Digital transformation workforce: need to be treated according to IT industry standards. The sixth part of Acquiring and Organizing Talent to Drive Digital Transformation (DX) Success explores the importance of treating members of a dedicated digital transformation (DX, DT) organization in line with IT industry standards. Examines the competitive landscape of the domestic and international IT labor market and the strategies needed to recruit DX talent.
Up-and-coming careers in IT and the demand for digital transformation talent
Most of the jobs in the top 10 of Glassdoor’s list of the 50 hottest jobs of 2020 are in the IT field. The list was based on salary, job satisfaction, and job placement rates, and the top 10 jobs include front-end engineer, JAVA developer, data scientist (AI modeler), product manager, DevOps engineer, data engineer, and software engineer, all in the IT field.
The current state of domestic and international IT talent competition
In fact, these are the people who are essential to digital transformation. The domestic situation is not much different. Recently, the battle for IT talent among Korea’s top IT companies, such as Naver, Kakao, Delivery Nation, Coupang, and TOS, has been fierce enough to resemble a war. They are competing fiercely to recruit A-level developers with the best treatment in the industry, as well as large signing bonuses (incentives given in advance upon signing a work contract), various other welfare benefits, and stock options. This competition for talent is only getting more intense.
The importance of treating your digital transformation workforce right
The reason for the lengthy description of the job market in the IT industry is that the talent for digital transformation falls into the above categories and is competing for talent with the big names. One of the first things that comes up internally when you’re building an organization to execute DX from a non-IT perspective is the treatment of new hires. This is not only true for large organizations, but also for small and mid-sized companies.
If you’re a small startup, you have the flexibility to negotiate with the managing director and make decisions based on individual capabilities, but if you’re a larger company, you’re limited by the size of your workforce, and you can’t treat people differently for different jobs. However, the bottom line is that it is important for DX employees to align their treatment standards with the company’s existing treatment and the IT industry in which they work. This will ensure organizational continuity.
Key factors to consider in digital transformation staffing
Beyond the need to align average pay with market standards, there’s something else to consider when hiring new talent. In IT, the difference in productivity between an A-player and a C-player is more than double. So, if you can, it’s better to hire one A-player, even at a higher salary, than two C-players. Of course, as your organization grows, it’s not practical to keep everyone at A-level talent.
But in the early days of building a new organization, it’s a good idea to keep it that way. And one more thing, what companies like Google, Netflix, and Amazon in the US have in common is that more people want to work for them because they know that the people they work with next to them are A-listers and they want to work with them and compete with them. This can also be an important factor in driving loyalty to the company. This is something that we need to think about when we’re recruiting talent.
Digital transformation workforce: Strategies for reference checks and turnover in the IT workforce
When conducting a recruitment interview, it is difficult for managers or interviewers to accurately assess a person’s capabilities based on a short interview time. However, people in IT jobs are relatively easy to evaluate because it is easy to check references and see their own apps, services, and data modeling. When checking references, it is possible to get two or three or more external people instead of just one.
In recent years, the IT industry has seen a lot of competition for talent, and it’s not uncommon to see people jump from one job to another in the middle of a project for a higher salary. It’s not uncommon to see people leaving for double their previous salary. Not all employees decide to change jobs simply because of salary. However, it’s important for executives and managers to realize that many workers are getting offers from more places than they realize. For non-IT organizations, the loss of hard-earned talent can be devastating. Don’t overlook the fact that digital transformation is more likely to be an individual effort than an organizational effort in the short term.
Digital transformation and the IT department: Effective management and strategy. The fifth part of Talent Acquisition and Organizational Structure to Drive Digital Transformation (DX) Success explores how to approach and execute digital transformation with the traditional IT department. Learn about organizing for DX success, the importance of pilot projects, and strategic organizational placement.
Digital transformation and the IT department: the pros and cons and leveraging your IT department
We’ve talked about who you should organize for digital transformation (DX). Now let’s take a look at the pitfalls of running a DX organization. When it comes to setting up a DX organization, the most popular choice is to leverage the IT organization already in place. Companies of a certain size already have a separate organization that runs enterprise systems like ERP and HR. Smaller companies may not have that level of organization, but they do have an IT person who is responsible for their employees’ OA experience.
So it’s very natural for them to take on DX when planning and organizing DX. However, as I mentioned earlier, the chances of success are very low if the existing IT department is tasked with DX. Sure, there’s a very small chance that they can pull it off, but for the most part, the results are far from successful. This is the path most companies take, but it can also be the riskiest. Why? Let’s take a closer look.
IT’s limitations and strategies for organizing for DX success
First of all, if your main business is not in IT, you can’t afford to have a large IT department. With a small staff, these organizations are responsible for the operation of existing internal systems and, in some cases, new development projects. For these organizations, keeping existing enterprise systems running reliably is a key performance indicator. And they don’t have a lot of internal headcount to spare.
They rely heavily on external partners to maintain their systems. As a result of this situation, the existing IT department members are mainly required to perform administrative functions, and they tend to focus on the stable operation of existing systems rather than pioneering new technological changes in the market. This is a conservative approach from a technical point of view. Rather than defining and solving problems on their own, they are more likely to leverage the resources of their environment and the partners around them to keep things running smoothly.
I emphasized earlier that sustained DX requires internalization as an enterprise capability. This is why the ability to define the problem and lead the content is more important for DX success than the management capabilities required of IT. If IT continues to work in the same style as it has in the past, with a focus on cost savings or stable operations, it will be slow to get up to speed on DX. The systems, internal processes, and regulations it has created will continue to self-censor against an unclear goal like DX. As a result, you’re stuck in a holding pattern instead of taking action. So what can you do?
Approach DX implementation with a pilot project
One way to start is to leverage your IT organization to run some pilots before you commit to a full-fledged DX organization. The idea is to introduce digital tools and, if necessary, run a few big data or artificial intelligence pilots to see if they can make your existing core business more competitive or even test the waters for the DX you want to pursue.
However, keep in mind that this is a pilot, and the return on investment should be less about the return on investment and more about the fact that you’ve tried something that falls into the DX category in your organization. If you’re satisfied with the results of the pilot and want to take it to commercial scale, it’s a good idea to consider separating the organization. In some cases, pilots can be delivered without any internal resources and with only external partners. Moving to commercialization means you’ve decided to make it a core part of your business. This means you need to think about the structure that will allow you to internalize the capabilities.
The importance of organizational and role separation in DX execution
And while running pilots, it’s a good idea to separate the people working on enterprise systems from the people working on DX, if possible. This separation is necessary to increase the likelihood of success and to lay the groundwork for a dedicated organization down the road, as the two will inevitably have very different goals. As the pace of technological change in IT continues to accelerate, and jobs are increasingly fragmented, it’s not uncommon to see developers with different competencies and specific skillsets.
Based on this understanding, DX should be pursued with the understanding that a new organization should be created if possible, or at least a temporary one if not. In addition, it can grow into a major management issue, so it is recommended to think about the placement of the organization in the approval line regardless of the size of the number of people, such as running the organization directly under the CEO.
Internalize and strategically align your organization for DX implementation
As we’ve said many times, DX must be internalized. That’s why you should start with a separate organization if possible, but if you have to leverage your existing IT department, you should definitely pay attention to the things we talked about today and decide on an organizational structure.
Digital Transformation Outsourcing: What Works and What to Watch Out For. Explores outsourcing strategies and caveats to drive digital transformation (DX) success in the fourth pillar of talent acquisition and organizational structure. Learn about transforming your internal workforce, leveraging experts, and building sustainable collaboration models.
Basic strategies for digital transformation talent acquisition and the need for outsourcing
New jobs should be based on recruiting people with experience in the field. You can’t just train people to do the job. And even if you outsource, internalization is a must.
The importance of building a DX organization and preparing for the challenges of execution
We’ve covered what the goals and personality of a DX organization should be and how to select leaders. Now, let’s look at how to organize your practitioners and prepare for the challenges of execution. When it comes to implementing DX in earnest, most organizations are likely to face a labor shortage.
To execute DX, you need people who are familiar with the key technologies – artificial intelligence, big data, cloud, and the Internet of Things – and unfortunately, there is a huge shortage of specialized talent in the market. You also need people who are not just developers. For example, we need service planners for strategy and business modeling, service planners for planning new services, and designers for UI/UX/GUI. Depending on the direction of your company’s DX efforts, your staffing needs will vary slightly.
Once you’ve decided that DX is an important strategy for your company, building an organization with the necessary skills is a natural starting point. But where do you find these people? The first and most preferred option is to create a new DX organization, but leverage your existing workforce rather than hire new people. This is a way to build the organization through transitional assignments to new roles that don’t necessarily have the experience or technical background for DX projects.
From a management perspective, this is the easiest option because it leverages existing talent. You’re putting someone in a new field with no experience, but with enough training, you can expect great results. It can also be seen as a way to revolutionize the company and streamline management at the same time. However, the bottom line is that it’s not impossible, but it does require an absolute investment of time and money.
Limitations of internal staffing transitions in DX projects
When you’re transitioning people who don’t have experience in a particular field, you usually run a training program to get them up to speed and give them experience on a project or two. However, if there is no one else in the organization with experience, everything is new to them and trial and error is inevitable, even if it’s unintentional.
This is a major reason why DX implementations can take at least a year and up to three years of wasted time. However, this is only the case if the person in charge has enough experience, and if everyone from the head of the organization to the practitioner has been deployed through job switching, it is practically impossible to successfully conduct DX through their own efforts. Therefore, if possible, you should focus on recruiting people with external experience, even if they are the core of each job.
There are several criteria for selecting people to switch roles. The most important thing to look for is an interest in acquiring new knowledge and a passion for self-improvement. Unlike other roles, DX is not one of those fields where you learn all at once and build up your own know-how as you go along, so it’s important to have an open mind and attitude towards change. This, coupled with experience, increases your chances of becoming a great DX person.
Critical considerations and strategic approach to leveraging digital transformation outsourcing
After internal hiring, the next option for executives is to outsource to a specialized company to drive DX. This is an easy decision to make and can be done quickly. However, there are some important considerations. Since the goal of DX is the continuous growth of your company, you shouldn’t outsource every aspect of it. For example, in the case of big data analytics, there are many different roles, from data scientists who do the analysis and modeling, to data engineers who pre-process complex data from existing systems, to people who develop and operate the analytics platform.
However, outsourcing all of these analytics tasks may produce the desired results quickly, but it is not possible to build them into a company’s core competency and advance the analytics results. This is why it’s better to have an internal team of data scientists responsible for data analysis and modeling, meaning that domain knowledge and data expertise are internalized within the company. Having at least one person who understands the company’s domain and who understands the technology in the field is a good starting point for internalization, as it allows you to respond to various risks. For other areas, you can actively consider outsourcing.
The same goes for other functions. Outsourcing due to a lack of internal resources versus outsourcing the entire process because you don’t understand the field are two different approaches with different outcomes. Even if you outsource most of your work, continuous improvement and internalization of business-critical functions is essential.
If you want to create a new business model with mobile services, you need to keep the people who design and develop the apps in-house for the medium to long term. If you outsource this process to a one-time SI project team, you may be able to create a service right away, but you won’t be able to continuously operate and improve it, and it’s likely that the service will eventually fail. It is important to keep in mind that this is not a problem with the SI project itself, but with the different purpose of the business.
Collaboration models and internalization strategies for sustainable digital transformation
Is there anything you can do to improve your odds of success when outsourcing? As mentioned earlier, the nature of DX projects is subtly different from traditional SI projects. It’s not something that can be accomplished in a single assignment, and it requires constant iteration and improvement. It’s important to understand this difference and create a collaborative relationship with your outsourcing partner.
For example, even if you do contract, it’s better to have an operational contract that complements your internal resources rather than a traditional SM (System Maintenance) contract, which means that you need a contract that brings in external experts rather than a traditional SI and SM contract. However, these contracts are only for the supply of manpower, not for finalizing the project scope and date. There is a risk of uncertainty on the part of the hiring organization, but it is a more likely way to keep up with changing goals.
Consider a business model shift to a mobile app. Your first outsourcing contract will focus on the planning and development of your mobile app. The on-site and outsourcing partners would work together to bring the mobile app to market based on a mutually agreed upon timeframe and scope through a project agreement. This is a traditional SI type of outsourcing agreement. Afterwards, a minimum operating agreement for the mobile app to cover errors and maintenance is also concluded, which is the SM contract.
If some features need to be further developed, a new SI contract is signed and the app is improved, which has been the general practice of outsourcing contracts until now. However, these SM contracts are not scoped according to the DX characteristics, but only to secure resources. In this case, the service can evolve into a more sophisticated process as the company continues to collaborate with the acquired personnel and make continuous improvements to the mobile app. Historically, we’ve seen companies start a DX assignment and end up with a stalled project because they don’t have this type of arrangement.
The last point I would like to make is that even with such a contract, it is not realistic to retain all the people involved in the SI contract, so it is important to explicitly declare these conditions in the initial development contract, so that the SI partner is fully aware of them and can start the assignment. It is important to retain at least 30% of the workforce on an operational contract to ensure continuity of development. In addition, as a DXer, you shouldn’t rely on your partner to do all of the work, but rather identify key people who will be co-creating and working with you in the future.
To summarize. The key to sustainable DX is to internalize the capabilities within your organization. For this to happen, it’s important to have internal talent, even at the smallest scale, as described above. Keep in mind that if you’re going to train and transition people, you’ll need to give them plenty of time. If you’re outsourcing, you’ll need to build a different kind of collaboration model.
Understand that DX is your work, not someone else’s, and be clear that it should be a tool for continuous innovation. DX is also a human endeavor. Whether it’s done internally or with external help, people are at the center of the process. The key is to make sure they understand the need to continue to execute on DX and to give them plenty of support so that the capabilities remain within the organization.
