Company culture is a critical success factor in digital transformation initiatives, and digital transformation impacts three areas of opportunities, in their order of importance: people, process and technology.
Unfortunately, between IT organizations and their respective consulting partners, the focus has almost always been the last – technology. Why? Technology is real, shiny and easily quantified. On the other hand, more mature organizations focus on both technology and process. While this is impressive, the potential to realize stated objectives and business value is still stymied. Technology modernization and process improvements alone will not be a holistic approach to authentic digital transformation. The people aspect, specifically, company culture, influences the engagement (or lack thereof) and thus, the adoption of new mindset and behaviors inherent in change events.
Let us focus on company culture. How is company culture defined, articulated and demonstrated in business organizations? Who sets the company culture in business organizations?
The leadership team does.
Let’s face it: digital transformation is not focused on incremental change. Rather, its goal is to affect not just radical change (e.g. the way the company engages its customers) but also a fundamental change (e.g. the way the company does business). Digital transformation projects aim to reinvent the whole business. And while in principle, we accept the notion that change is the only constant, let’s face it: change is usually not welcome. The current state, or status quo, usually prevails. When a business is successful at the present time, the more challenging it is to introduce disruptive innovation in the organization. This is precisely the premise of Clayton Christensen, a Harvard professor, in his book, “The Innovator’s Dilemma.”
How can the leadership team help define and demonstrate a company culture that enables and propels the digital journey?
Vineet Nayar, writing on Harvard Business Review, discussed the opposite in his article. He proposed three traps that leadership teams must absolutely avoid while engaged in executing an enterprise transformation. What then must the leadership team focus on?
Let me offer the following:
- Articulate Shared Values. In my second article, I mentioned Simon Sinek: he proposes that many organizations have failed to define their “why.” Why does your business exist? What really matters to the organization? In my own practice, I espouse and stick to my three values: trust, respect and transparency.
- Focus on Sustainability. Is your business model sustainable in the long run? If you’re a public company, you’re under pressure to constantly monitor and impact shareholder value – on a quarter by quarter basis. By focusing on the company’s stock price alone, many businesses have missed the opportunity to truly innovate. We have to remind ourselves that sometimes, the really important business value takes time to realize.
- Champion Stakeholder Engagement. The business landscape has become hyper-complex as it undergoes an astounding rate of change. The market has changed and so has consumers. Let’s prioritize stakeholders over shareholders. Stakeholders are your customers, employees, partners and supplies. The all have a stake in the success of the organization. They also matter. In the end, a business that’s engaged all its stakeholders become successful in rewarding its shareholders.
- Become Agile. One of the key goals of digital transformation is business agility. Agile principles that originated in software development have now become a best practice management methodology. Startups like Uber and Airbnb are successful because they’re agile. They can shift priorities and resources as they adjust to the constantly changing consumer behavior.
- Shift Mindset from Cost-Cutting to Investment. When I ask CxOs what keeps them up at night, most of them would answer: keep costs down. Cost optimization is not a bad idea – it impacts the bottom line. And I get it. But focusing too much on costs is sometimes costly (no pun intended). This mindset regards every budgetary spend as an expense. Moving to the cloud? No, too expensive. Are strategic initiatives like cloud computing and mobility really expenses? I don’t think so. Done right, they strategic investments – that is, investment in the future. All we have to do is remember the recent disruptees: Blockbuster, Nokia and Blackberry.
- Embrace Intrapreneurial Mindset. Sometimes, I think that the success of a business becomes the actual reason the same business fails. As the saying goes: if ain’t broke, don’t fix it. And yet in business and in these very chaotic and demanding market, businesses that don’t innovate will be doomed eventually. Organizations like Apple not only obsess about their customers; they stay one step ahead of them. We used to say: think outside the box. Now, I say: there is no box.
The business reality is that the leadership team is in the enviable position of defining and demonstrating cultural behaviors that will propel the organization into the future. And since we’re discussing digital transformation here, a transformational culture, is a key success factor for businesses attempting to create their own future. A transformational culture is composed of business leaders who are humble in their power and authority. They subscribe to the idea and practice of servant leadership.