Institutional view of Digital Transformation

We all probably heard about the digital transformation at some point – after all, it should be our business.

This nebulous term, however, doesn’t tell us much about what it actually is. Sure, there is some digitizing, new systems and throwing buzzwords like automation or AI around. So it’s quite hard to figure out how to do digital transformation, god forbid how to do it well. Roughly said, digital transformation is about moving businesses to cutting edge, or at least edge sharp enough for the company to not go under. But even that doesn’t tell us much.

When working on research, one article caught my attention. Digital innovation and transformation:
An institutional perspective from Hinings et.al. The abstract was promising to show ways how to correctly approach digital transformation by using what authors called ‘Institutional perspective’. This got me interested so I decided to try reproducing papers interesting points in simple understandable form.

First though, what the hell is institutional perspective?!

Basically, it’s a perspective, trying to view organization, not as a rational system – which they might look
as, but really are not. Rather, they see it as a social and cultural system, with its own ideas about that is appropriate.

This is actually quite a good lens since people are anything but rational. The systems don’t cover just org. charts and processes, but also good and bad work habits, working overtime, uncooperative colleagues and office politics. It basically covers everything that is actually embedded in company culture as ‘legitimate or appropriate behaviour. You know, real people with own agendas, and not just lines in the HR excel sheet.

What can this view tell us about digital transformation

The paper focuses on the tension between stasis and change (status quo and progress) and how it
progresses as an outcome of structures, activities and actions (meaning people, processes and decisions). Basically, what makes some changes go through and being accepted throughout organization, and others not. Which is good to know, since most of the difficulties of implementing innovation are in having it accepted, since users like clinging to status-quo so much!

What the institutional view suggests, is a 2-stage model for achieving that:

  • Securing support from external environment thorough practice and legitimacy
  • Addressing the internal environment through internal practice and identity work.

As an example was showed company Manulife Financial, which was trying to transform to stable a company with a startup mindset (because since Apple, who wouldn’t).

To start promoting innovation, they used the model:

1 st stage – Started by establishing innovation hub, for carving time and resources for innovation. At first, it was about experimenting and theorizing with novel digital tech. ‘nurturing’ the startup logic. This is the start of the legitimization work. It was achieved as an external legitimization, by working and celebrating change with key stakeholders, or internal legitimization, by approval from top management and key stakeholders, showing support for a new system and communicating the values to employees. Having this as a first breakthrough, the company could move forward to 2 nd stage, where organization can then roll out new organization logic throughout its parts.

How can it actually work on a project

This model is quite simple, but it still can be very useful, since for many companies can be starting
the transformation from scratch problematic. That’s why so many opt for getting Best-practise tools
and/or processes externally (described as Digital constitution-building blocks).

The process, in this case, is similar. At the first stage, support from external sources (mostly stakeholders)
must be secured. Outsourced solutions already have an advantage due to the company’s reputation and
best practices that go into the product.

The second phase, where legitimization must come from inside, can be more tricky, however. Internal
employees – stakeholders (and people in general) tend to cling to status quo, while seeing change as
undesirable, dangerous, or just simply annoying – distracting them from their real work. There, the legitimization work must come first. Both from leadership (as perfectly showed on the Manulife case,
where management showed their support and explained their vision of strategy so employees were aware of the system’s role in a big picture), and workers, responsible for change (as a discussion,
and way to adapt to new paradigm).

Conclusion

Users (or humans generally) clinging to the status quo is nothing new. In today’s turbulent times with
the speed of changes at all-time high however, the innovation and change for companies are necessary.
As a conclusion, the authors do not suggest a simple solution, but rather propose areas for further research. Probably because one solution just doesn’t exist. That’s why we still have to rely on the experience and expertise of professionals or go by trial and error.

Although possibly new in the theoretical area of Digital Transformation, this paper confirms what is known in the area of Change Management, and that’s achieving acceptance and handling rejections of stakeholders within the company.

For that, it proposes interesting (although a bit vague) strategy on how to approach it from the user’s side,
which is still important for expanding view when dealing with these kinds of decisions. Because despite all the technology, businesses are still about people.

 

Ref: HININGS, Bob, Thomas GEGENHUBER a Royston GREENWOOD. Digital innovation and
transformation: An institutional perspective. Information and Organization. 2018, 2018(28), 52-
61.https://doi.org/10.1016/j.infoandorg.2018.02.004

Pavel Pohorelec, ServiceNow Consultant with a focus on the technical solution of ITSM and ITBM. Pavel is an absolvent of Information Management degree from the University of Economics in Prague and he is curious about processes and psychology. Reading and climbing mountains are Pavel’s passion.

 

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