Addressing the key research question of how organizations transform to generate new forms of public and shareholder value by leveraging digital technology.
Honored to share a chapter I authored for the book, Digitalization and Sustainability – Advancing Digital Value edited by M. Kathryn Brohman, Associate Professor at Smith School of Business at
Queen’s University in Canada; Gregory S. Dawson, Clinical Professor in the School of Accountancy in the W. P. Carey School of Business at Arizona State University; and and Kevin C. Desouza, Professor of Business, Technology and Strategy in the School of Management at the QUT Business School at the Queensland University of Technology.
Practice 1. Paradoxes and progress: perspectives on collaboration for digital value
Over the last several decades, new technologies have transformed how organizations can be structured and operated for success – specifically, digital change has enabled horizontal and collaborative organizations to increase their value, relative to that typically offered by traditional vertical hierarchies. This paradigm is reshaping public and private sector enterprises in both multinational and very local settings, including government agencies using automation to improve service delivery to veterans, expand loan assistance to small business, and service families in need.
The elements of digital change that mature organizations bring involve multiple factors, especially for government organizations, including:
- the move to cloud computing networks that allows organizations to access, assess, and share information and deliver service at faster speed and lower costs (see more discussion below);
- the development of artificial intelligence and machine learning applications that accelerates the analysis of massive amounts of data to support more accurate and more personalized decision making – value here relies on AI that builds in ethical protocols to reduce risk of bias from the data against particular groups;
- strong cybersecurity that is built into digital technologies, not added after the fact – securing the data and ensuring legitimate access while also leveraging more traditional firewalls and sensors, assuming that digital networks are always vulnerable and require ‘zero trust’ approaches that focus on protection across multiple threat vectors;
- a skilled workforce that has the tools to operate in a twenty-first century economy – this will require hiring, training, and partnering to ensure that that teams working on digital enablement can drive user-centered design, open source development, and customer experience in their work.
In Chapter 1 of this volume, the authors provide powerful evidence of the shift to horizontal and collaborative organizations, and also explore its differential impact based on organizational and technological maturity – maturity to harness digital technologies like those identified above in delivering value. Brohman et al. describe how twenty-first century companies and governments are expanding the definition of ‘value’ to fuse private and public sector objectives. Rather than only assessing value through a lens of either commercial profit or government serving the people, the authors note the importance of both and add a third lens that crosses sectors: that of a sustainable planet. Together, the three elements comprise a sort of balanced scorecard for a new age, referred to as the ‘triple bottom line’ or ‘3BL’. Sustainability represents a critically important – some would say existential – domain to measure value; the IBM Center for the Business of Government recently published two reports that address how digital technologies can promote sustainable outcomes across the public and private sectors.1
Technological advances now allow organizations to meet these multiple objectives not through a Weberian evolution of the singular organization, but rather through an array of formal and informal networks in which people interrelate in unconventional ways to develop and apply technology innovation and analytics in achieving mission objectives. Through a networked approach, organizations can bring the power of ‘collective action’ – which occurs when technology enhances the ability to cross boundaries in order for people to interact – that drives greater value than any one enterprise could bring.
As the former US Government leader for technology policy at the Office of Management and Budget, and now as the director of the IBM Center, I have experienced and advanced successful and problematic applications of technology. These divergent paths tend to co-exist as the power of new horizontal applications does not align well with the structure of vertical organizations. They create a paradox to be managed, one where successful outcomes emerge after co-creation in the development and implementation of policy and strategy. I have witnessed this firsthand in the development of regulations to deliver student financial aid more efficiently by developing regulations jointly with student and financial institution representatives; moreover, our Center has published research on the value of co-creation for governments as well, providing a research frame that supports further exploration.
Chapters in this section explore this paradox in different contexts. Authors Reihaneh Bidar and Behnam Abedin write in Chapter 2 that ‘co-creation’ among multiple interests can provide mutual benefit for 3BL, while those same interests can also engage in ‘co-destruction’ by suboptimizing operations as part of a network. This point reflects the benefits and risks of collective action – a recent Center report on network-service delivery demonstrates the proposition that I have witnessed in working with government – specifically, bringing organizations together upfront to co-create a delivery process that can benefit those receiving services, and reduce risk of destruction from one part of the network taking an outsized role in the production of those services.
Evidence of the importance of leverage among organizations even appears when assessing value created across rural communities. In Chapter 3, authors Juuli Lintula, Tero Päivärinta, and Tuure Tuunanen study a rural area of Sweden to write about the greater value derived from ‘smart villages’ that act collectively to co-deliver services, as opposed to the traditional case where each community seeks to provide a complete set of services that are redundant with those of their neighbors. Using ‘service dominant logic’ can help smart villages find common delivery methods through ‘regional services ecosys- tems’ – and digital technologies exist today that bring geographically dispersed areas together in new ways. Service-dominant logic approaches service design from the perspective of the outcome being received in a way that meets a user’s expectations and capacity to access services; our Center published a report describing how this principle informed service design across a range of localities through integrating ethnographic research to support villages, including a case from West Africa.
So how do digital technologies foster collective organizational action? Brohman et al identify several that resonate with my work in and out of government. These include:
- Cloud computing platforms, which allow multiple enterprises to share common technology infrastructure rather than recreate redundant IT stores. The US Government has moved toward greater cloud adoption through 15 years of policy, starting with the development of the ‘Cloud First’ Strategy by President Obama’s Transition Team in 2008 (I Chaired the Technology and Government subgroup, and the group architect of that policy, Vivek Kundra, went on to serve as the first Federal CIO of the Obama Administration) and now enshrined as “https://cloud.cio.gov/strategyCloud Smart” that can be implemented as a ‘hybrid’ of existing and new cloud systems.
- Open standards and APIs (‘application programming interfaces’), which provide a common lexicon and integrate application development so that enterprises no longer have to own or contract for homegrown software. The IBM Center report Aligning Open Data, Open Source and Hybrid Cloud Adoption in Governmentdescribes the value of linking open source software and hybrid cloud environments to allow collaborative action and collective data management across organizations.
- Online service delivery, which can enable producers and consumers – as well as governments and the public – to co-develop the value chain for access This has been a public sector goal ever since early e-government strategies were introduced in the US while I was still at OMB in 2001. Of course, as Bidar and Abedin note, organizations that do not adapt or incentivize around collaboration can follow this path only to experience collusion, inaccurate information, and increased cost and waste – elements of ‘co-destruction’.
- Agile IT governance, where capacity is built in iterative fashion by cross-organizational teams that assess customer feedback; in the last few decades, agile has increasingly replaced older ‘waterfall’ systems where large components are built and released after significant development and cost The success of the agile software movement has led a number of organizations to adapt agile tenets to other functions of governance, including policy development and program implementation – evidenced by recent initiatives from the World Economic Forum, the Organization for Economic Cooperation and Development, and the IBM Center’s collaboration with the National Academy of Public Administration on the ‘Agile Government Center’
Each of these technologies can help modern companies and governments work in multi-sector partnerships to realize greater digital value – serving people more effectively, doing so more sustainably by reducing the amount of redundant technology infrastructures that expend energy in a physical loca- tion, and driving greater cost efficiency and profit. Indeed, these technologies enable co-creation: cloud computing creates value by customizing ready-made software and hardware, APIs allow capabilities across organizations to be integrated, online services can allow customers to reach across siloes and develop recommendations that inform future service improvements, and agile approaches rely on user feedback to iterate new solutions.
But, as each of the authors note, the paradox of risk and value, co-creation and co-destruction, can manifest if organizations are not well-managed – where business processes are set up to support vertical and hierarchical structures that do not match the need to collective action, and do not leverage the collective power of digital technologies like cloud computing and APIs. Based on my experience, this paradox becomes both more likely to occur and with greater impact in organizations that fail to adapt how they manage people and processes to a new era. Organizations that remain siloed will limit value and can even lead destructive outcomes; as the authors note, collaboration as a standard procedure and cultural norm can conversely expand digital value for profit, people, and planet.