Digital leadership
What is Digital leadership?
Leadership is an important concern in deriving value from information technology, and over the past decades, organizations’ dependence on IT/IS has grown both operationally and strategically as technology and competitive differentiation become intertwined [1,2]. Leaders within this area are increasingly expected to combine technical skills with an in-depth understanding of other functional areas of the organization to find and exploit opportunities that can lead to value for the organization [3]. This means that unique leadership challenges arise due to the interface between technology and organizational functions/business areas.
The profound changes occurring due to digitalization are impacting the potential sources of value that can be derived from technology. The keys to successful digital transformation are concerned more with strategy, culture and talent development than with technology issues [4], and El Sawy et al. (2016) [5] define digital leadership as “Doing the right things for the strategic success of digitalization for the enterprise and its business ecosystem.” They discuss several areas of change that IT/digital leadership must emphasize: Business strategy, business models, humanized digital workplace, enterprise platform integration, people mindset and skill set, and the corporate IT function.
Why is Digital leadership important?
Digital leadership is a critical topic for all types of organizations in all industries and sectors seeking to derive value from IT [5]. Relevant issues include organizational design/structure, communication and interaction processes, and decision-making authority. For example, research has found that the Chief Information Officer’s (CIO) level of strategic decision‐making authority influences IT's contribution to organization performance – Preston et al. [6] found that effective CIOs have a greater influence on IT's contribution when provided with strategic decision‐making authority. Regarding communication processes, studies show that the interaction between the top management team (particularly CEO) and the CIO/CDO is important for alignment between business and IT. Karahanna and Preston (2013) [3], for example, found that the relationship between the CIO and the top management team is consequential to organizational value creation and that IS strategic alignment is a mediating mechanism by which this occurs. Finally, literature on digital transformation highlights changes to an organization’s leadership structure as an important enabler of new business models [7].
For several years, both practice and research have focused on the changing role of the CIO, and the challenges of balancing traditional (functional) IT/IS management with strategic business leadership delivering digital innovation and broader strategic business value [8]. This research may provide valuable insights for organizations needing advice and guidance on IT/digital leadership
Practical advice
A summary of advice based on a selection of research articles is given below (with references and links to internal article reviews where available):
Organizations should emphasize structures and processes that promote interaction between the CIO/CDO and the top management team (TMT). Several studies have shown that this may enhance business – IT alignment.
- Organizations should establish organizational structures (like direct reporting lines) between the CIO and CEO to increase interaction and development of shared understanding [9].
- To promote social alignment between business and IT executives, organizations should assure that [10]:
- IT executives are informed about key business initiatives and plans
- top management is involved in IT developments
- the CIO and TMT develop a shared view and understanding about the role of IS within the organization, including how IS can create competitive advantage, improve quality, and increase productivity of operations.
- the CIO and TMT develop a common view about the prioritization of IT investments.
Incumbent organizations should emphasize digital leadership to improve their capabilities for digital transformation. Such organizations may experience tensions between the existing and emerging approaches to innovation with digital technologies that they need to face.
- Incumbent organizations should consider redesigning internal structures, and this can be achieved through the decentralization of business units and establishment of independent subsidiaries [11].
- Setting up digital transformation governance structures is important for digital transformation strategy practice. This may include both roles (Head of Digital Transformation), units (Digital Transformation Unit), and other governance structures like digital transformation board, judging panel. The objective is to steer and execute digital transformation efforts under the direct responsibility of the CEO, without being hindered by internal politics and slow decision making [12]. However, different options exist regarding organization of the digital innovation function in organization. Decoupling this function from existing units comes with disadvantages/challenges that organizations need to consider.
- When designing and enacting the role of Chief Digital Officer, organizations should be aware that since digital technologies have historically fallen under the jurisdiction of the CIO, this can result in institutional contradictions and tensions. Units that are new to taking such a proactive role in digital innovation do not necessarily draw upon the institutionalized principles, values, and approaches of the IT profession. Organizations should make deliberate decisions based on weighing of pros and cons of the different options for enacting the role of CDO and organizing the work on digital initiatives [13]:
- The grafting approach leverages and tightly connects to an existing function, typically the IT function.
- Bridging involves establishing links between existing functional units to achieve a new digital initiative.
- Decoupling describes how new digital initiatives are separated from the existing functional units to achieve a new digital initiative. This enables greater independence, opportunity for fast execution and flexibility for the unit leaders. Drawbacks include a lack of integration with existing structures (the rest of the organization), challenges to the scaling of innovations, no sufficient consideration of existing IT governance policies, and a culture of ‘‘lone warriors”.
References / sources
- Information systems leadership.
Karahanna, E. & Watson, R.T. (2006). IEEE Transactions on Engineering Management, 53(2). - Taking the reins as CIO: A blueprint for leadership transitions.
Gerth, T. & Peppard, J. (2020). Palgrave Macmillan. - The effect of social capital of the relationship between the CIO and top management team on firm performance.
Karahanna, E. & Preston, D.S. (2013). Journal of Management Information Systems, 30(1). - Is your business ready for a Digital Future?
Kane, G.C, Palmer, D., Phillips, A.N. & Kiron, D. (2015). MIT Sloan Management Review, 56(4). - How Lego built the foundations and enterprise capabilities for digital leadership.
El Sawy, O., Amsinck, H., Kræmmergaard, P. & Vinther, A.L. (2016). MIS Quarterly Executive, 15(2). - Examining the antecedents and consequences of CIO strategic decision-making authority: An empirical study
Preston, D.S., Chen, D. & Leidner, D.E. (2008). Decision Sciences, 39(4). - Understanding digital transformation: A review and a research agenda.
Vial, G. (2019). The Journal of Strategic Information Systems, 28(2). - The emerging CIO role of business technology strategist.
Thatcher, J.B., Carter, M. & Grover, V. (2011). MIS Quarterly Executive, 10(1). - How information technology governance mechanisms and strategic alignment influence organizational performance: Insights from a matched survey of business and IT managers.
Wu, S.P-J., Straub, D.W. & Liang, T-P. (2015). Management Information Systems Quarterly, 39(2) - Unraveling the alignment paradox: How does business—IT alignment shape organizational agility?
Liang, H., Wang, N., Xue, Y. & Ge, S. (2017). Information Systems Research, 28(4). - Building dynamic capabilities for digital transformation: An ongoing process of strategic renewal.
Warner, K.S.R. & Wäger, M. (2019). Long Range Planning, 52(3). - Digital transformation strategy making in pre-digital organizations: The case of a financial services provider.
Chanias, S., Myers, M.D. & Hess, T. (2019). The Journal of Strategic Information Systems, 28(1). - Digital innovation and institutional entrepreneurship: Chief Digital Officer perspectives of their emerging role.
Tumbas, S., Berente, N. & vom Brocke, J. (2018). Journal of Information Technology, 33(3).
Other relevant external resources
Professor Nelson Phillips talks about digital leadership and digital transformation:
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