Turning the Digital Pyramid Upside Down
The effort to digitalize organizations has the last 15 years, been almost entirely focused on a top-down approach to digital transformation. Large-scale digital projects, organizational transformations, a shift in business models, and digital ecosystem transformations are all initiated through a top-down approach to transformation. When some transformation efforts run into trouble or merely stall, organizations focus on culture, development of new skills and competencies, and leadership improvement as the cause. Measures that are also top-down driven. This begs the question; Can we turn digitalization into a bottom-up driven effort? Or, put another way, can we turn the digital pyramid upside down? Could the combination of low-code/no-code tools, embedded AI in software products, an increase in cloud-based end-user and team-based tools, increased digital competencies among employees, and digital-first first-level management, all in combination, unleash a new rise in digital productivity? A productivity increase, not driven organizationally top-down, but bottom-up. Organizations should consider whether the time is right for an initiative or perhaps a complete rethink that approaches digitalization in a completely different way.
All digital transformation efforts impact the first-level manager and the front-line staff. The first-line managers and front-line staff of any organization are primarily involved with clients, suppliers, and capital assets. Perhaps herein lies the challenge and a future opportunity. The first-line manager and front-line staff are rarely involved in the planning, implementation, and execution of the digital transformation. However, they are recipients of most digital changes, and they are creators of most digital "moments of truth." (digital “moment of truth” is when an employee and the organization's technology engage with a customer or a supplier). Employees continuously engage with customers and using the digital processes and tools of the organization. Should they then not be directly involved in the digital transformation, including perhaps designing and running it? Why not “reverse” the digital transformation? Turn the digital pyramid upside down. Have the front-line staff and first-level managers drive their jobs' digital transformation, end-customer focus, digital team processes, and the value they create. Historically this has been complex since the software tools used have been large, complex, and cumbersome and the skills required within the organization for digital transformation scarce and expensive. The result has been a top-down digital transformation driven by the IT organization. A transformation that has not always been successful. But imagine the combination of tools and skills in the hands of an inspired front-line organization. That might lead to a second digital wave within organizations. Precisely at a time when front-line staff and managers have already shown they can take responsibility, as demonstrated through the many actions and initiatives over the last 12 months of the pandemic.
The elements that will drive this potential in a reversed digital pyramid are:
Low-code software tools: The maturity of low-code software tools, including "citizen development tools," has improved substantially over the last five years to the degree they are now gathering significant interest by many organizations. While they still require a level of understanding of software development, some are becoming mature enough for small teams and front-line workers to use. And thereby enable a bottom-up driven digital transformation.
Embedded AI: An increasing number of software products embed AI functionality in the product, allowing the product user to increase the value created at the point of usage. It also provides for integration between the front-line user's job and the augmented support for the tasks they perform. We have previously called this "Shadow AI." Embedded AI will make increased functionality and automated tasks available at the organization's team and front-line level and accelerate the digital transformation at customer or supplier engagement points.
End-user process tools: An increasing number of software tools are available for small teams to improve and configure processes. Tools such as customer experience-oriented tools allow small teams in larger organizations to improve how they engage with customers or suppliers. These tools' adaptability and “citizen” programmability increase the digital transformation capabilities at the front-line working and team level.
Increased digital competencies across the organization: Parallel to the emergence of tools targeting front-line and first-level managers, front-line workers' technology knowledge has increased substantially as millennials make up an increasing number of front workers. The knowledge of programming, technology familiarity, and digital awareness increases the desire for change and skills to execute that change.
First-level management is "digital-first": In addition to an increased percentage of millennial front-line workers, there is also an increase in millennial first-level managers. These digital-first managers are more informed and change-ready when it comes to a digital transformation, and they are accustomed to using programming, data, analytic tools for digital transformation. Compared to even five years ago, digital management capabilities have increased exponentially in many organizations.
Each of the areas mentioned above alone will not drive substantial change. Still, in combination, they can act as a catalyst for “reversing the digital pyramid” and drive a new phase in the digital transformation.
However, there are valid arguments why a bottom-up-driven digital transformation will not work. First, there is a potential for lack of coordination of the effort as it scales and potential for malicious activities or regulatory non-compliant solutions at the digital intersection between front-line staff and customers or suppliers. Both issues could seriously derail a digitalization effort. Then there are a series of technical challenges such as life-cycle management of the software code and software processes created lack of an architected technical approach and a significant security risk. Lastly, an in-built assumption that top-down decision-making is the only way to get things done. That command and control is the way to lead organizations. In support of this, there will also be several internal and external entities interested in ensuring a bottom initiative's failure. For example, companies selling to top management or technology providers interested in retaining a top-down driven digital transformation.
All these arguments must be weighed against several positive aspects of a bottom-up digital transformation. First, there are many case studies of the positive effects of employee empowerment. A bottom-up digital effort is about digital empowerment and releasing employee (and customer) creativity in solving critical issues in the digital transformation. Furthermore, a bottom-up digital effort will drive speed, greater creativity, and higher client centricity in the digital transformation since the implementation happens at the intersection between the front-line staff and clients, suppliers, and partners.
The most likely scenario would therefore be to create a mixed digital transformation approach. To test out a bottom-up effort as the elements listed above mature. To blend top-down digital transformation with a bottom-up approach. The bottom-up digital transformation could be done in several ways:
A proof-of-concept demonstrated in one department or portion of the company, followed by scaling the approach.
A separate entity where a bottom-up digital transformation is a prevalent approach. This approach would compare business results or KPIs with parts of the organization only engaging in top-down-driven transformation.
Full-scale implementation, a complete bottom-up driven digital transformation. This carries significant risk but would align the next phase of digital transformation to management literature around employee empowerment. It will only be possible for organizations with an advance digital platform environment.
In all three instances, turning the "digital pyramid upside down" will require the CEO to support the front-line employees' digital empowerment and first-level managers. We recommend that all organizations consider such an effort as part of the digital transformation next 18 to 24 months.
The Sondergaard Group is working with organizations to assist them in developing and evolving their digital transformation and their leadership skills to support this transformation.