The Culture of Digital 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. “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

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.”

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.

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.”