Digital transformation: What's culture got to do with it?

Organisations need to move away from valuing business outcomes to valuing customer outcomes (Image: Shutterstock - for illustrative purposes only)

This was a meeting with a diversified Asian company. At the table were the CEO, CFO, CIO, CMO and two of the largest P&L owners. They wanted to discuss how they could digitally transform themselves.

We started by introducing ourselves. And waited for them to do the same. Every one of the leaders just looked at the CEO as he introduced himself and then introduced each of his team members. Through the entire meeting, as we asked question after question – “What are your key growth priorities?”, “What are you seeing with your customers?”, “What kind of investments have you made in technology?” – the answer would come from the CEO. The others would perhaps add a couple of lines, but never anything new.

As we parted, it became clear to us that much before they think about what to do with digital, they needed to think about what to do with how they worked.

This is a somewhat extreme example of an organisation culture that is at obvious odds with their aspiration. In our work with organizations across the region, we consistently see culture as the single biggest impediment to successful digital transformation.

Peter Drucker famously said, “strategy is a commodity, execution is an art.” To use an analogy provided by author David Maister - imagine you are a person who’s hugely overweight and smokes heavily. The strategy for getting healthy is simple, “Lose weight. Quit smoking.” Every person in your position will have the same strategy. It is the daily discipline of giving up your favourite foods, of starting to exercise, of eliminating triggers one at a time, of failing, learning and finding the energy to start again that will determine your success.

As you think about the transformation of your business, you may spend a lot of time creating new value for your customers, redesigning end-to-end journeys, embedding analytics into your processes, and building open technology platforms. Yet, for these elements to truly change the core of your company and your future, they have to be enabled by a significant cultural change.

Take three changes that are acknowledged to be essential to a digital transformation.

Consumer centricity: Most companies have experienced the irrevocable shift in balance of power towards consumers. Most companies respond by creating “enterprise start-ups” - self-sufficient autonomous teams tasked with delivering customer and business outcomes, like reducing the time to service a customer, or improving the experience of finding the product they need.

This is a great start, and even a lot of fun for a while. However, these practices fail, if not supported by a shift in organizational values. For example, organizations need to move away - from valuing business outcomes to valuing customer outcomes. This requires a whole new set of metrics and mindset.
- from top down governance to fast delegated decision making. This requires giving the teams the confidence to make decisions with imperfect information, and respecting those decisions, even if those are not what the senior leadership would make.
- from being rewarded for not making mistakes to being rewarded for speed. The former drives an obsession with reducing errors and lowering risk - that inevitably slows down decision making.

Agility: This much-desired attribute is rightly on the transformation agenda for most organizations. Being able to innovate quickly and cheaply, test digital products and services in the market, refine them, and release them on a regular basis has become a competitive advantage.

Most organizations rightly undertake a redesign and automation of their software engineering methods. However, what they fundamentally need is a new operating model which allows information and insights to travel rapidly through the organization and drive changes to products, services and propositions.

For this to happen, you need to break down functional boundaries, create a shared language and incentive that allow front end sales people and product designers and IT and Legal and Marketing to talk to one another. Many organizations do not dismantle existing mental models that consider one function “superior” to another. This in turn preserves the unspoken but well understood hierarchies that hinder true sharing and discovery.

Being data driven: Big data and analytics have climbed to the top of the corporate agenda, promising hitherto unseen performance gains. Most companies start on this journey by building models that predict and optimize business outcomes, establishing IT systems and infrastructure that allow new types of data sourcing, storage and analysis.

But if organizations do not change how decisions get made, all the insight out of the data won’t solve anything. For too long experience and intuition based decision making has been woven into the organizational fabric, and many senior leaders don’t feel the need to justify decisions with data.

Being data driven is also a commitment to changing one’s opinions if presented with the right data. If an organization values knowledge and experience over learning, it is near impossible for it to create a data driven culture.

So while companies reorganise themselves to make the changes discussed, the most important change they must bring is that in their culture! Too often, culture is viewed as an outcome of business transformation. On the contrary, CEOs need to examine their culture thoughtfully, understand the changes they need to make, and hold themselves and their teams accountable to making them. In the long run, it is this commitment to changing the very core of their being that will separate the digital winners from the rest.

- By Rajdeep Endow, Managing Director, SapientRazorfish, Asia Pacific. Views expressed are personal.

The thoughts and opinions shared here are of the author.