March 18, 2015 DIGITAL TRANSFORMATION: ORGANIZATIONAL DESIGN

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1 March 18, 2015 DIGITAL TRANSFORMATION: ORGANIZATIONAL DESIGN by Tim van Tongeren and Dennis van Rooij with AbbVie, AstraZeneca, GlaxoSmithKline, Eli Lilly, Novartis, and Takeda Pharmaceuticals ORGANIZATIONAL STRUCTURE CHALLENGES DIGITAL TRANSFORMATION A company s structure influences how effectively it can execute its overall (digital) strategy, including which actions to take and which to defer. Digital leaders are exposed to organizational design for three primary reasons. First, they need lots of cross-functional collaboration to attain their business objectives. Second, they are often caught between local and regional management teams; regional teams want to make efficient use of digital strategy, while local teams want a customized digital footprint for their market. Finally, to maximize the value of digital, leaders need colleagues from other areas of responsibility to provide input and pull leaders out of their routine. 1 We surveyed thirty-eight digital leaders to find out if they face challenges with organizational design. Five of them reported having one or more challenges in this area; specifically, they said that they: Don t see how to structure differently. While respondents recognize that a change in organizational design is needed to better support local and global digital operations, they don t know what the ideal structure is or how to get there (see Figure 1). Generally, organizational tension comes from making tradeoffs in levels of engagement for individual markets and prioritizing new digital capabilities for specific markets or business units when working under resource constraints. Lack global coordination. Most of the digital leaders we spoke with have responsibility for multiple countries but do not have authority over global digital operations. The lack of a global remit requires leaders from different regions to align with each other before embedding new digital capabilities or ways of working. Digital leaders mentioned that they face coordination challenges more often than they d like. Require more resources. Other digital leaders lack sufficient resources to staff their digital operations at both the local and regional levels. They believe that more headcount would allow them to achieve a more consistent and determined execution of their digital strategy.

2 Figure 1: Obstacles to structuring digital operations from a global to local perspective

3 THERE ARE PLENTY OF CORRECTIVE ACTIONS, BUT NONE IS A SILVER BULLET Effective organizational structures assign clear roles and responsibilities to people across the organization to get the jobs related to digital transformation performed and the mission achieved. Ideally, there are shared goals across the organization for digital transformation so that everyone is on board and makes a contribution. Companies that have not reached this state need to take action to get there. The digital leaders participating in our roundtable mentioned a range of corrective actions that worked for them, including: Thoroughly analyzing the effectiveness of the existing structure. Every organization has a unique set of challenges, so digital leaders should be careful of implementing any best practices prior to completing an assessment of their existing structure. Clever digital leaders raise organizational structure as a potential obstacle to strategy execution and get commitments from the various stakeholders to collectively analyze the root causes before embarking upon an intervention. Organizing for joint ownership via the governance structure. One digital leader found success by structuring his organization to give marketing and digital joint ownership of key operations such as technology planning, agency alignment, and business engagement. Setting clear accountabilities, defining roles, and instituting mutual communication between the two organizations improved the shared understanding of the overall objective and the route to it. Seeking senior management support. Making changes to the structure and the ways people divide up their responsibilities is not something digital leaders can decide and push through themselves. But senior management certainly can and digital leaders should engage with them first to make sure they realize the current inefficiencies in the company structure. Working on incentive schemes. Incentive schemes are an obvious measure to consider, but they re not so straightforward to implement. What digital leaders would most like to change among their marketing and communications peers is those peers rigid marketing routines or inertia towards digital as a new opportunity. To accomplish this, digital leaders might focus on building capability, but they re better off working hard to change incentive schemes to reward marketers for executing the digital strategy well. Over time, these changes in incentives will also change roles and responsibilities within the organizational structure.

4 ABOUT THE AUTHORS Tim van Tongeren For more than ten years, Tim has specialized in helping commercial and marketing leaders navigate the strategy and operational transformations required to deal with technology change. He has developed digital capabilities for marketing managers, set long-term strategies, and adjusted planning processes for Tier 1 pharmaceutical firms. Tim helps business leaders formulate and implement pragmatic digital road maps, ensuring that they don t overlook the necessary change management elements of digitally transforming their marketing organization. In his current role as Managing Partner, Tim spends most of his time leading DT s Research and Consulting offerings helping global pharmaceutical companies to improve their digital capability. Prior to joining DT Associates, Tim acquired an extensive background in strategy consulting across a number of industries, which supports his digital excellence work for life sciences firms. Tim served as interim advisor at Eli Lilly s Digital Hub in Europe and at GlaxoSmithKline s Digital Centre of Excellence to transform the customer experience and digital analytics. As a senior strategy consultant at global marketing agency SapientNitro, he worked with clients across industries to develop and execute digital marketing strategies. Prior to that, Tim was an analyst at Forrester Research, where he produced thought-provoking, new research on technology innovation and customer experience management. Tim received a master s degree (M.Sc.) in business economics from Tilburg University. Dennis van Rooij Dennis is a recognized expert on how pharmaceutical executives can take full advantage of new digital technologies to bolster their commercial objectives. He brings a strategic yet pragmatic perspective on digital channels for the life sciences vertical in general and the pharmaceutical industry in particular to every engagement. In his current role as Managing Partner, Dennis is responsible for managing client relationships with a number of leading global pharmaceutical companies and spends a significant portion of his time working directly with clients. Prior to joining DT Associates, Dennis was the Global Head of Digital Transformation and Acceleration at Novartis in Switzerland. He also served as an interim advisor for AstraZeneca, supporting its global digital marketing capabilities and engagement team. Prior to that, Dennis led the digital marketing strategy for Asia Pacific, Japan, and emerging markets for GlaxoSmithKline, where he earned the prestigious President s Award for innovative marketing in emerging markets. Dennis also has seven years of commercial and digital transformation experience outside the global pharmaceutical industry as a senior consultant at MetrixLab and Forrester Research, where he worked with many of the world s top companies. Dennis received a bachelor s degree (B.Sc.) in business economics and a postgraduate degree (M.Sc.) in international business and economics from Tilburg University. ABOUT DT ASSOCIATES We help pharmaceutical firms achieve digital excellence to create successful customer experiences. As a specialist consulting firm, we use assessments, benchmarks, bespoke projects, complementary insights from carefully crafted research, and peer networking for executives in digital or related areas to address digital excellence transformation in the pharmaceutical industry. Learn more at

5 ENDNOTES 1 See the April 2, 2014 DT Associates report The State of Digital Excellence in the Pharmaceutical Industry, 2015: Capabilities.