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Digital transformation for chiefs and owners. Volume 2. Systems thinking
Dzhimsher Chelidze
There is an opinion that the use of digital technologies alone can improve business efficiency and solve all problems. But this is a misconception, because technology is powerless where chaos reigns.This book will introduce you to the author’s systematic approach to business management and show how a competent combination of technology, psychology and management allows you to minimize risks, achieve success and carry out digitalization even with a lack of resources.
Digital transformation for chiefs and owners. Volume 2. Systems thinking
Dzhimsher Chelidze
© Dzhimsher Chelidze, 2024
ISBN 978-5-0064-2488-3 (т. 2)
ISBN 978-5-0064-2489-0
Created with Ridero smart publishing system
Foreword
If you are reading this book, you probably already understand what digital transformation is, why it is needed, and you have the realization that change is indispensable.
As I said in the first book, digital transformation is a management tool and a global redesign of the business model and the entire management system.
But what do you think I face personally in life? It is banal with the fact that there is no system, but there is either complete chaos and dependence on personalities (at best), or bureaucracy with the suppression of any personalities.
The book will focus on the implementation of a systems approach to management, without which any transformation will be a simulation.
I do not insist on the truth in the last instance, but every time such an approach was applied at least partially, the result amazed even me!
Do you think it’s possible from a community where no one wants anything to build a team with exemplary discipline to triple their productivity in three months? I will answer «yes» because I have achieved this result.
But to do that, first person involvement is needed. And without accumulated dissatisfaction with the situation and political will, all other manipulations and tools are meaningless.
We will go through the areas of the system approach, find out what key tools are needed for its implementation, what global practices already exist, and explore practical cases.
Therefore, what is the systemic approach I am promoting?
It is built on a combination of:
– Lean Manufacturing
Its mission is to continuously improve, eliminate losses, including through the use of digital technologies. Allows you to determine the objectives of the implementation of the figure, to build tactics.
– Project Management
Allows to minimize risks and budget.
– Using the product approach
Digital transformation must be accompanied by the creation of new products. Additionally, without the basic tools of food management, it’s almost a guaranteed failure. Additionally, then you won’t just be disappointed, you might end up on the verge of bankruptcy.
– System constraint theories
It allows for prioritization so that efficiency gains can be achieved with less investment. For example, a project for 3 million rubles, aimed at increasing productivity by 3 times, when applying the theory of system limitations, allows to reduce the budget to 1 million rubles, while receiving a 2.5-fold increase in productivity.
– Introduction of Changes
Digital transformation is about people and processes. The application of the main tools for implementing changes minimizes risks, resistance and the likelihood of a setback.
– Managing communication between units
Communication between units is a secret ingredient of both success and failure. Digital transformation is absolutely about the same – the ability to sit down, negotiate, hear each other. In my practice, all crises or problem projects / companies have one problem on the basis – cannot agree or do not hear each other, especially the top managers of their subordinates.
In general, working with SEO’s is very difficult. As a rule, these are people so-called «E-type» by Adises: entrepreneurs, bright and strong personalities, authoritarian, do not tolerate opinions different from their own.
These qualities help build companies, overcome the first problems – thanks to stubbornness, perseverance, authoritarianism, but then it begins to hinder business growth.
From this there is such a principle in management: centralization of power is needed at the start and at the collapse of the system, but for development decentralization is needed.
Which means the decision maker needs to change. However, when this man reaches the heights, he becomes stale, loses his former flexibility: he has gone the way, proved his worth, and now it is very difficult to recognize the need to change for further growth or the correctness of others’ opinions.
Now, can you imagine how a strong person like that would learn to detach from manual control?
– Using Digital Technologies and Data for Decision-Making
The first book was essentially devoted to this section. Digital transformation involves the active use of digital tools and analytics to minimize risks, create new products.
– Regular management practices
Digital technology will not fix chaotic controls, blurred targets, toxic communication, lack of control points. These are only tools that need the master’s hands.
– Working with strategy, organizational structure and business processes
Organizational structure and business processes are the foundation of an organization that supports the achievement of strategic goals. But they (structure, processes, strategy) are not eternal and must change over time.
Digitalization and digital transformation must become your strategic goal in order to «top» initiate all other changes.
Org. The structure aims to achieve the goals of the company by providing the necessary people with resources and dividing areas of responsibility.
When changing goals, strategies, available technologies (resources), you need to change the structure, allocation of resources and authority.
Therefore, you can shape the book’s message: digital transformation is one of the tools to achieve the goal; you can’t just implement one tool and hope that it will dramatically improve efficiency – you need integrated work.
Is it possible to master the whole approach one person? With due perseverance and consistency for 10—15 years – yes. Of course, no one has that much time, so the only way is to form a team with the right competencies.
Therefore, this book will be useful for both top managers of large organizations that can build work with middle managers, and managers of small companies.
P.S. This is the second edition of the book. In addition to minor adjustments to the original material, it is supplemented by two new chapters – what to teach staff and to what level, and a roadmap for digitalization and digital transformation. Practical examples of sharing systems approach tools have also been added.
Chapter 1. Organizational Structure and Business Processes
We will start with the organizational structure and work with business processes. If you translate into everyday language, org. The structure is the skeleton of the company, and the described, streamlined and efficient business processes are the nervous system.
The organizational structure is the basis for the management system. It achieves the company’s goals by providing resources to needed people and delineating areas of responsibility.
Additionally, when you have new technologies, changing goals, the company «matures» and moves to a new level, then business processes with organizational structure should change.
A clear and visualized organizational structure is a MUST. In my practice, there has never been a single case of a company operating smoothly without the organizational structure described, accessible and understandable to all.
Most often I observe the following:
1. There is no organizational structure. This is acceptable if you are 2—3 people, you are a strong manager and you have a strong team, you know how to negotiate among themselves. Otherwise, it is a realm of chaos. Even if you have the processes described.
2. The organizational structure is on paper, but in life quite differently. As they say, «waiting is reality».
3. There is an organizational structure, but it has no information about functions, powers, responsibilities. It’s not synchronized with the company’s goals, it’s not confined to team-building.
You can work without a description of business processes, but if there is a clear structure, with a description of functionality, key indicators and target product, it allows to radically improve efficiency and productivity, to establish a team relationship. Here the business processes described will allow to achieve even more efficiency, and subsequently to engage in automation and digitalization.
However, the business processes described will not work without a clear and understandable organizational structure, because you will not have a skeleton.
Types of organizational structures
It is now customary to identify several types of organizational structures:
– linear;
– functional;
– linear-functional or linear-stacked;
– divisional;
– market;
– matrix;
– food.
We’ll tear down each of them.
Linear
The simplest model: straight and hierarchical. Key decisions are made from the top, and they go down without any separate functions: sales, marketing, production. Suitable for small companies with simple manufacturing technology and minimal need for additional features.
LINEAR
Pros:
– simplicity and speed of management decision-making;
– quick reaction to instructions and orders;
– a clear allocation of responsibilities and responsibilities;
– discipline.
Cons:
– overload of managers;
– concentration of a large amount of non-core work on managers;
– weak relationships between the performers;
– with the growth of the organization, the number of management levels increases rapidly, which reduces the flexibility of the company and the speed of response to changes.
Functional
The division of responsibilities is based on the functions performed: production, sale, marketing, accounting and tax accounting, financial management. At the end of the day, everyone takes his own direction. Optimal for small companies that work with one product, but require already more complex production organization.
FUNCTIONAL
Pros:
– narrow specialization of directions – increase of productivity and quality;
– a clear allocation of responsibilities;
– exempting line managers from functions outside their competence;
– no duplication of functions (if business processes are built).
Disadvantage – the larger the company and the larger structure, the more difficult it is to organize the division and communication between the departments, while retaining the team interaction. Bureaucracy is beginning to flourish.
Linear-functional
The combination of distribution of linear and functional problems. In line management, there are production units where the manager is responsible for everything and support functions are performed by functional managers.
An example is a production hall with a technical director who is responsible for the work and discipline of the staff, the state of technology, productivity – in general, for everything. At the same time, there is a management apparatus, headquarters, where all support functions are carried out: procurement, search for contractors, travel arrangements and so on.
It is the most common among medium and large organizations, where people from a few hundred to a couple of thousand. Optimum in a stable environment: standard production processes, stable demand and external environment, without the need to implement a large number of projects and create new products.
LINEAR-FUNCTIONAL
Pros:
– narrow specialization of directions – increase of productivity and quality;
– the ease and speed of managerial decision making;
