Digital transformation and organisational debt

Ignoring your organisation’s operating system can ruin your digital transformation efforts. Here’s what to look out for.

by Maish Nichani Updated 01 May 2019

Digital transformation is a way for traditional organisations to stay relevant in the digital age. It is a deliberate attempt to create value by applying an evergrowing portfolio of digital technologies. However, if you are a traditional organisation and are progressing well in your digital transformation journey, then are you the same organisation?

Not quite. It is not just that you are getting better at applying digital technologies, but you are also changing your organisational operating system.

“No man ever steps in the same river twice, for it's not the same river and he's not the same man.” - Heraclitus

What is digital transformation

Digital transformation is characterised by doing digital projects at scale. A big bank in Singapore, in pursuing its ambition to become a leading digital bank, had at a given time around 200+ digital projects taking place across the organisation. So integrated and co-ordinated scale matters. It is misleading to say your organisation is undergoing a digital transformation when a small team subscribes to a marketing automation plan.

Digital transformation requires a change in the organisational operating system. The organisational operating system determines how work gets done. Digital brings its own set of requirements that are very different from traditional operations. These include working in teams, trying things out, always testing, always learning, continuous delivery etc. It is the kind of stuff you would expect from teams at Apple, Google or Amazon. So adopting the principles of modern day work matters. Hiring an A-team and subjecting them to traditional bureaucratic practices will result in mediocre outcomes.

When you embark on a digital project and ignore the organisational operating system around it, you incur debt. This shortfall is called organisational debt. Similar to technical debt, organisational debt accumulates and presents a significant barrier to change.

When you say that a process requires specific steps, you incur debt. When you force yourself to go through three approvals when one would do, you incur debt. When you timebox the scope and deliverables of a complex project, you incur debt. When you outsource product management, you incur debt. When you ignore user research, you incur debt. For an enlightening story on how debt can play out in real life, see Hertz sues Accenture for setting its dumpster on fire.

Addressing organisational debt

Aaron Dignan, in his book, Brave New Work: Are You Ready to Reinvent Your Organisation?, lists 12 areas of an organisation’s operating system:

  1. Purpose
  2. Authority
  3. Structure
  4. Strategy
  5. Resources
  6. Innovation
  7. Workflow
  8. Meetings
  9. Information
  10. Membership
  11. Mastery
  12. Compensation

What elements go into your organisational operating system depends on your business and its context. The critical point is that you map the areas and make deliberate attempts to change them when doing digital transformation projects.

At PebbleRoad, we use our double-loop approach to focus on the elements of the operating system. The operating system track of our work has seen the creation of new teams, new divisions, new leadership models, new work processes by simply asking the question: what underlying assumptions around the way we work should change to sustain the type of digital transformation we want?

Before starting the project, we agree with the client on how we are going to run the organisational operating system track in the engagement. For example:

  • What types of assumptions to look out for?
  • How to capture and share the assumptions so that people are aware of them?
  • How and when to brief senior stakeholders on gaps in the operating system?
  • How to build momentum and pursue changes in the operating system?

Organisational debt is a serious blocker. It demands its own research, design and development track. It pays to heed the warning of Steve Plank, “Organizational debt is like technical debt – but worse”.

Maish Nichani

Maish Nichani


I enjoy helping organisations achieve their potential in an ever-changing and complex world. I lead product and transformation conversations.

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