The DTDS Online Summit on November 30, 2021 was attended by 7,000+ people, with enthusiastic responses and positive reviews. Geek Time Enterprise Edition Will sort out the wonderful content shared by each speaker of the conference in the next few days for everyone's reading and reference.
Digital Cube, deconstructing the digital transformation of human resources
Wei Wei, former Vice President of SAP Greater China and former Co-Founder and First Dean of McKinsey & Company
The following is a transcript of the speech:
Thanks to the DTDS Global Digital Talent Development Summit, I'm here today to share some insights on the digital transformation of HR.
My name is Wei Wei, and I've worked at more than five management consulting firms over the past 20 years, helping more than two hundred companies in China define their strategies and design their business models. In the past five to ten years, my main experience has been in the field of digital transformation, and I have also helped many leading Chinese companies to discover their business opportunities in the digital era, helping them to use digital means to improve their operations and management.
Today I will share with you some of my thoughts on digitalization in recent years, including tips and methodologies, and industry best practices. This sharing will mainly be carried out from the following aspects:
What is Transformation?
What is a management transformation for an enterprise?
What is digital transformation in the enterprise?
How can the HR field support the comprehensive digital transformation of the entire enterprise?
And when we talk about hr digital transformation, what are the main points we usually consider?
When we do the digital transformation of human resources, what direction should we think?
Digital transformation should be in line with the strategic issues of the enterprise development stage
In the past five to ten years, I have come into contact with a large number of entrepreneurs, and when many entrepreneurs talk to me about digitalization, they usually talk about the most about enterprises like our type, in this industry, at a certain stage of development, and whether it is suitable for digital transformation. I think this is probably the most concerned topic for business managers and senior leaders, so I want to start from this point.
What kind of enterprise, what kind of development stage of the enterprise, is suitable for digital transformation, my answer is that in any enterprise, whether it is early, middle, late, it is necessary to consider digital transformation.
However, digital transformation must be in line with the strategic issues of this stage of development of enterprises. The characteristics of each enterprise I have served in the past are different, different industries, different management histories, different stages of development, so in different stages of enterprise development, the management problems they face, called strategic issues, or organizational pain points are completely different.
For example, in an early stage of a business that has not yet reached the level of standardized operations, it may actually have only a few people, a dozen people, like this type of enterprise need to consider digitalization? It is also possible, now there are a lot of very lightweight digital tools, like many startups have begun to use some digital collaboration means, such as WeChat is actually a relatively free digital tool, use this tool well, in fact, you can achieve collaboration within the organization at this stage. After doing a good job of this coordination, or even doing a good job of strategic transmission, after the internal consensus is established, it can develop to the second stage of the organization.
When the organization reaches the stage of standardized organization, usually at this stage, what the enterprise likes to do most is to do the process, set the standard, do the system, and do the organizational structure design, through which the enterprise can achieve standardized management.
In fact, many enterprises after the process reengineering, process combing, are hoping to solidify the process into the system, so you will see a large number of enterprises will be on THE ERP after the process reengineering, which is a basic practice of the past enterprises.
Now there is no need to do the process first and then on the ERP, now there are many lightweight cloud tools, such as cloud ERP, cloud CRM, cloud supply chain management system, these lightweight tools can quickly standardize the enterprise. The last set of very simple standardized lightweight management suites can make the enterprise management level basically reach about 60 points, which is basically a very standardized organization.
When organizations want to develop into mature enterprises, it usually consumes a long time, and from the past, many enterprises will be stuck in the second stage to the third stage, or the third stage to the fourth stage. From the second stage to the third stage, most enterprises will take ten years, or even more time, and there are very few enterprises that can reach the third stage to the fourth stage.
The ecological enterprises we are talking about, such as Tencent and Xiaomi, will consider more ecological cooperation at this time, constantly break through the boundaries of enterprises, and constantly design the second growth curve and the third growth curve of enterprises. In the second to third stage, and the third to the fourth stage, the enterprise is really large-scale application of digital technology, through digital improvement of management efficiency, expand the business boundaries of enterprises, find new opportunities, and even solve problems at the ecological partner end, through the formulation of digital standards, so that the management boundaries of enterprises become more open, more diversified, so that more upstream and downstream enterprises can access its ecology.
This is what we talked about, and enterprises can do digital exploration at all stages. But this exploration should not go beyond your current level of enterprise development management, which is a basic point of my opinion.
The impact of digital transformation
In the past five years, after the concept of digitalization has become popular around the world, in fact, in terms of both global and Chinese, the exploration of digitalization by China's leading enterprises has made a lot of achievements.
The revenue growth of enterprises with high digital maturity is 5.5 times that of ordinary enterprises, and the growth of profit margins is 2.4 times that of ordinary enterprises. We also see that digitalization can bring about rapid growth in revenue, but digitalization will lag behind the improvement of management efficiency by one to two years, but overall, whether it is in revenue growth or in the improvement of operational efficiency, the value of digitalization to enterprises is very significant.
Traditional industries, especially the service industry, have done a lot of exploration in the field of digitalization in the past, and have also achieved very good results.
For example, shells listed last year, the valuation of the first listing exceeded the sum of the two leading domestic real estate companies Vanke Plus Sunac. As a traditional offline matchmaking transaction service industry, the valuation of Shell can already be compared with the head of the listed Internet company, it is trading online is a large asset such as real estate, but its GTV can basically rank second, and Ali and JD.com are similar.
In addition, people like Meituan and Didi are very typical cases of continuously improving the experience and optimizing delivery efficiency through the combination of service industry and digital technology, thereby changing the original production and delivery mode, and even changing the entire industrial format.
Digitalization has created a large number of jobs, which is why in recent years, the government, head enterprises, and enterprises with a real sense of social responsibility are considering creating some new business opportunities through digitalization, and will also bring a large number of new employment directions.
Recently, the concept of digital talent is also very hot, whether it is party A or party B in the traditional sense, we have seen a lot of matchmaking transactions, such as C's suppliers, who are very hungry for digital talents, which is another impact of the digital wave.
For example, in the automotive industry, especially the combination of new energy vehicle companies and digitalization is optimistic about capital, we can see that the global auto manufacturer Tesla market value continues to hit new highs, it is higher than the total market value of several traditional car companies combined, of course, we will also see domestic like Weilai, Xiaopeng, Ideal, BYD and so on also caught up with this wave.
Why do most enterprises end in failure in their digital transformation?
Industries are integrating with digitalization and creating more potential. But most companies are failing in their digital transformation, why is this?
A mcKinsey report last year showed that the overall transformation success rate of the enterprise is less than 30%, and if you put it into the success rate of digital transformation, it is even lower, about 16%, what is the reason for this?
The main reason for the failure of digital transformation, or the biggest challenge facing digital transformation is the lack of digital transformation professionals and methodologies, which are complementary, sometimes find the right people, basically there is the right way, with the right way it is easier to attract and cultivate talent.
Digital transformation is not a matter of a certain department, a certain leader, it is a fusion of business transformation, organizational transformation and technological transformation. These three are not sequential, but occur simultaneously, and the lack of any one often leads to the failure of digital transformation.
How digital cubes can be applied to enterprise digital transformation
Digital transformation requires sophisticated design and careful planning, so how do we design digital transformation? In the past, we basically started from experience or best practices and put forward many core assumptions about the enterprise based on industry benchmarks. Assuming that the three points of ABC are required, what resources are needed, what prerequisites are required, we analyze and verify them one by one, and finally give a solution. To do this kind of design, the experience, vision, attention to best practices and in-depth thinking of the strategic designer are very important.
Now, whether we are doing digital top-level design, digital strategy, or digital operation, we usually want the company to define its core digital asset first. According to the digital maturity of the enterprise, the definition of core digital assets, comparing the management requirements of the current stage of enterprise development, designing the digital vision of the enterprise, and then carrying out the detailed design of the digital scene, and finally doing the digital landing, this is the biggest difference in methodology.
When an enterprise is doing digital design, the core is to reflect the core value of digitalization to the enterprise, around this core value, the core organizational capabilities of the enterprise are divided into nine main areas, and the red part in the middle is the core digital strategy of the enterprise that we often talk about - the digital business model, and the core digital assets, what is the most valuable digital asset of the enterprise, this part is defined as the first step.
Around it, we are going to digitize other functional areas of this company and conduct a digital maturity assessment. This includes finance, operations, growth, ecology, customer value, products, talents, technology, etc., which closely focus on the core values of the enterprise and form the nine pillars of the entire enterprise's digital capabilities.
Each of the nine pillars of organizational capabilities is divided into strategic capabilities, operational capabilities, and structured talent, or digital talent.
If we want to judge whether a company's organizational ability in marketing and sales is strong, we usually look at these three layers, the first layer first looks at how the company's marketing creates value, which is the strategic level of thinking, it is digital thinking and digital definition at the level of value creation.
The second layer looks at how the company operates. For example, in the field of marketing and marketing, we will see whether it fully realizes the circulation of data, for example, in marketing to do some specific matters such as accurate delivery, whether the data is applied to the extreme.
The third layer from the perspective of organizational empowerment depends on whether the enterprise has talents who really understand digital marketing, which is the bottom layer. These nine pillars are all unfolded with these three levels, and together they form the three layers of the Rubik's Cube. We will look at whether the core value creation layer of the entire enterprise in all functional areas is collaborative, whether the data layer is collaborative, whether it is open, whether digital talents have a training foundation, and whether the entire organization empowerment has a training foundation.
Digital transformation should pay attention to both top-down and bottom-up design, but also bottom-up value innovation, that is, the underlying innovation from front-line business personnel, gradually converging upwards, which is a process of combining up and down. These nine key functional areas, the three layers of each functional field, form a digital cube as a whole, so what do we do with this digital rubik's cube?
The three management pillars on the left are related to the cost reduction and efficiency improvement often mentioned by enterprises, such as finance and operation; the far right is related to the ultimate experience; and the middle layer, especially through the red in the middle - the core digital assets of the enterprise are constantly mined, around it to do strategic or ecological innovation, we can do innovation through digitalization.
These three vertical cuts are the three major themes of digital transformation at present, usually, cost reduction and efficiency improvement are basically used by the manufacturing industry relatively more, while retail and FMCG basically do a little more extreme experience. The integration and innovation of head enterprises such as Shell and Didi just mentioned are the most difficult, and of course, the value for enterprises is also the greatest.
How businesses choose the topic of digital transformation
Therefore, enterprises can choose the theme of digital transformation from shallow to deep and from easy to difficult according to the characteristics of the industry and the development stage of the enterprise. The shell just mentioned, if you use the digital Rubik's Cube to interpret this case, you can see that from 2004 to 2020, it has done a lot of digital investment and exploration at each stage of development, if you use the 27 grids mentioned, these 27 grids have a focus at each time node, and each grid is gradually changing.
With the digital evaluation scale, it can be very clearly restored or reviewed to each time node and its digital maturity, and we can see why it has been so concerned by capital and become a case of digital transformation that may be the most successful in the past two years in China. If you compare it with the digital maturity of the entire industry, you will see that it is far ahead of the competition in various fields.
How can the human resources field support the digital transformation of enterprises?
Now cut back to the field of human resources. Just mentioned that the digitization of many business aspects has a quantifiable dimension, so what can we do about the digitization of human resources? In the past, human resources were often considered soft sciences, and everyone managed them with experience. In fact, human resources in the past five years has been subverted by digitalization in the field of more in-depth, recruitment, performance, ability training and other aspects are doing a lot of quantitative exploration.
So what perspectives can the management level of human resources, or the management system of human resources, be quantified? First of all, I think the core is to establish organizational efficiency in a more scientific way, and it was said that one BU in this enterprise is more efficient than other BUOs. From the maturity of human resource management, or the degree of support of HRBP, it is possible to judge the efficiency of HR supporting business decisions through certain means and visually display it.
In addition, in many fields, human execution and judgment are actually less efficient than machines, so people can actually turn to machine learning in many fields.
We can see that machine learning is not a simple machine to imitate human behavior, when people analyze and make decisions, the algorithm extracted through machine learning actually exceeds the efficiency of people, how to keep up with the efficiency of machines in some areas, this is also an important topic.
On the other hand, let the machine become part of the organization management, there are many enterprises will find that AI becomes a super employee in the enterprise, the concept of super employee is that there are eight people in our department, and now the ninth person is newly added, this person is AI, his management level, judgment, decision-making, work efficiency may be the sum of the eight people is even higher, how do you coexist with this person?
This actually creates a lot of management problems, such as process reengineering, how should this process node flow through AI? Is it possible to do the whole process alone? How is this process designed? How are our permissions designed? Many leading companies are exploring how the organizational structure should be optimized when there are super employees.
Let's give an example to make it easier for everyone to understand the digitization of human resources. We help a leading domestic FMCG company to do digital exploration, this company used to rely heavily on the display and selection of stores to do design, and they even pulled the leading experts in the entire industry in this field together to do design. After a lot of running-in, in about 17 years, 18 years, the accuracy of decision-making increased from 30% to 40%.
This is already very advanced for functions that are more difficult to make precise design and measurement judgments. But they did a much more advanced thing, they precipitated the wisdom of these experts, developed the behavior of the experts in the form of algorithms, tried to let the machine do the measurement directly without the labor, and the success rate of the first version was as high as 71%. Everyone was stunned, and the machine far exceeded human judgment.
After that, they continued to feed the algorithm with big data, and in just two or three years, the accuracy of machine recognition has gone from 70% to 90%. In such a situation, the expert team can basically take a back seat and become the feeder of AI algorithms, which may be a trend that will appear in many human-machine collaborations in the future.
In the case of super algorithms and super AI in the enterprise, on the one hand, it greatly improves the operational efficiency of the enterprise, continuously expands everyone's management space outward, and at the same time releases a lot of time for people, especially our past managers and industry experts, what should they do? This brings us to the second question, what should be done in the organization design of human-machine coexistence?
Many leading enterprises will separate the special activities of human beings and the special activities of machine tuning, take human-machine collaboration as a key point to consider, and constantly through the optimization of processes and the optimization of the organization, let humans make up for the lack of machine judgment, and constantly let the machine strengthen people's judgment and analysis ability, and achieve the optimization of organizational efficiency through human-machine learning from each other.
When the machine continues to grow stronger, the view of the organization's capabilities will change a lot, and many enterprise HR is very clear and often gives the enterprise a capability model. This is a company's post capability model, which is what we do for a supply chain logistics company, in procurement, logistics capabilities and other relatively low-level requirements, corresponding to the first level of the second level, before relying on people's preliminary experience judgment, such as whether the packaging is damaged, whether it is compliant, logistics risk point control. Now a large number of risk judgment capabilities, or the primary ability to predict decisions, have been replaced by cameras and intelligent algorithms, and there is no longer a need for primary technical workers to do this work.
This forces people's abilities to go up, and the professional abilities of many of these companies' employees are being re-optimized. In the past, the professional ability of employees may be the first, second, third, and fourth levels, but now if the first and second levels of capabilities are replaced by machines, the human ability is left with three, four, five, and six levels of upward adjustment, or the requirements of the first, second, third, and fourth levels of ability are re-distinguished and redefined. The emergence of AI has greatly changed the matrix of machine capabilities and personal capabilities, so many companies are doing professional capabilities, or re-sorting of leadership.
Through behavioral analysis, we can do better talent matching and organizational design. In the past, when doing organizational design, we usually considered a lot, such as the influence characteristics of the organization, the characteristics of efficiency, and the characteristics of innovation. Innovative industries and innovative BU may use one organizational structure model, while stable such as finance and operations can use another organizational characteristic.
These organizational characteristics we must first have a preset, and then through the organization chart and other ways to design. Now through digital technology, we can see a large number of collaborative software, leaving a large number of employee behavior traces, can analyze the behavior trajectory of some people, such as how deep, far, how wide the influence of this person, according to which can accurately optimize the organizational structure, feed the organizational structure design.
Advice for HR digital managers
First, all managers need to be bold and curious. Now that digital best practices, digital technologies, and new business models are emerging, we must be passionate about new things and keep learning.
Second, fully establish a digital ecosystem. The networking giant has created a very complete digital ecosystem, and it may be impossible for the vast majority of enterprises to build a digital ecosystem in the short term, but you can fully integrate into it, including excavating suitable digital talents from within the ecology.
Third, for human resources, how to build an agile organization, make the organization more flexible, and cultivate the digital innovation cube and innovation ability of the enterprise from the bottom up is very important.
Finally, pay attention to policy and regulatory regulations. After several years of fermentation, digitalization is not a completely new concept, the government, the country has a lot of attention, the recent two years on digital supervision and digital regulations are gradually deepening, this piece is also very much need to pay attention to.
That's it for today's sharing, thank you very much.