To digitally transform, start with culture. Here's why and how.

Digital transformation is high on the agenda of pretty much every large-enterprise senior executive right now, and for good reason. The opportunities and threats presented by disruptive technologies have never been greater as the relentless pace of technological evolution, driven by Moore’s Law, generates exponential change.

This is a huge challenge for our human brains, and the enterprises we inhabit, to cope with. Both are wired for a strictly sequential modus operandi. It is perhaps not very surprising then, to find that many businesses are really struggling with their digital transformation (digitalization) initiatives.

A raft of senior executive surveys from the likes of Gartner, HBR Analytical Services and Tech Republic reveal that around half of companies have no formal, enterprise-wide digital transformation plan. And even amongst those that do, a significant number are prioritising relatively established areas such as e-Commerce and digital marketing. Very few seem to be approaching digitalization as a fundamental re-engineering of their core business; in fact only about a fifth according to Gartner. Not surprisingly, relatively few also have metrics for what constitutes digital success.

So what’s the issue? It’s hard to believe that so many companies are sitting on the fence on a topic that constitutes a goldmine or a landmine, depending on your perspective.

There’s a big clue in the HBR study, which found that many companies trying to move forward with digitalization face organisational roadblocks including an inability to experiment quickly on digital projects, change management problems and departmental silos. In other words, cultural issues. The loud and clear message is that culture is the biggest blocker to digitalization.

This finding isn’t a big surprise. Digitalization is about much more than technology. It’s about creating a new digital mindset across the enterprise which is open to agile experimentation, open to new possibilities for digitally re-engineered processes and open to collaborative co-creation and learning. To achieve this digital mindset takes a new form of positive collective leadership in which every employee from the boardroom to the shop floor has a stake in building the future and is able to be their best self every day. No mean feat.

The difficulties with cultural change are underlined in a recent report from Cap Gemini and Brian Solis, which reports that over 60% of respondents drawn from some 340 organisations across 8 countries see culture as one of the biggest roadblocks to becoming digital. Further, this challenge has actually worsened by over 10% since 2011 when Cap Gemini began researching the topic. Even more alarming is the finding that there is a significant perception gap between senior leaders and employees on the existence of a digital culture – whilst 40% of senior-level executives believe their firm has a digital culture only 27% of the employees surveyed agreed with this statement.

Again, perhaps none of this should be a surprise.

Culture is a difficult topic to get to grips with because it is implicit and is reflected in a set of preferred behaviours.

Senior executives need to have pretty high emotional intelligence (EQ) to clearly see their culture and get to grips with changing it. But this attribute is not always high on the wish list when appointing senior executives. There is research evidence that EQ is often highest in middle management layers but then drops significantly in executive management, reflecting the assertion that middle managers have to deal more with the troops and executives have to make tough decisions that may not be popular.

Draw your own conclusions about the logic of this.

So how might senior executives go about changing culture?

There is some great insights on this topic from researchers at the Center for Positive Organizations in Michigan Ross Business School. Professors Bob Quinn and Kim Cameron propose a Competing Values Framework (CVF) model which encompasses four competing facets of organisational culture:

Value #1: Collaborate: how we work together.

Value #2: Create: how we create the future.

Value #3: Control: how we do things right.

Value #4: Compete: how we get things done.

Every culture comprises a unique mix of emphasis and orientation across these four competing Values.

The model explains elegantly why established businesses – so called dinosaurs that need to digitally transform – struggle so much with their culture. When a business finds success, it will tend easily towards emphasising the Control and Compete dimensions, since these are the ones that promote consistent, disciplined execution. In such a scenario, creativity and collaboration carry less value, since they will tend to distract the business from its established formula for success. However, a digital mindset requires that these Collaborate and Create cultural elements thrive. Hence the internal struggle.

Looking deeper, the CVF model defines opposing orientations within each of the four Values. Taken together these represent, alternatively, a Normal cultural state and a Transformative state. In the Normal state, the culture is closed to new ideas, focused on personal self-interest, directed by senior management and driven by fear, causing people to remain firmly in their comfort zone. Sound familiar?

In the Transformative state, the culture is open to continuous learning, creativity thrives at all levels and people are motivated to do the right thing and strive for excellence through a shared sense of purpose and mutual trust and respect. There is a state of 'intelligent collective leadership' in which everyone is able to contribute positively as their best self. Sound attractive?

No prize for guessing which variation corresponds to the very essence of the culture needed to drive digitalization.

The challenge is that the Normal state is the one most of us have lived with for most of our career. It is the comfort zone of corporate culture and requires positive intervention to change. However, with courage, strong moral leadership and positive effort the senior executives in any enterprise can stimulate the shift from A to B.

It may seem like a daunting journey but here’s the way to think about it: even a 1% change, over a sufficient period of time, will get you to a very different place. Here’s an example that neatly brings this idea to life. If you fly around the globe starting in Washington DC but with a 1% error in your compass heading, you will arrive back in Boston. That 1% makes a big difference!

Senior executives can ask themselves four basic questions to get started on the journey, one for each competing Value of the CVF model:

Question #1: Collaborate: Do we focus on helping each other or ourselves?

Question #2: Create: Are we externally open to new ideas or internally closed?

Question #3: Control: Do we instruct or empower people to do the right thing?

Question #4: Compete: Do we strive for excellence or stay in our comfort zone?   

In the answers to these searching questions lies the path to true transformation and ultimately, to the digitalization that is so necessary in order to thrive for the long-term in a hyper-competitive digital world. If your honest answers are that your culture is about everyone helping each other, is open to new ideas, is about empowering people to act and stimulates a shared striving for excellence, you are well on your way.

That’s what I think. Do you agree or disagree? I’d very much welcome your views and experience. Please leave a comment.