Digital transformation: 3 steps to build a digital-ready culture
Blog: The Enterprise Project - Digital Transformation
The leaders of many traditional companies sometimes wish for the fast and innovative cultures of digital startups. They covet the cultures of large digital-born companies like Amazon, Facebook, and Google, which have used their innovativeness and customer obsession to become three of the top four most valuable companies in the world.
But, in thinking more deeply, smart execs tamper down that wish. Companies with thousands of employees cannot use the management practices of startups; they’re just too big. Uber, Facebook, and other digital firms have encountered ethics-related difficulties that no executive would want to experience. Other digital darlings have reputations as difficult places to work. What’s more, their HR practices may not be something that you want to copy. For example, Netflix allows employees to take as much vacation as they want, or to buy anything they feel is important for the business without supervisor authorization. It regularly replaces people who are no longer high performing stars.
How can leaders in large traditional companies build cultures that keep up with the digital leaders? Our research, published in MIT Sloan Management Review, shows that these companies should strive not to be digital, but rather to be “digital enough.” Rather than try to copy the practices of digital-born companies, leaders can take three steps to build a digital-ready culture.
What is a digital-ready culture?
We define digital-ready culture as a shared and mutually-reinforcing set of values and practices that enable high performance in service of innovation and execution in a digitally-enabled business environment.
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Values matter. Leaders in digital-ready firms continually promote four key values that foster the right behaviors.
- Speed: Moving fast and iterating rather than waiting to have all the answers before acting.
- Impact: Focusing on changing the world, not just making money.
- Openness: Engaging broadly with people who have the right insights, and sharing information with others rather than hoarding it.
- Autonomy: Having freedom to work within broad guiderails, rather than controlling action through formal authorization processes.
Beyond communicating broadly about digital-ready values, leaders must make sure that employees truly internalize the values, and make them part of everyday practice. After all, another way to define culture is “what happens when the boss leaves the room.” The practices make the values real, and practices that run counter to the values will take culture in the wrong direction.
How to build a digital-ready culture
We surveyed employees in digital and traditional companies to understand how values and practices differ between the two. Running the numbers for what employees told us about their organizations’ practices and performance, and then comparing the findings to our case studies and interviews, we identified three steps that traditional companies can take to gain a digital-ready culture.
1. Build the practices that set digital firms apart
Cultivate habits of rapid experimentation and self-organization within a framework of data-driven decision-making. These practices may seem to run counter to companies whose structures, values, and governance rules were designed for cautious stability. Yet, our analysis shows that these practices strongly drive self-reported growth and innovation. Moreover, organizations can’t experiment effectively without the data to measure change.
2. Preserve practices that promote integrity and stability
Your customers, employees, regulators, and shareholders deeply appreciate these qualities and the practices that support them. We found that companies managing for integrity and stability report innovative performance that is neither better nor worse than companies that do not. But what is critical is finding ways to achieve these without hindering the self-organizing experimentation that makes innovation happen.
That’s where the values of openness, to work with people regardless of title or organizational location, and accountability, giving freedom within guidelines, can help. And, companies should strive to get rid of a rules orientation, where people may use rules to prevent changes they don’t want to see.
3. Reorient important practices that were only optimized for the pre-digital world
The speed and interconnectedness of the digital world demands new approaches to customer obsession and results focus. If you are asking customers for what they want, you’re likely to get incremental and non-innovative answers. If you are managing by quarterly reports, you are months behind what is really happening.
Instead of just asking customers about their needs, focus on anticipating customer desires and proactively experimenting to delight the customer. Demand the most current information on unit and product performance, and manage with it. And change infrequent and opaque performance evaluations into ongoing attention to transparent goals and performance metrics.
How CIOs can help
CIOs are critical to making their companies digital-ready. Self-organizing, rapid experimentation, data-driven decision making, and results focus depend on having the right information and tools available – especially in today’s COVID-era world of ubiquitous remote working. In an environment of openness and accountability, you can build controls to prevent people from overstepping guiderails and monitoring to detect if someone did. And customer obsession in a digital world means knowing customer behavior in real-time and being able to sense changes in those behaviors with each new experiment.
Many CIOs and IT leaders can go beyond just tools and infrastructure. They can help to guide the company culture in the right direction. Agile product development has many of the elements of digital-ready culture. And today’s DevOps and agile cybersecurity practices show how companies can be fast and highly responsive while still protecting integrity.
If you are already doing these practices – in the way they are meant to be done – then you can serve as an example to the rest of the company, and a coach to help them get the culture they want. And if you are not, then now is the time to start.
Editor’s note: George Westerman is a moderator of the MIT Sloan CIO Digital Learning Series. To hear more from Westerman, join episode #5 of the series on Oct. 14, where he will discuss digital transformation alongside leading CIOs and experts.
[ Culture change is the hardest part of digital transformation. Get the digital transformation eBook: Teaching an elephant to dance. ]