When Gradual Change Beats Radical Transformation

Industrial companies may not be the face of digital disruption, but their evolutionary approaches to successful digital initiatives hold lessons for other sectors.

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Transforming the organization to reap the benefits promised by advanced digital technologies is no longer a question of “if” or “when”; it’s a question of “how.” Business leaders are often counseled by expert advisers to set up a dedicated digital unit that “disrupts,” driving change from the top that is executed on a grand scale.

That approach isn’t right for all companies, but there’s another way to successfully tackle this major change. Our research into digital transformation in industrial companies shows that the best approach in many cases is not revolutionary but evolutionary. We suggest that, depending on circumstances, that may be the better approach for organizations in other sectors as well.

Take the case of Italian electric utility Enel, which serves about 70 million customers worldwide. It was the first utility to bring smart meters into people’s homes in 2001, and it pioneered many digital enhancements to the user experience through the 2000s. In 2017, it started a digital plant project, harnessing the latest sensor and automation technologies to improve the efficiency of electricity generation and distribution. It created a digital twin of the electricity network and brought in virtual reality and augmented reality to train field service technicians. Alongside these changes, the company moved its IT infrastructure to the cloud and pushed responsibility for IT operations out to 13 digital hubs. It trained employees across the company in digital technology, put in place a crowdsourcing innovation platform, and introduced so-called agile working practices. Enel is now one of the most digitally advanced utilities in the world, but there was no big-bang revolution. Rather, the transformation was managed in an integrated and incremental way, through initiatives put in place by executives working across all the different parts of the organization.

Enel’s evolutionary approach contrasts markedly with the large-scale transformations attempted in some industrial companies.

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1. In addition to these front-line digital initiatives, most large companies have digital projects underway aimed at transforming back-office and support activities to make them more efficient. Due to space constraints, our focus in this article is on customer-facing initiatives.

2. C. Linz, G. Müller-Stewens, and A. Zimmermann, “Radical Business Model Transformation: How Leading Organizations Have Successfully Adapted to Disruption,” 2nd ed. (London: Kogan Page, 2021).

3. C.C. Markides and C.D. Charitou, “Competing With Dual Business Models: A Contingency Approach,” Academy of Management Perspectives 18, no. 3 (August 2004): 22-36.

4.CloudCheckr Is the Engine Driving Cloud Governance at Siemens,” PDF file (Rochester, New York: CloudCheckr, accessed May 21, 2021), https://click.cloudcheckr.com.

5.The GE Journey: Culture and Talent Accelerate GE’s Transformation From Industrial Conglomerate to Digital Services Provider,” Capgemini Research Institute, accessed Nov. 18, 2021, www.capgemini.com.

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Comment (1)
Clement GAVI
'When Gradual Change Beats Radical Transformation'
When gradual change affects the principles that are at the root of what deserve a change. Otherwise gradual change can only be a matter of what that isn't determinant. Dictators like to talk about gradual change because it an argument that allow not to touch the dictatorial structure, but only the peripheries that have no any determinant dimension. We at Togo have experimented it with the 60 years old dynastic tyranny.
The promoters, propaganda and co-owners of that tyranny that represents suffering and death, deprivation and misery to millions since decades will come with the idea of progressive or gradual change. But what have never been elements of what they termed progressive change is precisely what if it changes will affect the tyranny in its structure.
Therefore as far as we are concerned anyone who come to us with an idea of progressive or gradual change we will consider him or her or they with suspicion.
60 years of sufferings, of pains, of death and of ruin, the freedom of people and democracy cannot be consider a radical change. And we are not going to give up.