Why Entrepreneurial C-Levels Are Not Able to Manage the Digital Transformation (Alone)
At the start of 2021, German companies are in race of catching up with the goal of promoting the digital transformation, which has been yet slow in many places. After all, the restrictions caused by the Corona crisis make the advantages of digitized business processes and models evident. However, executives in particular who are under observation especially in phases of disruption appear to be largely dissatisfied with how the digital transformation has developed in their organizations: According to a survey, 44 percent are convinced that the overly static corporate structure is one of the main causes for making transformation efforts fail. Others as the study authors argue believe in the possibility of major changes when “certain people have left the company” (Fraunhofer Institute, 2020).
But who will take the place of these “transformation inhibitors”? Or more broadly spoken: Which executives up to the level of the board of directors do companies require as to master significant changes in their organizations which would allow them to grow (further or again)?
In point in fact, a meta-analysis revealed that it is the Entrepreneurial Orientation (short EO) of an organization that has a direct positive effect on its performance (Couto Soares and Gattermann Perin, 2019). This effect as authors suggest will be particularly strengthened when revenue-relevant indicators are put in place, i.e. where growth is measured.
According to Couto Soares und Gattermann Perin (2019), the extent to which the existence of an EO positively influences an organization is substantially conditional on a moderating factor: The learning orientation within the system of concern.
The CEOs of the Crises: Are Entrepreneurs Automatically the Right Ones?
The entrepreneurial influence of CEOs may be thus pivotal for how well organizations master crises – yet with varying degrees depending on the development stage of the organization (Greiner, 1998).
The classical “Entrepreneur” takes almost always the form of a lighthouse – and shapes a culture of openess, willingness to learn and a shared vision (Couto Soares und Gattermann Perin, 2019) which is required for the renewal of the organization. But when such an “Entrepreneur” is hired in management positions of a traditional company, conflict is preprogrammed (Ashkenas 2019). For transformation processes, it is proposed to hire an Intrapreneur, that is, someone who has the creative drive of a founder, but also someone who possesses sure instincts for internal firm policies (Bosma, Stam & Wennekers, 2011).
Creating Environments Where Transformation Is Possible and Embedded
The competences and capabilities of C-Level members and their entrepreneurial attitude is essential for the success of transformations. However, an individual may be as active and engaged in driving forward the transformation, yet, a significant effectiveness and sustainability may only be achieved if that individual is able to make an impact on the organization and its employees and to win them over (Osmundsen, Iden und Bygstad, 2018).
Moreover, it is crucial that leaders create a learning envrionment which would pave the path for a digital transformation. For starters, typical change dimensions may serve as a first guidline including the corresponding leading questions that can be found below. In order to decide which dimension to tackle first, it is recommended to conduct a Change Impact Analysis.
- Leadership & Culture: Wich understanding of leadership does support the digital transformation? Which leaders of today have internalized this understanding? How is the organization and how are leaders responding to (citical) feedback? Which form of collaboration does support the digital transformation?
- Responsibility & Structure: To what extent should leadership and team structures be adapted? Which roles need to be established or superseded as to support organizations on their way of digital transformation? Which decision-making authorities ought to be conferred to roles as to make them effective?
- Processes & Methods: Wich processes are supporting the digital transformation? Which methods will be implemented in the future? Which requirements will arise for IT systems?
- Competences & Capabilities: Wich competences will be required as to manage the digital transformaton? Which developmental requirements will emerge?
- Products & Services: Wich implications does the digital transformation has for products and services? Why are customers opting for certain products in the future?
It is therefore necessary to consider the phase of disruption in which the organization is residing in as to identify the competences and capabilities it requires. In order to successfully deploy them advantaging the organization, an environment ought to be established which supports and promotes the digital transformation.
Ashkenas, Ron (2019): “Are You Adapting Your Leadership Strategy as Your Startup Grows?“, Harvard Business Review Digital Article
Bisman, Niels; Stam, Erik; and Wennekers, Sander (2001): “Intrapreneurship Versus Independent Entrepreneurship – A Cross-National Analysis of Individual Entrepreneurial Behavior”, Utrecht School of Economics Tjalling C. Koopmans Research Institute Discussion, Paper Series 11-04
Couto Soaresa, Mauren do; and Gattermann Perin, Marcelo (2019): “Entrepreneurial Orientation and Firm Performance: An Updated Meta-Analysis”, RAUSP Management Journal, Vol. 55, No. 2, pp. 143-159
Greiner, Larry E. (1998): “Evolution and Revolution as Organizations Grow.” (1998), Harvard Business Review, Vol. 76, No. 3
Osmundsen, Karen; Iden, Jon; and Bygstad, Bendik (2018): “Digital Transformation: Drivers, Success Factors, and Implications”, MCIS 2018 Proceedings, 37.
Spiegel Online (2020): “Fraunhofer Studie – Führungskräfte zweifeln an der Anpassungsfähigkeit ihrer Unternehmen“, retrieved October 17, 2020: https://www.spiegel.de/wirtschaft/unternehmen/deutschland-fuehrungskraefte-zweifeln-an-der-anpassungsfaehigkeit-ihrer-unternehmen-a-6f1e35ea-1bcf-490e-9bf8-6756193c3f07,