Why your digital transformation is probably doomed
6 steps to avoid disaster
It must be considered that there is nothing more difficult to carry out, nor more doubtful of success nor dangerous to handle, than to initiate a new order of things.
Niccolò di Bernardo dei Machiavelli, in 1513
Recently I was meeting with a friend and speaking about why digital transformation fails. This exec works at a global software provider where he heads content planning for client demonstrations and solution architecting.
He offered this insight, “We have corporate C-Suite visitors come in to see what new technologies we can offer them to stay competitive and become more effective. They are always wowed. And then they say they have introduced new tech in the past, and the biggest problem is cultural acceptance, adoption, and in essence, changing the way the company works. We can provide all sorts of technical advancements, but at the end of the day, if we can’t help the client with the culture change that is needed, we won’t build trust and ensure repeat and increased business.”
Today’s business world is driven by a never-ending game of catch-up with technology. We continually introduce new apps, platforms and devices and are increasingly adopting AI, Big Data, and robotics—all in an effort to increase efficiency and drive performance. But humans can’t keep up. In fact, most of us don’t like change. And organizations (groups of humans) are even more inclined to reject change.
It’s really no surprise that organizations are struggling to keep up. Old-school work culture is completely incompatible with the new behaviors, attitudes and interactions required by digital transformation. We’ve learned that the solution is to change the organization’s cultural way of working—to promote a “digital culture,” if you will. This shift promotes embracing new technology and methods of collaborative and iterative working that complement the technological changes of today. What we are saying is that digital transformation is not just about implementing technology, but rather about building the attitudes, behaviors, and capabilities (new ways of working) that these technologies require. This is what we mean by a “digital culture.”
A growing case for change
Companies not actively taking the steps to design, build, and support a digital culture are doing so at their own risk. According to a recent study by McKinsey1, culture is the most significant self-reported barrier to digital effectiveness. And a PWC study found “a whopping 75% of change initiatives will fail, all due to a lack of a digital culture.” In fact, years of research on transformation has shown that the success rate for these efforts is consistently low—less than 30% actually succeed. No industry is free from these constraints.
The greatest reason to get on the digital culture bandwagon is that companies with an active and engaged digital culture significantly outperform their peers. According to a study of 40 organizations undergoing digital transformations, conducted by Boston Consulting Group, the “proportion of companies reporting breakthrough or strong financial performance was five times greater (90%) among those that focused on culture than it was among those who neglected culture (17%) 2.” According to the same study, organizations that are considered “digitally enabled” move faster, make more informed decisions, and deliver results faster.
What are the barriers to success?
Culture cannot be swapped out like software. Culture is the cumulative set of beliefs and behaviors that determine how an organization’s employees and management interact. Corporate culture develops collectively and is more like a nervous system wherein new pathways (ways of working) must be naturally forged over time. It seeps into all levels and is passed on passively from employee to employee. That is one of the key reasons it is so hard to change and it takes so long to bring everyone on board.
There are a few primary barriers to successful transformation. A siloed, hierarchical organizational design is chief among them. A more traditional “command and control” operation acts as a major barrier to transformation when compared with a collaborative and flat structure. An organization which reinforces a risk-averse culture that requires extensive review, reporting, and planning is another barrier. In this conventional environment employees are not encouraged, compensated, rewarded, or trained to actively engage and participate. Transformation is also inhibited when the organization is internally focused on product goals and metrics without considering the needs of the customer.
Old-to-New Cultural Continuum Assessment
We’ve created this Old Way – New Way assessment to illuminate the key characteristics and differences between an old school culture and a new digital culture. Use this assessment to see where your organization lies on the continuum of old to new ways of working.
Old School Culture
Formal hierarchical org design; functional silos; command and control operations; focus on in-house expertise
Flatter, connected, and matrixed org design; minimal hierarchy and cross-functional teams and operations; use of network of expertise – internally and externally
Old School Culture
Formal backward-looking data gathering, KPIs, and reporting; reactive decision-making
Real-time data and fast insight development; frequent proactive actions and decisions
Old School Culture
Customers are an abstraction; part of the system and considered just another cog in the supply chain
Customer-centric focus; attention on addressing customer needs, creating value for customers
Old School Culture
Use of outside market research and focus groups for perceptions
Constantly listening to user feedback and input, then learning and quickly adjusting
Old School Culture
Risk-averse; work and initiatives need extensive justification, formal review, and approval and take time
Encouragement and permission to explore, experiment, and test new ideas; leverage design and visual thinking for agility and effective communications
Old School Culture
Formal channels of communication; emphasis on email and detailed slide decks
Multiple channels used for communicating, sharing, and collaborating
How to build a digital culture
This is hard work. It takes time, commitment, leadership, and resources. Here are six key actions that will help to build a culture that will fuel your digital transformation and power up your people to avoid digital disaster.
Using a bottom-up and top-down approach, reimagine how your technology and culture will work together to achieve your business goals. Don’t hire a Big 4 consultancy to tell you what to do, then announce it from on high. Instead, collaborate with your people to develop a clear vision of what your new way of working will look like.
Build a change strategy, including a coalition of ambassadors, with action steps and tasks to move the users (employees) through phases of awareness, engagement, and adoption of the new way of working. This might include creating incentives and rewards that encourage experimentation into the fabric of your talent management, delegating power, and breaking down operational command and control silos into integrated working teams.
Instill a sense of urgency by messaging the compelling reason for the change and then widely communicate it. Use multiple sources and formats, that are not just your traditional email or town hall meeting, but include digital platforms, experiences, and plenty of ways to share, engage, participate, and offer feedback.
Anchor changes in the organization’s culture through experiences and activities. Design the organization to encourage collaboration and leverage implementation of digital tools to make information accessible. Engage and empower your employees to work in new collaborative ways and redefine individual roles and responsibilities to align with the organization’s strategy and digital culture goals
Leaders must walk the walk and talk the talk of digital transformation and the new way of working. Additionally, the organization must recruit, train, and advance digital leaders who embrace the new digital culture. Leadership actively and visibly removes obstacles which may include structural, operational, and process barriers.
Plan for and create short-term wins and monitor progress. Continually engage with your employees to understand their challenges and hear their successes. Acknowledge and incorporate this feedback into your ongoing communications.
Don’t wait – your competition isn’t
Undertaking digital transformation to stay competitive is simply a given today. While you will find many other companies on the same path, achieving consistent performance, being adaptive, agile, and relevant requires incorporating digital culture. It requires leveraging all of the organizational tools and resources at your disposal for changing hearts and minds to build a sustainable digital culture.
The effort is worth it. When cultural change is considered a key component of your digital transformation strategy, the results are “greater than the sum of the parts.” In addition to maximizing the benefits of the technology (think consistent and innovative application), the accompanying new ways of working will engage your workforce, build customer value, and increase performance.