Organizing for a Digital Future: Opportunities and Challenges

Abstract

As the digital age unfolds, possibilities for designing, organizing and managing productive work are expected to look very different from today’s effective practices. More remains to be learned, however, about the digital organization of the future and how firms might, or even should, respond to digital developments. This report explores this issue through three questions: What is fundamentally changing because of digital? How is digital changing the opportunities and constraints of industries? How is digital changing the opportunities and constraints of organizational design?

We argue that digital technologies fundamentally change human potential to access and act on a wealth of digital information. Focusing on the impact of digital technologies and digital data – rather than on the specific features of the tools themselves, we identify four interconnected, information-based capabilities underpinned by digital technologies: collection, connection, interpretation, and automation. Since the cost of acquiring or developing these capabilities is also declining, digital technologies are democratizing the potential to access information and act on it in economically and socially significant ways.

As a result, competitive dynamics are rapidly changing in all kinds of industries – even those that seem removed from the effects of digital technologies! At the same time, the possibilities and challenges for organizing internally are evolving. These dual effects both enable and impel organizational leaders to rethink fundamental decisions concerning where they choose to operate in the value ecosystem (strategic choices) and how they design their internal organization (organization choices).

In a digital future, all firms will confront new challenges to how they generate economic value. Firms that understand and establish strong digital capabilities will gain superior flexibility to choose where and how they play in their value networks.

Keywords: digitization, industry dynamics, organization design, information capabilities