Leaders in every industry are embracing digital transformation because they recognize its power. It enables businesses to modernize legacy processes, accelerate efficient workflows, strengthen security, and increase profitability. But as companies advance from pilot programs to wide-scale adoption, they often create culture clash.
Being a digital organization means not only having digital products, services, and customer interactions but also powering core operations with technology. And that requires a tectonic shift in the activities employees perform and the manner in which they engage people both inside and outside the organization—in other words, a shift in culture.
Why digital culture matters
Culture comprises the values and behaviors that define how things get done. A healthy culture provides the tacit code of conduct that steers individuals to make choices that advance the organization’s goals. Here are three reasons to instill a digital culture:
A McKinsey Global Survey on digital transformations shows the success rate for organizational transformation is low—less than 30% succeed. Results suggest that digital transformations are even more difficult—only 16% of digital transformations successfully improved organizational performance and equipped employees to sustain changes.
2. A digital culture empowers people to deliver results faster.
Digital organizations move faster than traditional ones, and their flatter hierarchy accelerates decision-making. A digital culture serves as a code of conduct that gives employees the latitude to make judgment calls and on-the-spot decisions.
3. A digital culture attracts talent.
Having a reputation as a digital leader is a magnet for talent—particularly digital talent. Millennials and Gen Zers are generally drawn to digital companies, with their promise of a collaborative, creative environment, and greater autonomy. It’s no wonder websites like LinkedIn.com and Glassdoor.com are increasingly used by job seekers to get insiders’ perspectives on company culture.
The anatomy of digital transformation
Just as there is no universal strategy, there is no standard digital culture. Nevertheless, a digital culture generally has five defining elements:
- Promotes an external, rather than an internal, orientation.
A digital culture encourages employees to look outward and engage with customers and partners to create new solutions. A prime example of external orientation is the focus on the customer journey—employees shape product development and improve the customer experience by putting themselves in the customer’s shoes.
- Prizes delegation over control.
A digital culture diffuses decision-making deep into the organization.
- Encourages boldness over caution.
In a digital culture, people are encouraged to take risks, fail fast, and learn as they go. And they’re discouraged from preserving the status quo out of habit or caution.
- Emphasizes more action and less planning.
In the fast-changing digital world, planning and decision-making must shift from a long-term to a short-term focus. A digital culture supports the need for speed and promotes continuous iteration rather than perfecting a product or idea before launching.
- Values collaboration more than individual effort.
Success in a digital culture comes through collective work and information sharing across divisions, units, and functions. The iterative and fast pace of digital work requires a greater level of transparency and interaction than in a traditional organization.
Of course, these defining elements vary in degree from industry to industry and from company to company. Even within an organization, the desired levels of risk-taking vary. Encouraging risk-taking nurtures thinking outside the box without being reckless, breaching regulations, or violating company policy.
Keys to Success
How does a company shift its digital culture?
When a company clearly defines the behaviors that matter and their employees adhere to them, organizations can realize a strong culture and are more likely to reap results. But leaders must first identify the characteristics of their target digital culture on the basis of the company’s strategy, goals, and purpose. Leaders then need to translate each cultural characteristic into specific behavior examples. Finally, leaders must identify the gap between current and target behaviors and integrate the changes into the communications related to the cultural change.2. Activate leadership.
High-performing cultures, especially digital ones, require strong leadership and engaged employees. In digital cultures, teams need to act autonomously, for example, and employees must exercise judgment. But words alone aren’t enough. Whether they’re in the C-suite or on the frontlines, leaders must model these behaviors. Activating leadership across company culture is essential for spurring employee engagement, which is particularly important in a digital culture given its emphasis on autonomy, judgment, customer focus, and an entrepreneurial mindset.3. Align context.
Scaling digital culture is a challenge. A traditional culture, based on hierarchical power and teams or units competing for resources, is in many ways antithetical to digital culture, with its emphasis on delegation, collaboration, and speed. Unless companies change the organizational context—underlying systems, processes, and practices—it’s virtually impossible to foster new behaviors. To embed a new culture, companies need to revisit their operating model. They also need to stimulate new practices by reviewing each one of the organizational context areas—leadership, organization design, performance management, people-development practices, resources and tools, vision and values, and informal interactions—and make changes that incentivize the right behaviors. Changes should also be made to companies’ hiring practices to find prospects who exhibit the new behaviors.
As with any transformation, leaders who guide a digital transformation are often preoccupied with structural and process changes and overlook the people side – only to wonder why the effort failed. Bottom line: culture transformation is a key determinant of a successful digital transformation.
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