley companies’ offices, symbolized as a new workplace, have no special seat for managers or partitions dividing spaces. Companies such as NVIDIA have post-it wall pads at any place and employees can have meetings anywhere and organize their results at that place. 

A more important thing in the era of communicating through webs and mobiles is a collaboration tool that allows us to overcome the spatial and temporal limitations of work. Digital tools that help us communicate and accumulate information in real-time and allow anyone who is related to the work to access to it, are now indispensable. The goal of HR services is to manage the daily tasks and achievements at the same time and reveal hidden contributions that have not been captured, beyond the conventional HR system. The result of an individual's work history and interaction between individuals will become valuable big data, and it will be not only the basis for establishing and evaluating new tasks, careers, and training plans but also the foundation of cultural management. 

Written by Seung-A Baek, Vice President, Consulting Biz Unit (sabaek@e-hcg.com)