• Camille Lecoeuche

How culture drives transformational success



Motivated by the growing fear of disruption in an increasingly digital world, a study by the International Data Corporation projected that organisations will spend nearly $2 trillion on digital transformation in 2022, in efforts to remain competitive (12).

According to Mckinsey, the ability to develop and maintain a digital culture produced 30% of the variance in company performance within a given industry (7). Organisational culture, therefore, plays a critical role in the success of digitally mature businesses, acting as either a driver or a barrier to digital adoption and transformational success (9)(13). Organisations risk loss of revenue, productivity and competitiveness if their digital initiatives are slowly adopted or fail entirely as a result of a corporate culture which does not align with digital transformation goals (12).

Organisations governed by a 20th Century management style are characterised by a hierarchical structure to communications, plans and rules in order for management to control their employees and make money for shareholders via cost optimisation (2)(1). This traditional corporate structure, however, creates excessive bureaucracy, threatening team structure and quashing creativity and innovation (1). This results in grudging compliance and failure to keep up with market demands and demotivates employees who seek meaningful work over money-making (1).

To achieve the substantial results promised by digital maturity, organisations must look at both new technology and new strategies which considers their current culture, people, structure and tasks (4)(10)(13). Organisations can cultivate an environment in which their employees drive and execute the vision for transformation if they actively build and maintain a digital culture which aligns employee behaviours and values with their goals and strategies for transformation (13)(11).

For many companies, incumbents in particular, this may involve a dramatic overhaul of the old culture, structure and organisational values to encourage the incorporation of new behaviours that align with a digital culture (12). Organisations who passively wait for cultural change will fail to keep up with the pace of the current market and would do better to take the opportunity afforded by digital transformation to actively develop their cultures (13)(9). Even conscious cultural shifts are a time-consuming process, particularly for companies following the advice to introduce incremental change; organisations looking to maintain a competitive standing should look to act quickly (14)(15).

An established digital culture allows transformations to progress more smoothly and companies committed to cultivating the right culture are 2.5 times more likely to succeed (6)(13). As Tony Hsieh, founder and CEO of Zappos, says: “If you get the culture right, most of the other stuff will just take care of itself.” (15).

But what characteristics form a digital culture?


Characteristics of a digitally mature culture:

There are similarities between the cultures of digitally mature companies (8). These companies actively encourage cultural qualities including:

  • Innovation, experimentation and smart risk-taking

  • Customer centricity

  • Cross-company collaboration and communication

  • Data driven decisions

  • Accountability

  • Flat corporate structure

  • Effective change management

Innovation, experimentation and smart risk-taking

Digitally mature organisations have integrated a ‘fail fast’ mentality into their corporate culture; this approach allows employees to embrace the risks of rapid experimentation, leading to innovation (4)(14)(8). Failure in these small-scale experiments should produce only small losses, making the risk worthwhile for the occasional innovation which could produce valuable results (7). Without this freedom to take risks, corporations miss out on the opportunity to keep up with the rapidly changing and increasingly digital market (9).

Customer centricity

In a discussion with McKinsey in 2016, Francisco D’Souza, CEO at Cognizant, commented “the interdisciplinary requirement of digital continues to grow. The possibilities created by combining data science, design, and human science underscore the importance both of working cross-functionally and of driving customer-centricity into the everyday operations of the business. Many organizations have yet to unlock that potential.” (9). The goal of organisations today must shift from making money to bringing value to their customers (1)(2). This approach, paired with a clear understanding of the customer, will help unify employees’ understanding of their role in the company's vision and bring workers a sense of purpose whilst providing better services and products, building customer loyalty (9). A clearer understanding of the customer also helps mitigate the risks of experimentation, as it allows an organisation to produce a product and run their business in a way which incorporates customer input and anticipates customer trends (9).

To develop clarity about the customer, it is valuable for organisations to harness customer data like their demographic, purchase history and social media information (9). Siloed organisations, however, may struggle to widely circulate such information.


Cross-company collaboration and communication

Companies where leadership or people in transformation-related roles encourage cross-unit collaboration are 1.6 and 1.8 more likely to report success, respectively (5).

Organisational silos increase the risk of segregated information and a reduced sense of accountability within a workforce (9).

Data driven decisions

In alignment with the insight of D’Souza, companies in the early stages of digital transformation are commonly characterised by siloed work efforts (4). This increases the risk of misdirected information resulting in slower reaction to customers and missed opportunities for businesses (9). Increasingly, for organisations to flourish digitally, collaboration between all areas of an organisation must be possible (8).

When companies manage to break down silos, information can be more readily available throughout the corporation, enabling companies to communicate the goals and purpose of transformation and understanding of the customer to all employees, allowing data-driven decisions (8)(9).


Accountability

When undergoing transformation, it is critical that everyone in the organisation takes responsibility for reaching its goals. If risk is not managed and employees are not held accountable, there is an increased likelihood of irresponsible behaviour across the organisation which could threaten chances of success (10)(12).

Breaking down silos provides organisations with a common understanding of the customer and the means of attaining transformational success, which may help to develop a common sense of accountability (9).


Corporate structure

To nurture the attributes of a digitally mature culture, including increased collaboration, rapid experimentation and agility, company structure must transition from hierarchical to a ‘flat’ structure to increase the speed of communication, reduce demotivating and time-consuming bureaucracy and boost agility (4).

Leaders of digitally mature businesses, therefore, must expect their role to change to drive transformation; rather than controlling employees, leaders should enable self-organised teams to flourish (1)(2).

To achieve this, leaders should remove bureaucracy to allow rapid innovation and agility to please the customer (1)(2), which involves showing that they trust teams with some decision making (9). By encouraging continuous learning and providing workers with valuable data and training, companies can ensure that employees have the skills and knowledge for informed decision-making (9). It is also the role of leadership to help develop and instil a digital culture, enforcing attributes like accountability, collaboration and risk taking for innovation, by communicating a shared vision, inspiring employees, and role modelling behaviours (3)(12)(14).

According to the Global Culture Survey, over 71% of C-suite executives say they have culture on their agenda, despite only 48% of front-line employees identifying this as a key focus of their leadership (14). To reduce this culture gap effectively, leadership must understand the sentiment of their workforce and communicate clearly the purpose of transformation and the need for and path to cultural change (13). Greater clarity of the sentiment in the wider corporation via regular behaviour monitoring will also allow leaders to identify which key cultural attributes to prioritise during transformation, whilst ensuring employee engagement, allowing leadership to gain trust and mitigate risky behaviours (4)(14)(12).


Effective change management

Clear communication of the goals and reasons behind transformation by leadership can also mitigate change management challenges stemming from fear of change and scepticism of new technology.

Cultural change

44% of respondents from a survey by Deloitte and MIT SMR believe that their corporation is responding effectively in preparation for the digital disruption that 87% believe will affect their industry either greatly or moderately (13).

Despite the necessity of developing of a strong digital cultural to attain digital maturity, with 80% of survey respondents from digitally mature companies identifying their corporation as developing an effective digital culture with attributes like risk taking, agility and collaboration, only 23% of those from companies in early stages of digital development would agree (8). These corporations risk losing their competitivity in the current market unless they begin to focus on their culture.

A study by the Global Culture Survey, however, found that 70% of respondents would rather undergo incremental change than a large cultural overhaul (14). Corporations, therefore, should identify a few key behaviours to develop and continually gauge employee readiness before progressing to the next step of cultural transformation in order to achieve lasting change (14).

Considering transformation? How we can help you

Identifying the key attributes and behaviours to prioritise in your cultural transformation requires an in-depth understanding of your current state.

Nimbe are experts in enabling successful business transformations using AI and machine learning. By gathering information from discussions and workshops with leadership and knowledge workers, we work alongside our clients’ organisation to apply our Affix-3 Discovery Process to help them gain a comprehensive understanding of their current state, goals and challenges. We then provide our clients with clarity about their transformational opportunities and manage or support implementation.

If you are planning to undertake a transformation or are actively engaged in a transformation journey, have a look at our readiness assessment tool here for a preliminary evaluation of your current state.

To find out how our discovery, clarity and implementation steps can help your company to develop a digital culture, schedule a call with one of our consultants to discuss how we can help guide your business through a successful transformation.

References:

(1) https://www.forbes.com/sites/stevedenning/2011/06/07/learning-to-herd-cats/

(2) https://stevedenning.typepad.com/steve_denning/2010/11/the-deathand-reinventionof-management-a-draft-synthesis.html

(3) http://www.enterprisesolutions.tsg.com/sites/default/files/Deloitte%20-%20Aligning%20the%20Organization%20for%20Its%20Digital%20Future.pdf

(4) http://www.enterprisesolutions.tsg.com/sites/default/files/Deloitte%20-%20Aligning%20the%20Organization%20for%20Its%20Digital%20Future.pdf

(5)https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/Organization/Our%20Insights/Unlocking%20success%20in%20digital%20transformations/Unlocking-success-in-digital-transformations.ashx

(6) https://www.mckinsey.com/business-functions/mckinsey-digital/how-we-help-clients/digital-culture-and-capabilities

(7) https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-strategy-and-corporate-finance-blog/digital-success-requires-a-digital-culture

(8)https://www.deloittedigital.com/us/en/blog-list/2016/four-things-digital-transformation-leaders-know-about-culture.html

(9) https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/culture-for-a-digital-age

(10)https://www2.deloitte.com/content/dam/Deloitte/us/Documents/finance/us-rfa-future-of-risk-in-the-digital-era-report.pdf

(11)https://www2.deloitte.com/content/dam/Deloitte/us/Documents/human-capital/us-cons-digital-workplace-and-culture.pdf

(12)https://deloitte.wsj.com/cio/2019/07/18/the-role-of-culture-in-digital-transformation/

(13)https://deloitte.wsj.com/cfo/2019/10/20/how-culture-drives-digital-transformation/

(14)https://www.strategyand.pwc.com/gx/en/functions/technology-strategy/your-culture.html

(15)https://www.strategyand.pwc.com/gx/en/insights/2011-2014/building-a-digital-culture.html