This is an article that was published in BCG and that, including Harvard, has asked for reading, even today, in its extracurricular courses and that is worth a look!

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Digital Transformation is sweeping the business landscape. Leaders are embracing it wholeheartedly because they recognize its power. But as companies advance from pilot programs to wide-scale adoption, they often run into an unexpected obstacle: culture clash.

Being a digital organization means not only having digital products, services, and customer interactions but also powering core operations with technology. Becoming one, therefore, requires a tectonic change in the activities employees perform as well as in their individual behaviors and the ways they interact with others inside and outside the organization. Although it should come as no surprise that the traditional ways of working are incompatible with the new ways, it often does.

Leaders need to acknowledge digital transformation as the fundamental, strategic paradigm shift that it is. Like any major transformation, a digital transformation requires instilling a culture that supports the change while enabling the company’s overarching strategy.

Embedding a digital culture in an organization is doable, but it takes a clear methodology and a disciplined effort. Before we describe the critical moves companies must make to build an enduring digital culture, let’s first examine the reasons that having a digital culture is so important.

WHY INSTILLING A DIGITAL CULTURE MATTERS

Culture comprises the values and characteristic set of behaviors that define how things get done in an organization. A healthy culture provides the guidelines—the tacit code of conduct—that steer individuals to act appropriately and make choices that advance the organization’s goals and strategy. We see three important reasons for instilling a digital culture during a digital transformation.

By ignoring culture, an organization risks transformation failure. We assessed roughly 40 digital transformations and found that the proportion of companies reporting breakthrough or strong financial performance was five times greater (90%) among those that focused on culture than it was among those that neglected culture (17%).

The case for fostering a digital culture is even more powerful if we look at sustained performance: nearly 80% of the companies that focused on culture sustained strong or breakthrough performance. Not one of the companies that neglected to focus on culture achieved such performance. 

A digital culture empowers people to deliver results faster. Digital organizations move faster than traditional ones, and their flatter hierarchy helps speed 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.

For many digital organizations, this code of conduct amounts to a singular focus on the customer. Consider the example of a North American software provider. Aware that its new software-as-a-service product would require a much faster response to customers’ needs than its existing product demands, leaders communicated five essential new behaviors that they expected of employees. Among those behaviors: making decisions on their own and challenging the status quo in order to make decisions that are favorable to customers.

A digital culture attracts talent. Having a reputation as a digital leader is a magnet for talent. Millennials are generally drawn to digital companies, with their promise of a collaborative, creative environment and greater autonomy. It’s no wonder that websites such as LinkedIn.com and Glassdoor.com are increasingly used by job seekers to get insiders’ perspectives on a company’s culture.

Having a digital culture is particularly important in attracting digital talent, the demand for which is rapidly outpacing the supply. Large, established companies must often employ new methods for attracting, developing, and retaining the talent needed to support their digital transformation. 

THE FIVE CORE ELEMENTS OF A DIGITAL CULTURE

A healthy digital culture is a type of high-performance culture. To understand the essential elements of a digital culture, it helps to be aware of the three critical attributes of a high-performance culture.

First, employees and teams are engaged to achieve results: they are committed to their work and to the organization’s purpose and goals, and they are willing to go the extra mile. Second, individuals and teams work in ways that will advance the organization’s strategy. Third, the organizational environment, or “context”—including leadership, organization design, performance management, people-development practices, resources and tools, vision and values, and informal interactions—is set up to foster engagement and encourage behaviors that will advance the organization’s strategy. 

Just as there is no universal strategy, there is no standard digital culture. Still, a digital culture typically has five defining elements:

It 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.

It prizes delegation over control. A digital culture diffuses decision making deep into the organization. Instead of receiving explicit instructions on how to perform their work, employees follow guiding principles so that their judgment can be trusted.

It encourages boldness over caution. In a digital culture, people are encouraged to take risks, fail fast, and learn, and they are discouraged from preserving the status quo out of habit or caution.

It emphasizes more action and less planning. In the fast-changing digital world, planning and decision making must shift from having a long-term focus to having a short-term one. A digital culture supports the need for speed and promotes continuous iteration rather than perfecting a product or idea before launching it.

It 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 far greater level of transparency and interaction than that found in the traditional organization.

These defining elements vary in degree from industry to industry and from company to company. The degree of risk-taking that’s appropriate at a technology firm will not be the same as the degree that is appropriate at an industrial goods company, for example. And even within an organization, the desired levels of risk-taking will vary; the strategy team, for example, should embrace risk to a much greater degree than the finance team. Encouraging risk-taking is intended to foster thinking outside the box without being reckless or breaching regulation or company policy.

ARTICULATE, ACTIVATE, AND ALIGN: THREE STEPS TO A DIGITAL CULTURE

How do companies shift to their desired digital culture? How can they avoid the missteps that have tripped up so many companies thus far? We’ve identified three crucial actions. 

Read the full article at: https://www.bcg.com/en-us/publications/2018/not-digital-transformation-without-digital-culture