Causal-Loop-Diagram explaining the (side-)effects of Uber's 'Get-Big-Fast' strategy

von Michael v. Kutzschenbach

Digital transformation” is becoming the newest mantra of business leaders. Companies initiate digital transformation programs in order to optimize their existing business model, but often do not follow through, leaving the innovative potential of information technologies untouched. A recent survey found that fully two-thirds of the respondents strongly agreed with the statement that "[d]igital technologies have the potential to fundamentally transform the way people in their organization work.” However, the same survey indicated that the greatest barriers to leveraging the potential of digital technologies came from not "[k]nowing the business and being able to conceptualize how digital technologies can impact current business processes/models" (44%) and low "[w]illingness to experiment and take risks" (44%).

Most transformation initiatives fail due to their fragmented view and outdated theories of change that ignore the relationship aspects of organizations. In order to implement and realize the benefits of digital transformations, managers must both understand the intended consequences of the socio-technical change and be able to identify the potential unintended consequences of the digital transformation. The common ways of (linear, event-oriented) thinking hampers our ability to generate effective mental models. This often leads to inappropriate theories of managing digital transformations and more fundamentally does not address unexpected (side-)effects of these initiatives.

A shift of mind (from event-oriented thinking to feedback systems thinking) in digital strategy management is not easy to achieve. An effective way to make progress is through examples of feedback systems approach applied to real-world situations. Using the case of Uber, we show how a feedback systems approach can illustrate how digital transformation affects both the business model and the established business environment.

For more information, please read our recently submitted paper "Education for Managing Digital Transformation: A Feedback Systems Approach."

Enjoy your reading and, as always, feedback is highly appreciated.