Thriving in Digital
How large enterprises can overcome the inherent challenges of the digital age
02.11.2023 | Artikel
Digitalization is driving significant changes in today's business landscape, necessitating the adoption of Digital Product Organizations (DPO). A DPO is a virtual organization that develops and implements digital solutions to address business challenges. It is based on E2E processes that are customer-centric value streams. This article highlights how DPOs facilitate efficient collaborations between IT and various business divisions.1 It emphasizes the need for a holistic structure, a unified business culture, and proactive IT divisions. By embracing digital transformation and leveraging DPOs, enterprises can drive innovation, efficiency, and customer value.
Digital complexity poses a challenge for large enterprises
In an average modern car, there are between 70 and 100 million lines of code used for the software. By 2030, this number is expected to further increase to around 300 million lines of code.2 This example shows the increasing digital complexity automotive companies are up against, even if their product originally stems from the hardware industry. In general, we see that especially those companies who create complex products are challenged because of their numerous business departments and diverse workforce. This requires the management to navigate within increasing digital complexity, while forging efficient collaborations between IT and each business division, such as R&D, production, sales, marketing, accounting, etc.
However, this is not the norm. Often silos are present in LEs, causing IT and business teams to work separately and drastically reducing efficiency within the organization. Statistics show that data silos lead to employees losing 12 hours a week chasing down the data they need.3 The CIOs with whom we have collaborated acknowledge that optimizing processes and efficiency as well as shortening the development time for digital products and services are important strategic goals.
The effects of the increase in customer expectations
Today, customers expect more than just products, not least because any sort of differentiation based solely on the product itself is currently nearly impossible. Connectivity, the increased quantity of software, and shortening lifecycles are bringing many products on the market closer together. Therefore, customer experience has become a deciding factor, and there is little room for error. In fact, the majority of consumers (86%) believe a company is only as good as its service, but only 13 percent of businesses have the tools and technology in place to deliver the experiences people want.4
One of multiple possible solutions is the establishment of integrated systems for managing digital products. These systems seamlessly combine online and offline customer interaction processes, by ensuring round-the-clock availability. Consequently, the organization of a company's product offerings becomes a crucial factor in setting it apart from competitors. This could take the form of convenient digital services, for example, scheduling maintenance appointments through a car app.
Managing internal complexities
Companies must efficiently handle the balance between traditional and digital product and service development and ensure seamless integration. Aligning the lifecycles of digital products can be quite challenging due to their differing structures. Because businesses tend to increase their digital assets and infrastructure, complexity management becomes crucial. Managing code growth, data, security, and hardware-software integration are just a few examples of the multifaceted challenges businesses face when trying to establish a holistic structure. Furthermore, employee attraction and retention in a rapidly evolving environment is incredibly difficult. Recruiting and retraining personnel with specific skills and mindsets, fostering a cultural fit, and ensuring role clarity are essential for the unified and aligned business culture of a Digital Product Organization – as well as being crucial for its growth and competitive advantage.
Business and IT acting together towards common goals
To address these challenges, the IT must undergo a transformation from being solely a reactive support function to becoming a proactive and collaborative entity. This shift involves IT becoming a product-oriented organization that works together with business in multidisciplinary teams to develop digital products. While technology enterprises have naturally embraced this approach, companies in other industries still need to adopt a more product-oriented structure to facilitate the development of new digital solutions.
One approach to overcome the external and internal challenges outlined above is the creation of a Digital Product Organization, which typically consists of cross-functional teams, leverages technology, data, and digital capabilities to drive innovation, efficiency, and customer value. Teams from different functions working collaboratively within the same operating model to deliver digital initiatives and drive digital transformation within the company.
In order to effectively manage the digital transformation journey and establish a well-functioning DPO, a methodical approach should be employed so as to ensure a transparent setup and governance of the company.
To collaborate effectively within the DPO, it is important to use one holistic organizational framework and mode of operation, which is well understood internally, helpful, and easily implementable. The Scaled Agile Framework (SAFe) is one possibility that is widely applicable and suitable for companies in most industries because of its flexible and scalable nature. SAFe is a structured way of scaling agile practices for teams and organizations. It helps companies to implement digital products by facilitating good collaboration. Teams are organized according to product, and they regularly sync up, so everyone understands each other and uses the same language for roles, routines, and the things they create. Organizational decisions are made by specific roles, making progress and issues more transparent. To succeed, it is important for employees to be committed to the agile methods introduced and follow SAFe principles. Furthermore, lean portfolio management must govern value streams across integrated portfolios, enabling a streamlined approach. This involves maintaining a single portfolio backlog with jointly prioritized products, ensuring they are ready for development in a coordinated manner.
Establishing a DPO has strong impact on the organization and can generally be measured on increased productivity, customer satisfaction, faster time to market, and increased employee engagement.
This article reflects insights from talks with various Chief Information Officers (CIOs) and from our analysis of publicly available data
Ag, P. (2022, January 4). A Modern Car Runs on 100 Million Lines of Code — but Who Will Write Them in the Future? Medium. https://medium.com/next-level-german-engineering/porsche-future-of-code-526eb3de3bbe
Staff, V. (2022, December 28). Report: Data silos cause employees to lose 12 hours a week chasing data. VentureBeat. https://venturebeat.com/data-infrastructure/report-data-silos-cause-employees-to-lose-12-hours-a-week-chasing-data/
Dickerson, J. (2023, May 05). Report: New Genesys Report Confirms Customer Experience Drives Brand Loyalty with Nearly One-Third of Consumers Jumping Ship After a Poor Experience.