I will start by exploring what digital transformation and governance mean, and the evolving nature of governance structures and practices in response to the ongoing process of digital transformation. Furthermore, I will shed light on the relationship between governance, trust, and control. Finally, I will wrap up by discussing the challenges and tensions in governance in light of digital transformation.
To start with the concept of digital transformation and its implications for governance structures and processes. The technological landscape is evolving rapidly therefore the digital transformation has become a focal point for various organizations (Lorenz & Buchwald, 2023; Kaganer et al., 2023; Carroll et al., 2023).
In the article ‘Understanding digital transformation: A review and a research agenda’ by G. Vial, (2019), digital transformation is defined as ‘a process that aims to improve an entity by triggering significant changes to its properties through combinations of information, computing, communication, and connectivity technologies’ (Vial, 2019, p. 118). Digital transformation involves enhancing a system through important alterations to its features. This is accomplished by integrating data, computational, interaction, and networking technologies. Essentially, it involves utilizing various technologies to make noteworthy enhancements or transformations within an organization or system, going beyond simple digitization (Vial, 2019; Carroll et al., 2023).
This transformation impacts not just operational processes but also cultural shifts within organizations, leading to new business models and opportunities for innovation (Vial, 2019;
Orlikowski & Scott, 2023). Besides, it represents a fundamental shift in how societies function, driven by technological innovations that have revolutionized communication, information exchange, and decision-making processes. The impact of digital transformation is pervasive, from e-government initiatives to smart cities and digital economies, reshaping the way governments interact with citizens, deliver services, and address societal challenges (Carroll et al., 2023; Putra., Pandza., Khanagha, 2023).
This session clarifies the concept of governance and its evolution over time, while also highlighting three specific types. Throughout this course, we explored various governance types, each differing in scope, focus, assets, regulations, and decision-making. I chose adaptive, corporate, and digital governance for this report because each offers unique perspectives. Adaptive governance focuses on continuous learning and flexibility as organizations navigate change, corporate governance emphasizes compliance with regulations and ethical behavior, and digital governance addresses challenges in managing digital assets.
Governance refers to the processes and structures through which decisions are made and authority is exercised in organizations or societies. It involves the mechanisms through which an organization’s objectives are set and pursued, in alignment with the interests of its stakeholders; and mediate their differences. Governance encompasses the framework within which decisions are made, including structures for accountability and control, to achieve desired outcomes and ensure ethical conduct and compliance with regulations. In other words, governance is the setting for management, providing guidelines and control mechanisms within organizations ( Lappi, T. M et al, 2019; Janssen, M et al, 2016). Traditional governance typically focuses on ensuring stability and accountability, dealing with repeatable issues, and following established rules and hierarchies. It is often slow to adapt to changes and may prioritize control and procedures over flexibility and innovation. On the other hand, new governance, such as adaptive governance, emphasizes adaptability, agility, and the ability to respond quickly to disruptive changes in the environment. It involves decentralized decision-making, mobilizing internal and external capabilities, and continuous adjustment to uncertainty. Contemporary governance models seek to balance stability and accountability with the need for adaptability and responsiveness ( Lappi, T.M et al, 2019; Janssen & Voort, 2016; Lumineau et al., 2021). The focus has shifted towards agility, innovation, and adaptability, with an emphasis on enabling rapid decision-making and flexibility in response to changing digital landscapes (Lumineau et al., 2021; Janssen & Voort, 2016).
It is worthy to mention corporate governance in the context of adaptive governance is important. In the light of the fact that corporate governance is a specific subset of governance that deals with the internal structures, processes, and mechanisms within a company. When discussing adaptive governance, which is a broader concept applicable to various sectors and contexts, including corporate governance helps to highlight the importance of internal decision-making, accountability, and transparency within organizations (Janssen & Voort, 2016; Scherer et al., 2013).
Moreover, considering corporate governance within the framework of adaptive governance allows for a more holistic approach to governance, recognizing the interplay between internal organizational dynamics and external environmental factors that influence decision-making and adaptability. It underscores the importance of aligning internal governance practices with the broader goals of adaptability, agility, and responsiveness to changes in the external environment (Scherer et al., 2013).
“Trust is the “lubricant” of the industry, and control is the safeguard that this trust will not be misused.” (Damen., 2017). The quote above explain the relation between trust and control in a simple way. While trust is important, it must be accompanied by control mechanisms to ensure that it is not taken advantage of. Control acts as a safeguard, ensuring that trust is maintained and not exploited for unethical or harmful purposes. Thus, trust facilitates cooperation and collaboration within the industry, while control ensures that this trust is protected and utilized responsibly (Damen., 2017) .
A spontounse question could be, how is this connected with governance? In the context of digital transformation, governance plays a crucial role in balancing between control and trust within organizations. Governance mechanisms must evolve to provide oversight without stifling innovation. This involves a shift from rigid control systems to more flexible frameworks that empower individuals and teams while ensuring accountability. Trust is built through transparency, open communication, and a culture that values ethical behavior and respects stakeholder interests. Effective governance fosters a trust-based environment where experimentation and learning are encouraged, and where control mechanisms are designed to support, rather than limit, digital initiatives (Lumineau et al., 2023).
The interplay between control, trust, and governance within organizational dynamics is essential for ensuring effective decision-making and fostering a healthy work environment. Whereas, trust is the foundation of healthy relationships and teamwork within an organization. It involves confidence in the reliability, integrity, and competence of individuals and systems (Carroll, Conboy, & Wang, 2023, Lumineau et al., 2023).
The interaction between control, trust, and governance is dynamic and complex. Control mechanisms must be balanced with trust-building initiatives to foster a culture of empowerment and autonomy among employees (Lumineau et al., 2023; Lumineau, Wang, Schilke., 2021).
In the rapidly evolving digital landscape, both organizational inertia and the challenges of digital governance stand as formidable obstacles to progress (Bel & Elston, 2023; Kaganer et al., 2023). Throughout the governance course we explore how digitalization introduces new opportunities and challenges for governance mechanisms within organizations and across industries. These dynamics are encountered within both the private and public sector.
The traditional bureaucratic structures could be one of the challenges pose to digital transformation efforts within organizations. Bureaucracy is often associated with rigid hierarchies, formal procedures, and slow decision-making processes, which can hinder the agility and innovation required for successful digital transformation (Magnusson et al., 2020). Bureaucratic processes and resistance to change from managers can hinder the implementation of new suggestions and innovative ideas within the organization, whereas, efficiency creep, favoring efficiency-oriented investments over innovation, can impede digital transformation efforts; in the decision making process.
Another challenge is organizational inertia, as discussed by various scholars, embodies the resistance to change deeply entrenched within established structures. This resistance stems from a multitude of factors, including negative psychology (when people prefer to stay in their comfort zone), sociocognitive beliefs (when the organization’s established beliefs and values make it hard to change). Moreover, sociotechnical constraints (it is about how the organization’s past choices about technology and the way people work are hard to change), political dynamics (when people in the organization who have power want to keep things the way they are), and economic dependencies (when the organization is used to making money in a certain way and finds it hard to change to a different way). These barriers impede organizational flexibility and hinder the adoption of new technologies crucial for digital transformation (Kaganer et al., 2023).
Another obstacle emerges in the form of legal and regulatory frameworks, which often find themselves unprepared to keep pace with the rapid advancements in technology. Not to mention data privacy and security emerge as paramount concerns in both organizational and governance contexts (Andersen et al., 2020; Park et al, 2023). The exponential growth in data generation and processing demands robust protection measures to safeguard individuals’ privacy and prevent unauthorized access. Robust cybersecurity measures and strategic investments in detection, prevention, and response capabilities are essential to safeguard critical infrastructure and data in the digital era. Cybersecurity, which emerges as a shared concern, reflecting the need for resilience against cyber threats in both organizational and governmental contexts. Orgnaiztions struggle to address pressing issues such as data privacy, cybersecurity, and intellectual property rights (Carroll et al., 2023; Andersen et al., 2020; Janssen & Voort, 2016). Yet, achieving a delicate balance between data-driven decision-making and privacy protection remains an ongoing challenge requiring attentive governance and oversight (Janssen & Voort, 2016; Janssen et al., 2020).
In a compelling case study that sheds light on how universities handle digital challenges, particularly in managing their IT investments under centralized systems. The case study had been done, during the COVID-19 pandemic, to explore how universities in the United States coped with the shift to emergency remote teaching. The study reveals the crucial role of centralized IT governance in addressing data privacy concerns. Whereas, universities with a centralized approach to their IT infrastructure found it easier to implement measures to protect student data while providing online instruction. This aligns with the challenges outlined earlier regarding the need for adaptable governance structures to address emerging concerns in the digital landscape, such as data privacy and cybersecurity.
By having all technology managed in one place and a CIO overseeing IT decisions, these universities could ensure that data privacy was maintained even during the challenging circumstances of the pandemic. This highlights the importance of adaptable governance structures in addressing emerging concerns in the digital landscape, such as data privacy and cybersecurity (Park et al, 2023).
The centralized approach to IT governance enables institutions to streamline operations and prioritize resources effectively, reflecting the need for comprehensive digital governance frameworks to navigate rapidly evolving technological landscapes (Park., Son., Angst., 2023; Lumineau et al., 2021).
However, some may argue that a decentralized approach to blockchain governance within universities could offer greater flexibility, transparency, and resilience. Decentralized blockchain networks could empower individual departments or academic units to have more control over their data and transactions, reducing dependence on a centralized authority (Lumineau et al., 2021). Moreover, decentralized governance could mitigate the risk of a single point of failure and enhance the trust and autonomy of various stakeholders within the university community (Park., Son., Angst., 2023; Lumineau et al., 2021).
It’s essential to consider both perspectives, in responding to the counterargument regarding centralized IT systems in universities. While decentralization offers benefits in terms of flexibility and autonomy for individual departments, particularly in normal circumstances, the exigencies of a crisis like the COVID-19 pandemic often necessitate a more coordinated approach (Park., Son., Angst., 2023). The centralized IT value in building resilience during crises as we discussed in this case study.
Moreover, while decentralization may enhance transparency within individual departments, a centralized approach can ensure transparency at the institutional level. By establishing clear protocols, standards, and oversight mechanisms, centralized IT systems can build trust among stakeholders and assure data integrity and security. In terms of resilience and risk management, centralized IT systems typically have better resources and expertise to manage risks and address security vulnerabilities proactively. This proactive approach minimizes disruptions and ensures continuity, even in the face of unforeseen challenges (Park., Son., Angst., 2023).
However, it’s essential to advocate for a balanced approach that incorporates elements of both decentralization and centralization, where appropriate. While certain functions or processes may benefit from decentralization, others may require centralized coordination for efficiency and effectiveness, particularly during times of crisis. While recognizing the merits of decentralization, it’s imperative to underscore the importance of centralized coordination in ensuring the resilience and continuity of university operations, especially in times of crisis like the COVID-19 pandemic (Park., Son., Angst., 2023).
Last but not least, the challenge in this part of the report is misalignment between stakeholders. The complexities of stakeholder perspectives and decision-making in IT governance, drawing attention to the diverse backgrounds and institutional logics that influence these processes during digital transformation (Albert Boonstra et al., 2017; Baker & Singh, 2019; Carroll, Conboy, & Wang, 2023).
One of the case studies that drew my attention during this course underscores the challenges of polarization, intricate decision-making, and the lack of alignment in stakeholders’ adoption of competing institutional logics in IT governance. It’s clear that the diverse backgrounds of stakeholders contribute significantly to these complexities. The case study delves into how a teaching hospital transitioned its IT systems from separate entities to a unified integrated
setup. Throughout this transformation, crucial decisions emerged regarding IT control, standardization, and the balance between maintaining the status quo and implementing changes (Albert Boonstra et al., 2017).
Conversations with various stakeholders, including hospital managers, doctors, and IT professionals, shed light on their differing perspectives and priorities, often leading to conflicts in decision-making. The study reveals that these conflicts resulted in varying outcomes; sometimes, stakeholders compromised, while other times, they held firm or found middle ground. Notably, the study underscores the pivotal role of IT professionals in facilitating understanding and collaboration among stakeholders to achieve common objectives (Albert Boonstra et al., 2017).
Lastly, the transformative potential of digital technologies risks exacerbating existing societal inequalities. Ensuring digital inclusion and accessibility becomes imperative, requiring governments to bridge the digital divide through initiatives that promote equitable access and digital literacy programs. These efforts align with broader goals of addressing socioeconomic disparities and fostering inclusive growth (Baker & Singh, 2019; Damen, 2017; Bel & Elston, 2023; Park, Son, & Angst, 2023). It necessitates investment in capacity building and digital skills development. Empowering individuals and organizations with the necessary skills to leverage digital technologies effectively is crucial to bridge the digital skills gap and ensure readiness for the demands of digital governance and transformation (Albert Boonstra et al., 2017; Baker & Singh, 2019; Andersen et al., 2020 ).
When digital systems are fragmented and data is stored in separate silos, it becomes difficult for different parts of the organization to share information and work together. The challenges discussed earlier highlight the importance of interoperability and standards in digital systems, which reflect a similar challenge within organizations known as sociotechnical inertia. This means that just like how different digital systems need to work together smoothly, different parts of an organization need to collaborate effectively. In answering the second question of this report we will discuss a few strategies to overcome some challenges. Due to the fact that establishing adaptable governance structures is paramount to address emerging concerns effectively.
To wrap up this post, governance in the era of digital transformation is evolving to balance stability and accountability with the need for adaptability and responsiveness. Traditional governance models, which often prioritize control and procedures, are being complemented by adaptive governance that emphasizes agility, innovation, and decentralized decision-making. The interplay between trust and control is crucial in this context, as effective governance mechanisms must evolve to provide oversight without stifling innovation. This involves creating flexible frameworks that empower individuals and teams while ensuring accountability. Trust is built through transparency, open communication, and a culture that values ethical behavior and respects stakeholder interests. Effective governance fosters a trust-based environment where experimentation and learning are encouraged, and control mechanisms are designed to support, rather than limit, digital initiatives. In the next post, I will share some insights about how governance can be designed to enhance digital capabilities and facilitate purposive digital transformation.
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