STRATEGY, NOT TECHNOLOGY, DRIVES DIGITAL
TRANSFORMATION PART III
4 THE
CULTURE OF DIGITAL BUSINESS TRANSFORMATION
A culture conducive to digital transformation
is a hallmark of maturing companies. These organizations have a strong propensity
to encourage risk taking, foster innovation and develop collaborative work
environments. “Culture needs to support collaboration and creativity,” says
Mohamed-Hédi Charki, an associate professor at EDHEC Business School in France
who focuses on the outcomes associated with the implications of an enterprise
social network at a European cosmetics company. “In this fast-changing, complex
world, if a company sees innovation as something incremental, it will be
marginalized in the coming years.”
Taking Risks Becomes a Cultural Norm
Digitally maturing organizations are
considerably less risk averse than their peers. More than half of respondents
from less digitally mature companies see their organization’s fear of risk as a
major shortcoming. In maturing entities, only 36% register the same complaint.
Phil Simon, author of several books on how
technology impacts business, sees risk aversion as a serious impediment that
plagues many established companies. “For every Google, Amazon or Facebook
taking major risks, hundreds of large companies are still playing it safe,” he
says. “Today, the costs of inaction almost always exceed the costs of action.”
Making a culture less risk averse is by no
means an insurmountable task. To boost risk taking in their companies,
executives need to change their mindsets. Dr. John Halamka, chief information
officer of the Boston health care provider Beth Israel Deaconess Medical
Center, says that leaders must acknowledge failure as a prerequisite for
success. “Failure is a valid outcome,” he says. “Wearable computing is great,
but Google Glass wearable computing devices turned out not to be for us right
now. We may discover that patients love the Apple Watch wrist-wearable device
and it becomes a platform. It’s hard to know. But even if it doesn’t, it’s OK.”
Cisco CEO John Chambers echoes the sentiment.
“We began working on the Internet of everything more than seven years ago,” he
comments. “The market wasn’t ready for it. In that instance, we had the courage
to keep going without overinvesting to the point where we were betting the
company on it.”
But it would be a mistake to suggest that
only the mindset of leaders drives aversion to risk. Employees may fear taking
risks as much as their managers do. Encouraging employees to be bolder is
especially important in digital business transformations. To draw employees
into the fold, businesses may have to take deliberate actions.
To encourage employee buy-in, one
telecommunications company uses gamification. When the company made its first
forays into social marketing, many employees were reluctant to communicate
directly with the market. To encourage staff to participate, the company
created contests and leaderboards. “We issue social communications challenges
for our employees, and in return those employees who publish via social or
complete a challenge get points,” says the company’s former chief marketing
officer and chief of staff. “Those points get higher the more important the
message or challenge is. We publish leaderboards, and every month we have an
award for the winner for that month. And guess what? Everyone wants to be on
the top of the list.”
As Disney’s Milovich has pointed out, most
employees use sophisticated social media platforms and interact with companies
using seamless digital technologies in their personal life, but things become
more difficult at work: “When we started this journey, we had a gap that
existed between how someone interacted with relative ease in their personal
life — to tap on an app and do his online banking or to quickly look up the
weather where they lived — and how they interacted at work.”
Disney is making great strides in closing the
gap. The company is identifying early adopters and rallying them. These
employees buoy risk taking by encouraging Disney employees who are not yet
actively involved in the company’s digital efforts to join the ranks. “We are
moving with as much speed and nimbleness with our efforts as we do on the
consumer side, so that the appropriate level of risk taking and speed is
balanced,” Milovich says. “You can tap into small but growing virtual
communities to keep things moving along.”
Industry Lens: Leaders, But No Laggards
Industries born of technology lead the list
of sectors with the greatest penetration of digitally maturing organizations —
IT, telecom, and media & entertainment. However, this year’s digital
business study did not find a consistent set of laggards on the opposite end of
the spectrum. Companies in each sector have strengths to build on as well as weaknesses
to address.
The construction and real estate sector, for
example, ranks lowest in terms of digital maturity — defined as an organization
where digital has transformed processes, talent engagement and business models
— but ranks in the top five industries reaping digital gains by improving work
with partners and employees. Companies in this sector also lag in the
development of digital strategies focused on transforming their businesses.
Consumer goods companies sit squarely in the
middle of the digital maturity spectrum but fall short on digitally enabling
employees. Conversely, the manufacturing sector is providing digital skills to
employees but has yet to realize digital gains. The issue may be that
executives in the sector need to increase their efforts to encourage employees
to use digital technologies to innovate.
Sparking New Ideas
People often think that innovation emanates
from sudden flashes of brilliance on the part of a gifted few. In reality, many
new ideas arise through collaborative efforts among people of different
backgrounds. Digitally maturing companies are in a position to recognize the
benefits from collaboration. More than 80% of respondents from maturing
organizations agree or strongly agree their workplace environments are collaborative
compared to competitors. Only 34% of respondents from early-stage companies
feel the same way. Digitally maturing organizations are also much more likely
to use cross-functional teams to implement digital initiatives — 44% of
respondents from maturing organizations versus a scant 16% from early-stage
companies.
“Because products and business models are
becoming more complex, organizations are creating an increasing number of silos
to ease the challenge of managing large enterprises,” says Paul Leonardi, a
professor of technology management at the University of California Santa
Barbara. “But ease of management can come at the expense of innovation by
squashing people’s ability to share knowledge.”
Comfort with risk and creating collaborative
work styles are key drivers of innovation. As a result, digitally maturing
organizations excel here as well. More than 70% of respondents from maturing
companies say that their managers encourage them to innovate with digital
technologies. At companies with lower levels of digital maturity, only 28% of
respondents express the same sentiment.
Digitally maturing companies behave in ways
that are different than other companies.
Telling the Story
In our interviews, we found that storytelling
is becoming a popular means of gaining employee buy-in and organizational
traction for digital transformation. Disney is a prime example. To capture the
hearts and minds of its employees, Disney carefully crafts internal messages so
that they are highly relevant. “We develop stories all day long at Disney,”
says Disney senior vice president Milovich. “A great story is a key element in
getting funding for a pilot for our TV shows, and we apply this same
storytelling capability to allocate capital for our employee digital initiatives.”
Another company, in the manufacturing sector,
is working with the film school at the University of Southern California to
hone its storytelling abilities. “We are learning new approaches to create
narratives about digital,” says the company’s vice president of strategy,
research and new business innovation. She points out that although the context
is different — cinematic arts — a huge amount of the film school’s work is
about telling a story and telling it well.
“At a broad level, we need to continually
tell the story of digital and what it means to live in a world where mobile
phones and the Internet are becoming ubiquitous,” says Jim Rosenberg, chief of
digital strategy at UNICEF. “That story should build awareness, helping people
understand the implications of everyone having a camera in their pocket and
anything being able to go online.”
Telling digital stories to constituents
outside the organization can also boost buy-in by creating pride in the company
and its ability to tell its story digitally. The popularity of a captain’s blog
at the formerly publicity-shy shipping and oil conglomerate Maersk Group is a
moving example. The captain was about to retire after spending years at the
company and his entire life in shipping. Anna Granholm-Brun, the company’s
corporate brand manager at the time, convinced the captain to write a daily
blog about his last week at sea.
The captain recounted his life in shipping
and memories of different ports. The posts captured internal attention, and
Granholm-Brun presented all officers and cadets the same opportunity to blog
and become Maersk’s social media ambassadors. As she describes it, “What we end
up doing is telling the story of what Maersk does and how we do it and the
values that we live by through the very trustworthy and honest voices of the
people who work for us.
Can Technology Change the Culture?
Whether culture drives technology adoption or
whether technology changes the culture is still an open question. Beth Israel
Deaconess’ Halamka stands on the culture side of the question. “I have never
seen a technology drive change on its own,” he says. “Culture leads the
adoption of technology. Our ability to innovate depends on the impatience of
our culture.”
A former telecom industry CMO sits on the
other side of the debate. He observes that the digital culture of his
organization traces its roots to early social media experiments. “Social helped
get the momentum going,” he says. “As more people jumped on board, social
played a major part in changing the culture. I’d like to say it was thought
through in advance and part of a formal culture change program. But it wasn’t.
The change started with a technology experiment.”
The strategy executive from the manufacturing
sector quoted earlier is somewhere in the middle. To her, culture and
technology are inextricably linked. As an example, she cites replacing desktop
computers with laptops, which allows people to move around the office. But if
the culture and physical space of a company don’t support employees working together,
people will likely stay put. “Organizations often think about technology in a
very narrow sense,” she says. “They don’t ask questions about what behaviors a
new technology might foster and what behaviors it might actually inhibit. The
answers must line up with the overall culture and direction that leaders want
to take the company.”
CONTINUES IN PART IV
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