The main problem posed by digital disruption is not the rapid pace
of technological innovation but the uneven rates of assimilating these
technologies into different levels of human organization. Thus, companies
can effectively navigate the challenges of digital disruption by
undertaking initiatives that are far more organizational and managerial
than technical. Only by fundamentally changing the way the organization
works—through
flattening hierarchies, speeding up decision
making, helping employees develop needed skills, and successfully
understanding both opportunities and threats in the environment—can
an organization truly adapt to a digital world.
In a foundational paper, published in 1990, Wesley M. Cohen and
Daniel A. Levinthal introduced the concept of an organization’s absorptive
capacity. They define absorptive capacity as an organization’s ability
to identify, assimilate, transform, and use external knowledge, research,
and practice. In other words, absorptive capacity is the measure of the
rate at which a company can learn and use scientific, technological, or
other knowledge that exists outside the firm. Cohen and Levinthal argue,
Kane, GC, Phillips, AN, Copulsky, JR, & Andrus, GR 2019, The Technology Fallacy : How People Are the Real Key to Digital
Transformation, MIT Press, Cambridge. Available from: ProQuest Ebook Central. [3 May 2020].
Created from rmit on 2020-05-03 03:21:03.
Copyright © 2019. MIT Press. All rights reserved.
Digital Disruption Is Really about People 35
“The premise of the notion of absorptive capacity is that the organization
needs prior related knowledge to assimilate and use new knowledge.”9
Expressed simply, this means that the more a company knows, the more
it can learn. They note that “an organization’s absorptive capacity will
depend on the absorptive capacities of its individual members. . . . A
firm’s absorptive capacity is not, however, simply the sum of the absorptive
capacities of its employees.”10 Absorptive capacity also depends on
how an organization learns about the external environment and how
different parts of a company transfer information to one another.
The obvious question is whether and how an organization can increase
its absorptive capacity, with the goal of narrowing the adaptation gap.
Cohen and Levinthal believe that absorptive capacity is an organizational
competency that can be cultivated, and that firms can be purposeful
about increasing their absorptive capacity. This question is also
the focus of an article by Shaker Zahra and Gerard George published
in the Academy of Management Review in 2002.11 Collectively, the work
of Zahra and George and Cohen and Levinthal suggests some specific
steps that companies can take:
- Expand talent diversity with a goal of increasing prior related knowledge.
The challenge here, which we take up in chapter 9, is how to
attract the right kind of individuals. - Augment the prior knowledge base of individual employees by providing
them opportunities to develop skills for working in a digital
environment. - Enhance the organization’s mechanisms (e.g., sensing systems) for
more effectively acquiring knowledge from the external environment,
thereby increasing the firm’s knowledge base. - Increase the velocity of internal information flows through initiatives
that range from employee rotation to collaboration tools
(e.g., Slack) to redesigned workplaces that encourage serendipitous
exchanges among employees. - Focus on helping employees understand the “why” that Pfeffer and
Sutton believe is so important to closing the knowing-doing
gap.
Kane, GC, Phillips, AN, Copulsky, JR, & Andrus, GR 2019, The Technology Fallacy : How People Are the Real Key to Digital
Transformation, MIT Press, Cambridge. Available from: ProQuest Ebook Central. [3 May 2020].
Created from rmit on 2020-05-03 03:21:03.
Copyright © 2019. MIT Press. All rights reserved.
36 Chapter 2
Absorptive capacity builds on itself over time. Cohen and Levinthal
argue that a company’s existing related knowledge is a key antecedent
for its ability to integrate new knowledge. This baseline knowledge is
why companies maintain research and development initiatives, rather
than just purchasing the innovations themselves. In other words, the
organization needs to learn how to learn. Conversely, if the organization
kills innovative experimentation for a time, integrating new
knowledge in the future can be more difficult.
Adobe: Combining Employee and Customer Experience
The software company Adobe is attempting to address the technological disparity
between customer and employee by uniting their experiences under a
single leader. In 2012, Adobe undertook a major overhaul of its business: It
shifted from software sold through long-term
licenses and shipped in shrink-wrapped
boxes to a subscription model in the cloud, with lower monthly fees
designed to attract a larger portion of the market. The company also added
digital marketing to its portfolio, expanding from its traditional focus on the
graphic design and publishing industries.
Adobe’s senior management realized the importance of culture, talent development,
and employee engagement in making such fundamental changes to
its structure and business model. Although the company gained new digital
talent through a series of acquisitions, Adobe’s leaders strongly believed that
culture and talent development efforts had to be strongly fused. To foster that
connection, the company took the bold step of putting employee and customer
experience under the same organizational umbrella and leader. “We
have had a long-standing
commitment to investing in our employee experience,”
says Donna Morris, executive vice president of customer and employee
experience. “But we felt we needed to change our culture and put the same
emphasis on customers. We wanted all employees to share the common perspective
that they do contribute to the customer experience.”
As an example of the combination, Morris points to Adobe’s Experience-athon
program. Designed to put employees in their customers’ shoes and spur
change, the program turns employees into product users who provide immediate
feedback to the customer organization, Adobe. “There is such an opportunity
to have our employees experience our products and services firsthand
before we offer them to customers,” she says. “By combining employee and
customer experiences, we are able to create rich customer experiences through
high levels of employee engagement.”
Kane, GC, Phillips, AN, Copulsky, JR, & Andrus, GR 2019, The Technology Fallacy : How People Are the Real Key to Digital
Transformation, MIT Press, Cambridge. Available from: ProQuest Ebook Central. [3 May 2020].
Created from rmit on 2020-05-03 03:21:03.
Copyright © 2019. MIT Press. All rights reserved.
Digital Disruption Is Really about People 37
Takeaways for Chapter 2
What We Know What You Can Do about It
• The key challenge in responding
to digital disruption is the ever-increasing
gaps between the rates
at which the individual, company,
and society adapt to technological
change.
• Absorptive capacity is the rate at
which organizations can identify and
effectively assimilate knowledge and
innovations. It is a learned capability
that can build on itself over time.
• Invest in five (or more) digital “field
trips,” in which you take a close look
at what digital leaders actually do in
terms of deploying technology for
internal processes and customer interactions.
Share your observations with
colleagues and invite them to add
their observations about what digital
leaders are doing.
• Based on observations from the field
trips, identify at least three digital
pilots you can launch in the next
month that will give your organization
an opportunity to develop new
capabilities. Make sure that your pilot
plan includes clear learning objectives
that you can assess at the end of the
pilots.
• Execute, evaluate, and repeat at regular
intervals.
The post Improving Adaptation through Absorptive Capacity appeared first on My Assignment Online.