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Digital Pulse 2018: Organizational Structure

A shift in organizational approach to digital over the past five years indicates that companies have become increasingly aware that they must eliminate structural barriers to realize the opportunities

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Digital Pulse 2018: Organizational Structure

  1. 1. Structuring the Digital Team As business models in every industry have become increasingly tech enabled, companies have shifted focus from a centralized approach focused on digital to a hybrid model that facilitates end-to-end collaboration and connectivity among functions and business units. © Copyright 2018 Russell Reynolds Associates. All rights reserved. Digital Pulse 2018: Organizational Structure In the past, digital transformation focused on adding new digital capabilities to help organizations capitalize on mobile, social and big data. Today, technology-enabled disruption is compelling companies in all industries to think and act more like technology companies. Incremental, front-end changes are no longer enough—the new business ecosystem demands the rethinking of most companies’ strategies from end to end.  A shift in organizational approach to digital over the past five years indicates that companies have become increasingly aware that they must eliminate structural barriers to realize the opportunities presented by technology enablement. In the fourth annual Digital Pulse, Russell Reynolds Associates surveyed 1,300+ senior executives to learn how digital is transforming talent and leadership needs in organizations around the world. Brief Summary of Respondents The Evolution of the Digital Organizational Structure Comparing the Digital Structures: Vision and Leadership Originally marketing’s purview, ownership of the digital vision and strategy increasingly belongs to technology leaders. And while more than 80% of companies now have a unique digital leadership position, only 10% say this person is responsible for setting the full strategy—CEOs continue to play a critical role. The digital organizational models differ in three key areas: setting the strategy and vision, the reporting structure of digital leadership and the presence of digital leadership. Fewer than one third of respondents reported that their organizations are structured effectively to capitalize on the opportunities presented by digital. Additionally, there has been a steady increase in the percentage of respondents who perceive structural concerns (and intrinsically linked cultural challenges) to be the foremost barriers to transformation. Placing the Digital Strategy at the Heart of the Business DECENTRALIZED Digital capability is embedded solely in functions and/or market and/or lines of business CENTRALIZED A single leader with hard-line responsibility for all digital activity HYBRID Digital Experience A centralized group, but with some digital capabilities embedded in the wider organization Digital Experience Digital Department Digital Department Changing Prevalence of the Three Digital Team Structures (over 5 years) Who Is Responsible for Setting the Digital Vision and Strategy? Only predominant answers included Reporting Lines for Digital Leaders Job title Industry 26% 38% 38% 57% 22% 16% 13% 22% 50% 44% 41% 29% 2018 2017 2015 2014 Centralized Hybrid Decentralized Comparing the Digital Structures: Functional Ownership of Digital and Technology Initiatives CIO/CTO 2014 2015 2017 2018 Structural Barriers to Building an Effective Digital Business Digital vision and strategy are set by: Percentage without a digital leader: Percentage of digital leaders reporting to the CEO: The Path Forward Digital Experience In 2018, 55% of leaders identified organizational inertia, understood as functional departments being too fixed in their ways, as a significant barrier to becoming an effective digital business. Fewer than a third of leaders responded that their business is aligned on its various digital capabilities, and nearly half identified absence of a coordinated digital strategy as a significant barrier. Not having a single leader of the digital agenda is increasingly becoming seen as a barrier. In 2018, just over half of leaders saw both lack of digital skills/expertise and ineffective crossfunctional collaboration as significant barriers. Absence of a coordinated digital strategy Organization inertia No single head of digital Lack of digital skill/expertise Ineffective crossfunctional collaboration 26% N/A N/A 42% 47% 55% 18% 25% 25% 35% 39% 50% 49% 51%52% 24% 31% 35% 40% 48% 2014 2015 2017 2018 2014 20142015 2017 2018 2015 2017 2018 CDO CMO CEO 34% 27% 14% 7% 39% 20% 14% 6% 40% 13% 14% 10% 42% 19% 9% 10% 8%report to the CMO 11%report to the CIO/CTO 60%report to the CEO 40% CEO 23% CIO/CTO 13% CDO 10% CMO 55% 5% 38% CEO 19% CIO/CTO 13% CDO 9% CMO 62% 11% 50% CEO 17% CIO/CTO 11% CDO 4% CMO 65% 25% Centralized Hybrid Decentralized Organizational Inertia Clarity of Strategy Skill & Alignment Gaps Create a unifying strategy and vision for your tech-enabled organization Assess your current digital organizational structure Encourage collaboration to drive innovation and transformation Considerations Is there a clear understanding of current digital and technology initiatives across the organization and how they are integral to the overall strategy? Do parts of your organization resist adopting new digital and tech initiatives? How can you persuade everyone to buy in? Considerations Considerations How can you break down functional silos to ensure critical collaboration in the development and execution of the digital vision and strategy? Are your functional leaders aligned along a unified, forward-looking vision? Which leader/team in the organization is best positioned to develop a digital strategy and vision that will allow you to take full advantage of digital and technology opportunities and propel you beyond your competitors? Do you need to create a new team, restructure or upskill in order to find the solution? IT Digital Marketing Business Unit Digital Marketing Artificial Intelligence Cybersecurity Back-end Technology Digital P&L Labs & Innovation Product Management Marketing Digital Digital Strategy Data & Analytics Digital Program Management Ecosystems/ Partnerships/Ventures IT Business Unit There is a great deal of variation when it comes to what is defined as a digital capability, but ownership of the following capabilities most commonly falls into these categories: Respondents indicated that the digital capabilities most likely to be owned, at least in part, by a business unit were those which were more nebulous. However, these are also the capabilities most likely to require cross- functional collaboration, and additional ownership varies by structure. Data & analytics, digital strategy and digital program management are the functions most likely to have divided ownership. 45% 23% 32% C-Suite Executive Senior Executive (SVP, EVP, etc.) Junior Executive (VP, Executive Director, etc.) Company size Location Consumer 1–249 250–999 1,000–4,999 5,000–10,000 10,000+ Industrial Technology Financial Healthcare Non Profit 26% 24% 22% 18% 17% 11% 6% 15% 10% 33% 18% 11% Asia Pacific 8% Latin America & Caribbean 2% 8% 34% Africa & Middle East Eastern & Northern EuropeWestern Europe 37% North America 0% 20% 40% 60% 80% 100% 120% 140% 160% 0% 20% 40% 60% 80% 100% 120% 140% 160% 0% 20% 40% 60% 80% 100% 120% 140% 160% The least reliant on business units to drive digital capabilities, organizations with centralized digital models consistently rely on IT as much and, in some instances, more than their digital team. Hybrid organizations are expectedly matrixed—nearly every capability is owned in significant part by a business unit but these companies continue to rely on a centralized digital function for their digital strategy and for digital program management and data & analytics. Business units, of course, have significant ownership in decentralized models, but IT is also responsible for data & analytics and digital program management in more than a third of organizations—and marketing continues to play a role in the digital strategy. Digital Strategy Labs & Innovation Ecosystems/Partnerships/Ventures Product Management Digital Program Management Data & Analytics Digital P&L Digital Strategy Labs and Innovation Ecosystems/Partnerships/Ventures Product Management Digital Program Management Data & Analytics Digital P&L Digital Strategy Labs and Innovation Ecosystems/Partnerships/Ventures Product Management Digital Program Management Data & Analytics Digital P&L Hybrid Decentralized Centralized

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A shift in organizational approach to digital over the past five years indicates that companies have become increasingly aware that they must eliminate structural barriers to realize the opportunities

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