TheDigitalOrg

February 17, 2020

Supporting structures.

The digitization of customer experiences is a central focus for organizations. These efforts lead to the creation of new organizational constructs, roles, systems and ways of working which are centered around enhancing customer experience. Whether it be an insurance company digitizing their renewal process or a retailer providing contextual product recommendations, the organizational sub-structures created are quite common.

The most common one is the creation of a "digital" unit within the organization tasked with solving these problems. The term digital is ambiguous and misleading (what isn't digital these days?) but for the sake of discussion, it's referring to an organizational entity responsible for creating internet-enabled channels for their customers (as opposed to "analog" ones such as in-person transactions). This structure resembles something like this:

The digital organization as its own entity.

The digital organization as its own entity.

The products being offered by the organization reside in the business units responsible for P&L. These are the core money-making offerings of the organization whose distribution channels have remained largely the same for years. These units have products and owners of those products that are measured by P&L metrics. Without them there is no business.

The digital structure is staffed in a more customer-centric approach. This is where experience designers, researchers, agile teams fully equipped with Product Owners navigate the complexities the customer faces in interacting with the core products. Common metrics that are targeted relate to automation, customer service, customer experience and can also bleed into customer acquisition.

These are two groups that collaborate extensively to deliver customer value, and how well they do so is an indicator of the overall health of any transformational initiative. The digital group's ability to take these products and distribute them over different channels (e.g., web, mobile, IOT) is one of the key activities that delivers the value proposition of great customer experiences. These customer-centric approaches are nothing new - Amazon had an empty chair representing the customer in the room years ago - but now they're widely accepted as being a crucial step in any digital transformation.

At some point an organization will either reach the limit of these approaches and run into obstacles that require deeper change. One common one is when the digital organization through its investment in research activities uncovers customer needs that require more than a streamlining of the distribution channels but a fundamental shift in how the underlying product operates. This tension is where transformations can either break through and reach new heights or suffocate under the constraints posed by an organizational structure uneasy with change.

For example, consider the case when customer research in a telecommunication organization reveals that they'd like reduced costs even if it meant a lower class of internet service 80% of the time as they only need higher speeds 20% of the time. This customer need cannot be solved without rethinking the underlying product offering. The ability of the digital organization to address a need like this is a non-starter not because it is technically difficult to implement, but because it complicates stakeholdering, product dimensions, forecasting, operational utilization etc. Firms are already benefiting from the digitization and automation of services and tackling this level of problem is the next step in digital transformations.

One way to tackle this problem is to embed the digital component within the product:

Digital capabilities embedded in core product groups.

Digital capabilities embedded in product groups.

This structure is more true to the principle of locality as product units have digital components embedded in them thus simplifying communication. Decision velocity related to products may be higher as the communication channels are simplified enabling responsiveness to customer needs. At the same time, proliferation of this pattern can cause silos, and digital transformations need to consider the overall customer journey, not the interactions with one specific product. It can be argued that this pattern would take us backwards and encourage empire building through products while taking away from the customer-centric approach that design thinking encourages.

The question that one might ask is who truly is the product owner. Is it the person enabling the customer experiences through digital channels? Or is it the person who designs the core product offering?

It depends on what the product is and the size of the organization. In a smaller gaming company a product owner (or product manager) may be responsible for coming up with the game's value proposition which would be closely connected with game play and the marketing and distribution strategy. In this case the product owner is "backwards integrated" with the entire product's development and lifecycle. In a large organization where there is a lot of history of who does what and change (i.e., transformations) are made in small increments, the product owner may not have the capacity, ability or experience to be backwards integrated. This is where dependencies creep in and nothing kills velocity like dependencies. One can view these two cases as points on an autonomy spectrum - i.e., how autonomous (or dependent) are the digital teams designing customer experiences?

It's easy to say that teams should be autonomous in their decision-making but in complex organizations where knowledge is fragmented and not easily shared, this can be risky. The alignment/autonomy model is a good way to think about this problem - high alignment/high autonomy is a prerequisite for any initiative where this product ownership duality is present.

Alignment and autonomy

Spotify's Alignment/Autonomy model

In the above model the complexity arises when the response to the "Figure out how!" in the top right requires change that we haven't yet anticipated. This is an inflection point which presents an opportunity to inspect and adapt the structures we operate in. A learning organization will deal with these moments and make the necessary changes to the way it's organized. Those that don't suffer from learning disabilities and will try to force the problem into existing structures and will compromise on customer experience.

There is no textbook way to organize yourself. I see this as a continuum of where the organization is in its customer experience journey. Early on any model which puts the customer first is better than developing products in silos. Any effort to do any customer research using design thinking techniques is valuable. As products mature and organizations want to take the next step, restructuring to mesh the people developing the experience and the ones designing the product is ideal.

The digital organization is a temporary construct, not a permanent fixture.