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DT:TV Case Studies

Institutions in a digital age

Rudman Consulting has worked with the creative and tourism sectors over the last decade via The AmbITion Approach as they faced the need to change and transform their business and operational models; products, services and experiences; and engagements with their clients. That extensive experience and the expertise in the The AmbITion Approach is now offered to higher education institutions  to help adaptation and transformation around the opportunities and challenges of digital disruption.

Institutions Matter

In Why Nations Fail, Acemoglu and Robinson, the authors of the 2012 book and website, argued that the critical difference between successful and unsuccessful society lies in the quality of their institutions. If a nation’s institutions are inclusive and transparent there is better economic and social impact. So institutions shape how cohesive and prosperous a nation is.

Institutions matter. They:

  • take decisions
  • set and monitor rules
  • give expression, shape, to collective or shared values and purpose, determine the rules of engagement in a social or collective setting, and set expectations about behaviour and problem solving.

Practically, institutions matter because they are everywhere, and we all encounter them directly or experience the consequences of their work daily. In the industrial era, institutions scaled for efficiency – a relevant business model at a period of fairly predictable change and long periods of stability around the social, political, and economic context.

For the last several hundred years, infrastructure and technological improvements have helped organisations to grow in size and efficiency. Most institutions, say John Hagel III and John Seely Brown in their article Institutional Innovation, “are the product of the pursuit of scalable efficiency: self-contained entities that perform all critical economic activities within their own four walls.” Efficiency has been a winning model for the last two centuries. It relies on centralised governing systems, hierarchies, and times of stability and predictability. “Institutions are embedded in the cultures, technologies and infrastructures of their time, and the emergence of new social and technological infrastructures often catalyses fundamental institutional innovations”, state Hagel III and Seeley Brown.

Over the past twenty years though, we have seen massive disruption in our world from digital technologies. The chaotic change looks set to continue for another twenty as nascent digital developments emerge. Many sectors and enterprises have been significantly affected by the waves of digital disruption impacting earlier this century. But institutions seem to have remained resilient – they are, after all, built to last and see fads and fashions come and go, stand fast in the face of change and turbulence. This has been the case for the Higher Education Institution (or HEI) – universities exist not to answer the questions of why knowledge and learning is crucial, but to register and reiterate the question’s force.

Digital developments eventually disrupt institutions

But eventually, institutions and technologies always end up changing each other – new institutional form is created when technologies impact. Think about how the printing press both undermined the authority of and expanded the reach of the Medieval Church. Think about how TV has changed the way we interact with politics and sport. Or consider how the car has impacted the way we manage cities. It is now at this point in time that digital technologies are going to significantly change institutions, including HEIs.

When new technologies emerge, the impact is broadly the same – power shifts, authority is tested, and the constitution of legitimacy is reformed. Legitimacy used to be conferred to an institution through a mix of expertise, positional authority, distance, and mystery. In the digital world, expertise and knowledge remain as domains institutions can own online. But distance and mystery now don’t work as a currency institutions can lever to establish legitimacy. If an institution lays claim to authority and legitimacy online, then it can expect close scrutiny. Legitimacy is conferred differently in the digital world: through contribution, through value added by an institution authentically talking and sharing – online; through what an organisation does and how they act which is more important than what they are or say.

The traditional model of the institution as governor/expert/organiser/system is becoming dysfunctional and inefficient as mutually reinforcing trends come into play:

  1. a rapid proliferation of digital infrastructures (competitive advantage is knowledge and data, information is asymmetrical – customers know as much as the company)
  2. a global shift to liberal economic policy (ease of moving talent, product, and money globally is now easy because of digital).

New digital technologies have disrupted how organisations co-ordinate, work, and behave, as they break boundaries of scale and structure, which mean new economies of scale and new forms of co-ordination are possible. The speed, complexity, and transparency of the digital era demands a reshape of the institutional landscape.

Institutions are of course sources of trusted and respected authority, and are currently an important tradition on which society is based. But digitisation is causing the the relationship between institutions and the communities they serve to be renegotiated.

In the digital world:

  • requisite authority is derived from contribution not status.
  • legitimacy is gained through access and transparency, earning trust and collaboration.
  • legibility (being read, understood) is justified via scrutiny of the crowd/community and their mass participation.
  • coherence and purpose has to be forged from the trust and legitimacy earnt now, rather than any historical reputation.

What does digital disruption mean for institutions?

Digital technologies’ impact on institutions is not just transactional or computational. Digital technologies eat into the foundations of institutions, generating a need for deep behavioural change. We have invented and evolved institutions throughout history. Institutions are realising they no longer enjoy the unquestioned ownership of commanding heights of control and influence. Physical factors decline in importance as digital technologies open up new options for organising human activity. Digital has made things more connected but more fragmented, it favours smaller, looser networks.

To stay relevant in a digital era then, institutions need to be agile, networked, increasingly visible to a growing community of interest and influence, and combine formal expertise with informal experiential knowledge.

Applying the dominant design principles of a digital world can ensure an institution is fit for purpose in an fast, open, connected world. These design principles seek to scale:

  • transactions
  • relationships (participation, engagement – trust is here, not in brand)
  • learning via creation spaces, & R&D or open innovation with customers, or via crowdsourcing solution to problems e.g. via Kaggle.
  • learning (and unlearning) fast, with the full range and mix of digital infrastructures to be better and quicker in the face of accessibility and abundance – efficiency is compromised, but they have the large systems and scale to cope with mobile/cloud/social data (learning is efficiency).
  • a shift in focus, from aggregating and applying stocks of scarce and specialised knowledge in industrial age command-and-control models to decentralised models, such as open innovation.

Institutions now need to welcome open innovation. Open innovation is the term coined by University of California Centre for Open Innovation professor Henry Chesborough describing what happens when companies source ideas for innovation from wide and open networks that span not just the company, but also many other organisations, and individuals.

Enterprises (famously like P&G and Lego) practising open innovation, for example, buy patents and licenses from outside the company. They sell what is not being used in a company via licensing it out. The business model works because knowledge and learning is now widely distributed to smart people. The great ideas, resources, and assets necessary for creating new products and markets can be done as smart work.

Open innovation means the innovation is still generated by individuals and is therefore by definition isolated, but the organising framework is modular, bringing together the disparate knowledge. The framework:

  • generates specialised knowledge
  • aggregates it
  • combines individual pieces of knowledge with others.

Each contribution is made on the basis that the author accepts – as a condition of taking part – that their work gets rolled up into another iteration. Proctor & Gamble’s Connect+Develop platform is a great example, translated into Chinese, Spanish, Portugese and Japanese generating 4000 innovation submissions annually.

The logic goes: if the institution can’t handle the problem, make it a public problem, open innovation. Take a long term view of public good, balance special interests and competing values.

Supporting adaptation to digital disruption: Rudman Consulting brings learning from the creative industries to institutions

Rudman Consulting can help by supporting institutions develop adaptation strategies for transformation. Institutions were sustained by scale, brand power, government subsidy, and information asymmetries. Institutional design now starts from the premise that in digital age, devolving, sharing and explaining, publishing and story telling, and engaging and connecting need to proliferate.

Institutions must still focus on vision, mission and core values, but must consider that these may well be achieved via new tasks, new configurations, hybrids of the best of old and new, different principles for management, and alternative standards for organisational structure and culture.

Like publishers, media companies, film makers, the music, travel, and airline industries that have all had to completely overhaul their business models to adapt to digital disruption, so now too will institutions.

Contact us to find out more, or read Rudman Consulting’s Guiding Principles for institutions in a digital age.