02 Aug 2016 13:35 IST

‘Virtuality can be the great equaliser’

Sandhya Shekhar

If you have a good idea and the capability, virtuality empowers you to compete with much larger organisations, says Sandhya Shekhar.

While every organisation today is a virtual one, some more so, many continue to be managed in the same way as before. While technology can bridge physical distances there could be other distances that arise, such as cognitive, cultural, and leadership styles. Failure to recognise these can lead to disastrous consequences, says Sandhya Shekhar, in her book Managing the Reality of Virtual Organisations. A former CEO of the IIT Madras Research Park and now an advisor on innovation strategies, she says managing people in a virtualised world is very different from dealing with them face to face. Excerpts from an interview:

What was the insight that made you delve deep into the workings of virtual organisations?

There are a few life lessons I’ve learnt over the years. One is that it’s an unequal world, because of different opportunities, experiences, exposure, affordability, and so on. To my mind, virtuality appeared to be a great tool to bring about some level of equity in a very unequal world. So, I was merely attempting to address one life lesson.

The second life lesson was that the success of an organisation or an individual is not predicated on infrastructure, or resources or technology or wealth — it’s always the people that matter. Global dispersion of organisations and families has made virtualisation inevitable. But managing and dealing with people in a virtualised world is very different to managing them face to face. If this is not recognised and comprehensively addressed or is left to intuition and judgment alone, it could be fraught with risks.

Why do you view virtuality in such a positive way?

I have called it The Great Equaliser. Several start-ups are giving larger companies a run for their money. If you have a good idea and the capability, and if you capitalise on the strengths of virtuality, your reach becomes phenomenal!

Second, the world is waking up to the stark reality of environmental issues and is struggling to balance the apparently dichotomous objectives of reducing the carbon footprint as well as infrastructural and energy overheads with the need for increased economic growth. To achieve this, it will become imperative to embed virtuality into the planning blueprint at every level – whether it is the city, government, organisations or educational institutions.

Third, individuals working in well-designed virtual organisations get empowered to deliver results way beyond the limitations of their individual skill-sets by seamlessly connecting with a global talent pool of experts, leading to an exponential increase in organisational performance.

Fourth, the need for accessing the best global resources and seizing market opportunities all over the world has made global dispersion, and therefore virtualisation, inevitable for almost all organisations. This could lead to manifestations of the Virtual Organisation through linkages with value chain partners, alliances, joint ventures, subsidiaries, external domain experts, new office locations, and so on. We are beginning to see significant trends pointing to the phenomenal power of such arrangements — the emergence of aggregators as a disruptive business model or the propagation of Industrie 4.0 being a couple of examples.

So, how do we manage this virtuality?

Despite the compelling trends we spoke about earlier, organisations continue to manage themselves largely the same way as before. Many organisations believe that geographic dispersion can be managed simply by putting the right technology in place, with some minor tweaking of associated practices. However they fail to recognise that while technology can bridge physical distances there are a whole bunch of other distances that could arise in such organisations with heterogeneous entities. These could be cognitive, cultural, language, social, leadership styles, value systems, work practices, and so on, which I have referred to as Virtual Distances.

Just as in families, where it is not so much the physical distance but the emotional distances that are difficult to bridge, a failure to recognise these virtual distances in organisations could have disastrous consequences. This book provides a comprehensive set of diagnostic tools and techniques to pre-empt potential problems and also isolate and plan interventions that increase the probability of achieving the desired outcomes.

So, can an organisation choose how virtual it is going to be?

It should! Because it is important to understand how much virtuality is virtuous! The extent of virtuality that delivers superior business results should determine how virtual you’ve got to be. A snap poll with over 300 CXOs and senior managers revealed that they had very diverse interpretations of virtuality and a rather subjective opinion on how virtual they are. Some had adopted tele-work and e-learning extensively. Others were traditional brick and mortar businesses with highly virtual supply-side integration. Some had little option but to have extensive virtual linkages with JV partners, subsidiaries and new office locations. Yet others were primarily looking at online customer interfaces. Hence, each of these senior managers was looking at virtuality from very different perspectives.

It is important to understand that virtuality is not a homogenous construct. The degree of virtuality could vary at the individual, team (or departments) and organisational levels. It could also vary across the three primary dimensions of employees, customers and value chain partners. If these are not carefully aligned, it could result in adverse consequences for the organisation. There is clearly a need to scientifically predict and pre-empt such problems. Senior managers across the spectrum have rued the absence of tools for the same — a lacuna that this book attempts to bridge.

In your study, what challenges did you find the organisations faced, either in going virtual or in increasing the degree of their virtuality?

All organisations are primarily interested in improving performance. So, even before making a value judgment on whether they needed to go virtual or not, I first looked at what were the major factors impacting their performance. It came as a big eye-opener when I found that across a very wide spectrum of organisations there was one factor that emerged as critically important — Knowledge Transfer Effectiveness (KTE). It contributed to a whopping 72 per cent of the variability in performance. Ensuring uniformly high levels of KTE in geographically dispersed, highly heterogeneous, virtually-linked organisations is a challenge.

Why have you focused on adaptation and innovation?

It should come as a wake-up call for organisations that the physical transfer of information or mere accessibility of knowledge by employees accounts for only a 4 per cent variability in performance! Knowledge transfer can be considered to be effective only if the knowledge physically transferred is adapted and innovated upon so that it delivers business results. My studies show that these two together account for over 68 per cent of the variability in performance. It is my belief that one of the reasons start-ups are perceived to be more innovative than larger organisations is because the distance between knowledge availability and its use is very small. In a larger organisation, while there may be no dearth of creative talent, one person may have a great idea, and another may have a problem, but the two may never connect!

Therefore any assessment of successful knowledge transfer needs to take into account the extent of adaptation and innovation it facilitates. Whether these are MoUs assigned with other institutions, partnership alliances, parent-subsidiary relationships or joint ventures, the litmus test is whether there is adequate knowledge transfer that serves tangible business objectives.

How does an organisation ensure KTE in a dispersed organisation?

If organisations have a way of measuring the current levels of KTE in different departments and locations, they can also identify where a problem may lie. Is there an issue with a person, or the team, or the leadership or a supplier or with the technology? This has to be carefully identified as the solution has to be specific. While top-line and bottom-line patterns might take a while to emerge, KTE indices can serve as early indicators of the strength and viability of relationships. Viewing collaborations and organisational arrangements through the KTE lens might provide organisations with an elegant tool for assessing their viability and making mid-course corrections should they be required.

In your study across several organisations, did you find this awareness was there?

Strangely, no. The results that emerged using data specific to each organisation being studied took them by surprise. Some of them were counter-intuitive and I have described these in the book. Some organisations requested for further diagnostic studies to be carried out and these were simple to execute with the tool-set available. These findings helped with a root-cause analysis.

What was the leitmotif across the organisations that you have studied in the book — especially the Lulu group, Grundfos and Marriot?

The study was based on a very large sample size. I chose to precede this with a qualitative study of three very different organisations deliberately chosen to find out if any common patterns emerged. Grundfos is a Danish manufacturing company. Marriot, an American hospitality chain. And the third, Lulu, is in retail and is a West Asia-based company. The similarities across these very dissimilar organisations were astounding. The fundamental, core problems remain terrifyingly similar.

From the conversations I had with their CEOs and the rest of the studies that followed, I framed a list of 16 critical success factors that are a ‘make or break’ for any company. The most significant of these was something I call the ‘degree of concordance’, which is the level of harmony across three dimensions — people, process and technology. The second most important factor that emerged was Trust. Tools to scientifically measure these across entities are an important managerial aid to deal upfront with issues that are generally considered fuzzy and uncomfortable. Some of the counter-intuitive results that emerged serve to bust several myths that we have held on to for a long time.

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