Digital Transformation in Traditional Organizations. It all starts with Culture.

Digital Transformation in Traditional Organizations. It all starts with Culture. 3

The topic of Digital Transformation is often seen as an opposition between digital natives and “the others”. But how can we transform a more traditional organisation, while preserving some of the traits that have made the success of this organisation?
The answer is to look in Culture first, and in making sure we intentionally embed values and practices in the transformation journey.

When approaching Digital Transformation in many organizations, issues arises to how much we need to change without impacting the more traditional operations. Partially this is also a reaction to one of the most typical objections that many do when looking at the transformation on the markets. “We cannot be Google”.

A very interesting read on how a traditional company should address this transformation, comes from a MIT Research published on Sloan Business Review: Building Digital-Ready Culture in Traditional Organization.

Foundational Values

The research has first of all identified 4 foundational values that characterize successful Digital Transformations. What’s interesting is that these where based on assumptions cited from digital native companies, but have been validated by leaders of more traditional companies undergoing transformation.

Digital Transformation in Traditional Organizations. It all starts with Culture. 4
Fig.1: The 4 Key Values of Digital Culture. Source: MIT Sloan Review.

Recognizing the immense scalability of digital solutions, digital leaders typically focus on creating impact, assuming that profit will follow. […] The other three values support that mission. Speed helps companies stay ahead of competitors and keep up with rapidly changing customer desires. Openness encourages employees to challenge the status quo and work with anyone who can help them achieve their goals quickly. Autonomy gives people the freedom to do what’s right for the company and its customers without waiting for formal approval at every turn. Together, these values can foster an engaged, empowered workforce where employees feel a personal responsibility to constantly change the company — and often the world.

If we do recognize these aspects in most truly digitally native companies, it’s often hard to imagine how some of these can be “allowed” to live into more traditional organizations. One of error many organization make is to think they can allow these only to a limited group of people, “the digital team”. In this incubator mindset, the problem is that the foundational element itself, Impact, cannot be limited unless we want to negate its lasting effects.

Putting this into Practice

The MIT research shows that these values infuse a number of practices in Digital Organizations. More traditional organizations instead have developed other practices consolidated over time. And although these are often mocked from truly digital natives, they are essential to guarantee the stability of organizations that some time have more than a century of lasting success.

Digital Transformation in Traditional Organizations. It all starts with Culture. 5
Fig 2.: Alignment of Digital and Traditional Practices. Source: MIT Sloan Review.

Figure 2 shows a possible alignment between the practices that Digital Natives have established, and more traditional practices present in the consolidated organisation. This, however, should not be seen in terms of an unreconcilable gap, but more into a mix that can make the success of a traditional organisation that can become Digital.

The strategies to obtain these are easily identified and are about building the practices that traditional companies don’t have (based on the values seen), preserving the practices that give an advantage to the traditional model and reorienting those that instead create a burden to the agility of a company in reaching the results.

Build the practices that are needed for success.

Experimentation and Self Organization are two key practices that need to be enabled if we want to be successful. The link with autonomy, impact and openness is clear. What is important is to tie this in with the correct data and KPIs.

our analysis shows that rapid experimentation and self-organizing strongly drive measures of self-reported performance, including growth and innovation.

The challenge, especially in this area, is to make the organisation gets ready to experiment with new ways of measurement. We can’t use traditional financial-oriented reporting alone to measure the impact of new innovations.

Preserve what makes the difference.

In too many instances the risk of transformations is to throw away everything. Reality is that traditional models have been able to establish a level of stability and integrity that allows stakeholders to be at ease. These are valuable practices, that need to be nurtured and preserved, maybe just by reassessing their consistency with the new reality. Stability in this framework might take a different angle than in the past for example.

An example of relevant preservation is financial discipline. Many successful traditional organizations have been able to keep a valuable relationship with their shareholder because of the way they achieved results. This is definitely an element that needs to be preserved.

Reorient what could drag you in the past

The key challenge is in reorienting the practices that are more rooted in the past and often work against the necessary to be fast, to experiment, to self-organize. One example that comes to mind is the budgeting process. Organizations need to move from multi-year or yearly investment plans, and get into more agile and nimble processes, to be able to support with the flexibility the necessary technological agility.

There’s no one single way to succeed

The most important word in digital transformation is not digital, but transformation. Launching technology projects is just the starting point. The ultimate goal is to move from building systems and processes to building capabilities — building a culture where innovation is the norm and where employees constantly seek learning and growth, making the most of the best new technologies and techniques.

This strong link with culture makes it clear that there cannot be one solution that fits all. Many tools are needed (from organisation design to change management practices), and for sure Leadership Commitment is one of the key components. However we cannot limit ourselves only to the softer side, we need ways to enable these practices (also quickly).

I’ve already discussed to what I see as a potential solution: a mix of three disciplines that “fit” the transformational need, and that should be extended to the maximum possible to enable the correct practices in the organisation.

Digital Transformation in Traditional Organizations. It all starts with Culture. 6
Fig.3: The Three Mindset of Development. Source: @jonnyschneider

If you extend these mindsets from software development to the entire way problems are identified and addressed in organizations, you will immediately find out a new frame of mind that can enable both the practices identified and the underlying values we have seen above.

The advantage is that these mindsets are rooted in practices that can be more easily acceptable also by traditional organizations.

  • Design thinking is the best tool available to enable a new customer orientation more in line with digital principles.
  • Lean can help to reorient the excessive focus on rules, by correctly prioritizing what to keep and what to modify.
  • Agile will help to create a framework for experimentation.

Conclusion: Making Digital Transformation work

To summarize, Digital Transformation becomes a challenge not because of its technical component, but because of the need to reshape the intimate culture of an organisation. Despite the high rate of failure, it is important to start.

This does not mean getting away from everything that a more traditional organisation has built over time, but by carefully mixing the best of both worlds. Above all, taking conscious decisions about what to change, when and how, clearly understanding ownership, and making sure the entire set of Organisational Design tools is used.

What do you think is biggest obstacle in achieving this?

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