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Impact of Digital Transformation on Organizational Behaviors

Article in SSRN Electronic Journal · December 2015

DOI: 10.2139/ssrn.4580389

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 Impact of Digital Transformation on Organizational Behaviors

Bibhu Dash, Josephine Gatharia

College of Business, Illinois State University, Normal IL

bdash@isu.edu, jgatharia@isu.edu
December 2015

Abstract: Organizational culture depends on people, processes, and technology. The

organizational integrity, development, future plan, social influence, and brand value are reflected

in its culture. The way we work, communicate, give value to customers, and think about the future

are all changing as a result of the rapid digitalization that is taking place. Therefore, the digital age

has an impact on our organizational structures, either directly or indirectly, and compels us to adapt

over time. However, changing a culture quickly is never simple and can occasionally have a

negative impact on employee trust, performance, and the development of internal corporate

politics. This paper provides a thorough examination of why, in the digital age, it is imperative to

change with the times, the future workforce, and how to create an inclusive positive environment

for innovation and growth. It tells how the framework of organizational culture changed with

respect to rapid digitalization.

Keywords: Digital transformation, Customer value, Quality, Organizational behaviors, Business

value, Capabilities, Sustainability, Innovation

Introduction

Organizational behaviors and organizational development are interlinked and are both

professional fields of social action and create a pathway for scientific inquiry (Cummings &

Worley, 2014). After globalization, the world of businesses is becoming very competitive and

demanding to meet customer needs and to build a sustainable future ahead. That forces the use of

technology to rapidly improve performances in each area of business and it’s the number one

priority of enterprise CEOs. Executives in each industry are using digital advances such as
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analytics, mobile apps, social media, and smart devices to improve services, and products and to

reach better customer satisfaction (Westerman & Bonnet, 2015). Digital transformation is never

an easy step of change as it impacts the people, processes, and technology of the implementing

organization (Kane et al., 2015). When we ask people to adapt and change their culture of how

they operate, communicate, and deliver, those are the most difficult change demands. The wide-

open digital divide in many organizations makes it difficult to adapt fast and concentrate on

objectives. All of these have an impact on organizational behavior and cause process bottlenecks.

Organizational Behaviors

The study of organizational behavior (OB) focuses on how people, groups, and structures

within an organization interact with one another and how these interactions affect the functioning

of the organization. It is a multidisciplinary field that uses ideas and theories from management,

psychology, and sociology to comprehend and explain how people behave in the workplace. It

reflects the shared values, beliefs, ethics, communication, and norms that characterize the

organization and its goals (Dash, 2014).

In a professional situation, OB talks about us as well as about me. Behavior is

significantly influenced by an organization's structure, including its hierarchy, positions, and

reporting links. OB investigates the potential effects of various structures on employee behavior

and organizational effectiveness. Since it focuses on how leaders influence their followers and

mold the culture and performance of the company, leadership is a crucial component of

organizational behavior (Schuchmann & Seufert, 2015). In the framework of OB, leadership

philosophies, characteristics, and practices are explored.

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 OB also looks at moral conduct within organizations and a company's social responsibility.

In today's business world, moral conduct and social responsibility are becoming more and more

significant. Organizational behavior aims to increase an organization's efficacy and productivity

by comprehending and controlling employee behavior and workplace dynamics (Berman, 2012).

It offers managers and leaders useful tips and resources to foster a supportive, effective, and

innovative work environment.

Digital Transformation (DT)

The process of leveraging digital technology to radically alter how businesses function,

provide value to customers, and engage with their stakeholders is known as "digital

transformation" (Berman & Marshall, 2014). It entails integrating digital technologies into every

part of a company, leading to a significant change in its operations, culture, and business model.

By strategically utilizing digital tools and technology, digital transformation aims to

increase productivity, improve customer experiences, and develop new business opportunities

(refer to Fig 1.). Digital masters are exceptional in two key areas: a) rethinking and enhancing

current procedures and b) strategy-driven digital innovation to bring about change (Marchand &

Wade, 2014). The elements involved in DT include:

• Technology Adoption: Choose the right technology landscape. Adopting and putting into

practice cutting-edge digital technologies including automation, big data analytics,

artificial intelligence (AI), machine learning, and cloud computing (Piccinini et al., 2015).

• Process redesign: Build new processes and pipelines for faster and more efficient delivery

and streamlined operation.

• Data-driven analytics: It’s a critical step. Obtaining information about customer behavior,

market trends, and business performance by gathering and analyzing data from multiple

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 sources. It gives an edge to customer-centric analytics and decision-making (Marchand &

Wade, 2014).

• Cultural sift: Fostering an innovative, agile development, and adaptable culture within the

organization to assist efforts for digital transformation. Promoting a mindset that values

experimentation, proof of concepts (try and break culture), and lifelong learning is part of

this (Avolio et al., 2014).

• Security and compliance: Putting strong cybersecurity procedures in place to secure

sensitive data and digital assets. Observing applicable laws and regulations is also essential

(Marchand & Wade, 2014).

External-Environment

People

Process

Technology

Organization

Fig 1. Impact of DT in an organizational setup

Successful digital transformation programs can improve operational effectiveness,

customer satisfaction, competitiveness, and the capacity to adjust to changing market conditions

(Avolio et al., 2014). To fully reap its benefits, however, firms must successfully navigate issues

with data security, change management, and technology adoption. It is never easy to own or

change a corporate culture in a day, it needs continuous training, development, and motivation.

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Impact of DT on OB

As shown in Table 1, organizational behaviors are significantly impacted by digital

transformation since it requires a change in the way executives and employees interact, deliver

outcomes, and think within the group (Marchand & Wade, 2014). The following are some of the

most significant ways that organizational behaviors are affected by digital transformation:

i) Collaboration: DT brings a change when and how we collaborate as a team. Employees,

teams, and even external partners can collaborate more easily thanks to digital tools and

platforms. As a result, the organization places a greater emphasis on knowledge sharing,

cross-functional teamwork, and eliminating silos (Setia et al., 2013).

ii) Remote work and onshore-offshore culture: The advent of digital technologies has

expedited the trend toward remote work and flexible work schedules. As many projects are

outsourced to India, China, and other Asian countries, employees who adopt this change

in behavior must practice self-control, flexibility, and efficient time management

(Mazzone, 2014).

iii) Organizational agility and adaptability: Organizations need to be more flexible and agile

as a result of digital transformation. Employees must be adaptable and eager to pick up

new technology and abilities. This mentality change encourages a culture of creativity and

constant improvement (Milakovich, 2012).

iv) Innovation at all steps: DT brings a culture of invention and experimentation. Employees

are encouraged to quickly test new ideas and come up with innovative solutions to business

problems. Failure is not viewed as a setback but as an opportunity to learn.

v) Change in leadership style: The digital transition brings change in leadership practices.

Leaders must be willing to delegate decision-making authority, empower staff, and be open

to feedback from their teams.

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vi) Cross-functional collaboration: Cross-functional cooperation is encouraged by digital

transformation because it requires cooperation between several departments to implement

digital solutions. Employees must change how they act in order to get along with coworkers

from different backgrounds.

vii) Culture of feedback and iteration: It brings a change in the culture of feedback and

iteration. With the rise in social media interaction, more frequent client encounters during

digital transformation often result in more immediate feedback. Employees must be open

to client feedback and flexible in order to implement the required changes.

viii) Ethical and social considerations: Digitalization brings value proposition, ethical

considerations, and data protection. Ethical considerations are becoming increasingly

significant as data usage and adoption of technology expand. Employees are expected to

uphold ethical standards and think carefully about how their actions in the digital world

may affect others. This cultural shift promotes the social goodwill and branding of the

organization.

Table 1. Impact of DT on OB levels

Impact of DT on OB and Implementation Challenge Level

Sl. Nob Affecting Factors Difficulty Level (1-5)
*1-lowest and 5 -
highest)
1 Collaboration 2
2 Work Culture 5
3 Organizational agility and 4
Adaptability
4 Innovation 2
5 Leadership Style 3
6 Cross-functional collaboration 3
7 Ethical and Social Consideration 4

By encouraging customer-centricity, data-driven decision-making, collaboration, agility,

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and innovation, digital transformation transforms organizational behaviors. A culture that

embraces the potential and challenges of the digital age must be fostered by employees and

executives who are able to adapt to these changes. These changes must include an efficient digital

leadership paradigm as well as continuing learning and continuous improvement.

Role of digital leadership in a sustainable cultural change

The digital transformation requires innovative, tech-savvy executives who can comprehend

and provide value for both the company and its customers. Only with people and when employees

welcome the change then it is practically achievable. In order to motivate people and make a quick

transition during this cultural transformation, digital leaders must take the following actions:

▪ Get to know individuals better and comprehend their issues.

▪ Take baby steps first before attempting major changes.

▪ Motivate people to use their own resources, including training, to comprehend the gaps.

▪ Prioritize client satisfaction over technological advancement.

▪ Send the message that they can accomplish it; the only thing stopping them is their

thinking, not a lack of technology.

▪ Be a servant leader and take the initiative to lead.

Conclusion
Technology plays a significant role in the disruptive, ever-changing environment of digital

transformation. This digital technology creates a digital culture shift that calls for bottom-up

change management rather than traditional change management techniques. While there are many

components to digital transformation, it is individuals who make the change for a different group

of people known as consumers. As a multi-wheeled cart, digital transformation necessitates the

interaction of all business units, leadership teams, and stakeholders. Modern business needs a

better strategy and preparation in order to have a seamless transition from one state to another

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because it cannot ignore the push of change. Changes provide more positive news and a clearer

picture of the future, but they also present challenging times for changing processes and dealing

with people. Organizations can realize significant new value from digital technology, but they

won't be able to do so unless they have established the proper digital culture. Don't disregard your

staff because collaboration and constant movement are key to the success of digital transformation.

References:

1. Avolio, B. J., Sosik, J. J., Kahai, S. S., & Baker, B. (2014). E-leadership: Re-examining
transformations in leadership source and transmission. The Leadership Quarterly, 25(1), 105-
131.
2. Berman, S. J. (2012). Digital transformation: opportunities to create new business models.
Strategy & leadership, 40(2), 16-24.
3. Berman, S., & Marshall, A. (2014). The next digital transformation: from an individual-
centered to an everyone-to-everyone economy. Strategy & Leadership, 42(5), 9-17.
4. Cummings, T. G., & Worley, C. G. (2014). Organization development and change. Cengage
learning.
5. Dash, B., Swanson, T., & Hundley, D. (2014). Ethical Examination of Coca-Cola India-A Case
Study. Available at SSRN 4322099.
6. Kane, G. C., Palmer, D., Phillips, A. N., Kiron, D., & Buckley, N. (2015). Strategy, not
technology, drives digital transformation. MIT Sloan Management Review.
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company on the journey. Perspectives for Managers, (187), 1.
8. Mazzone, D. M. (2014). Digital or death: digital transformation: the only choice for business
to survive smash and conquer. Smashbox Consulting Inc.
9. Milakovich, M. E. (2012). Digital governance: New technologies for improving public service
and participation. Routledge.
10. Piccinini, E., Hanelt, A., Gregory, R., & Kolbe, L. (2015). Transforming industrial business:
the impact of digital transformation on automotive organizations.
11. Schuchmann, D., & Seufert, S. (2015). Corporate learning in times of digital transformation:
A conceptual framework and service portfolio for the learning function in banking
organisations. International Journal of Advanced Corporate Learning, 8(1).
12. Setia, P., Setia, P., Venkatesh, V., & Joglekar, S. (2013). Leveraging digital technologies: How
information quality leads to localized capabilities and customer service performance. MIS
quarterly, 565-590.
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transformation. MIT Sloan management review, 56(3), 10.

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 Author Biography:

Bibhu Dash is an MBA graduate from the College of Business at Illinois State University. His
research interests are marketing analytics and corporate finance. This work is part of the research
he is performing to view the impact the digital journey brings to organizational behaviors in the
globe.

Josephine Gatharia is an MBA graduate from the College of Business at Illinois State
University. Her research interests are project management and marketing. This work is part of the
research she is performing to view the impact the digital journey brings to organizational behaviors
in the globe.

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