The Importance of Cultural Change in Digital Transformation
Odds are that you’ve heard about digital transformation. Digital transformation is the process of fundamentally changing how your business operates and delivers value to its customers. In today’s fast-paced, dynamic business landscape, digital transformation is crucial for most legacy companies. A recent Gartner survey reveals that, “Eighty-nine percent of board directors say that digital business is now embedded in all business growth strategies,” and yet, Harvard Business Review reports an average failure rate of 87.5% for organizations with digital transformation goals.
How can it be that something so important, for so many companies, fails so often?
The secret sauce to any transformation is people. Always. Without the necessary cultural transformation, your digital transformation is doomed.
In this post, we’re going to look at the components of culture, the metamorphosis you’ll need for a successful digital transformation, and what happens if you already have a great culture.
Cultural Components — The Visible and Invisible Building Blocks of Company Culture
In a company, culture can be divided into different components with each contributing to the overall organizational culture. It’s important to note that these components of culture are interconnected and mutually reinforcing. Your organization’s culture consists of the following components:
Observable artifacts are the visible elements of culture that can be easily observed, such as the physical environment, office layout, dress code, symbols, slogans, rituals, and ceremonies. These artifacts provide external cues about the company’s values, beliefs, and norms. They are the most tangible and readily noticeable aspects of organizational culture.
Imagine a company whose office layout is all cubicles. Managers and executives have their own offices. People are expected to wear business formal attire. There is little artwork, greenery, or decorations on the walls and around the office. This has quite a different feel from a company with an open floor plan where there is no assigned seating, plants, decorations, and maybe even a pool or ping pong table.
Espoused values refer to the stated or desired values that the company promotes. These values are often expressed through official mission and vision statements, company policies, or employee handbooks. They represent the ideals and principles that the company aims to uphold. Espoused values serve as guiding principles for decision-making and behavior within the organization.
LT’s espoused values are: Professionalism, Curiosity, Community, Responsibility, Autonomy, Simplicity, and Humility. These values undergird the way we aim to work with each other at LT and with each of our clients.
Basic Underlying Assumptions
Basic underlying assumptions are the deepest level of culture and often remain unspoken and unconscious. They are the core beliefs, perceptions, and shared assumptions that guide employee behavior and shape the company’s culture. These assumptions are deeply ingrained and are often difficult to change. They influence how employees interpret and make sense of their work environment and affect their attitudes and actions.
A common underlying assumption in legacy organizations is that failure is discouraged and punished. This leads to things like a lack of experimentation, a blame culture, resistance to change, and a lack of innovation.
Norms and Behaviors
Norms and behaviors are the unwritten rules and expectations that govern employee behavior within the organization. They represent the accepted ways of doing things and determine how employees interact, communicate, and collaborate. Additionally, norms can vary across different departments, teams, or organizational levels but contribute to the overall culture. Behaviors aligned with cultural norms reinforce and perpetuate the culture.
A department might have a norm of continuous learning. This would manifest itself in behaviors like L&D programs, abundant use of wikis, communities of practice, dedicated learning times, employer-paid subscriptions to Pluralsight or Udemy, mentoring and coaching programs, and so on.
Shared Beliefs and Attitudes
Shared beliefs and attitudes refers to the ideas that shape the mindset and outlook of employees and influence their behaviors, decision-making, and responses to various situations. They contribute to the overall culture and can create a sense of shared identity and purpose among employees.
A shared belief that the customer’s satisfaction is the highest priority leads to attitudes of empathy, responsiveness, and a strong commitment to delivering exceptional customer experiences.
Observable artifacts and espoused values are more visible and accessible, while underlying assumptions, norms, behaviors, and shared beliefs are often implicit and require a deeper understanding of the organization. Examining culture at these different levels provides a comprehensive understanding of how the company’s culture operates and influences employee behavior and organizational outcomes. It can help you to see where your culture needs to shift in order to undergo successful transformation for the digital age.
The Metamorphosis — Essential Ingredients for Cultural Change
What, then, does a company culture look like in a digital world?
1. Adopt A Learning Mindset
Digital transformation involves embracing new technologies, processes, and ways of working. It requires a shift in mindset from traditional, hierarchical, and siloed thinking to a more agile, collaborative, and customer-centric approach.
In a learning culture, employees are open to new ideas, experimentation, and continuous learning. It means we no longer lean on what we “know” the customer wants, but instead we seek to understand the customer’s wants and needs through formal and informal customer research.
2. Obsess Over Customer Experience
A customer-centric culture fosters a deep understanding of customer preferences, improving communication and feedback loops, and encouraging a focus on delivering exceptional digital experiences. There is a distinct shift in priorities from “working on the business” to creating amazing customer experiences that still work for the business.
3. Collaborate and Innovate
Digital transformation is not just about implementing new technologies — it’s also about leveraging them to drive innovation and create value. A culture that fosters collaboration, cross-functional teams, and knowledge sharing encourages employees to work together, explore new ideas, and drive innovation within the organization.
Instead of people identifying solutions and then passing them to software teams for creation, the software teams collaborate with business people to develop a deep understanding of the problem at hand, and are then entrusted with creating an innovative solution that results in happy customers. Gone are the days of “IT” and “The Business”.
4. Embrace Change
Digital transformation often disrupts existing business models and processes, requiring organizations to be agile and adaptable to navigate through the changes effectively. Cultural change encourages a growth mindset and a willingness to embrace change, enabling employees to adapt to new technologies and ways of working more easily.
5. Be Agile and Fast
When you have a change-embracing, collaborative learning culture, you can take advantage of streamlined processes, reduced bureaucracy, and faster decision-making enabled by digital transformation. Cultural change promotes agility by empowering employees to make decisions, take risks, and iterate quickly. It encourages a culture of experimentation, where failure is seen as a learning opportunity rather than a setback.
6. Empower and Engage Your Employees
Cultural change creates an environment where employees feel empowered, engaged, and motivated. In the context of digital transformation, this is crucial as it requires employees to learn new skills, embrace new technologies, and contribute to the organization’s digital goals. A positive and inclusive culture will attract and retain top talent, fostering a sense of ownership and pride in their work.
“But Our Culture is Great Already” — How to Make it Even Better
It’s fantastic to hear that your company already has a great culture! But there are still several reasons to focus on cultural change in the context of digital transformation — even if your company already has a strong culture.
It’s about continuous improvement
Even if your current culture is positive, a growth mindset encourages continuous improvement and adaptability. It means being open to exploring new possibilities, challenging the status quo, and seeking opportunities for growth and innovation. By embracing a growth mindset, you can foster a culture that is well-suited for the dynamic digital landscape.
It’s about rapidly embracing new technologies
Digital transformation often involves the adoption and integration of new technologies and digital tools. Even with a great culture, there may be a need to create a mindset that embraces and adapts to these new technologies. Cultural change can help ensure that employees are open to learning and utilizing new tools effectively.
It’s about constant evolution
The digital landscape is rapidly evolving, with emerging technologies and changing customer expectations reshaping industries. Therefore, legacy cultures, while once effective, may not be equipped to handle the demands of digital transformation. Recognize that outdated cultural norms and practices may hinder your ability to embrace new technologies, compete in the market, and meet evolving customer needs.
It’s about future-proofing
Digital transformation is not a one-time event but an ongoing journey. A culture that supports continuous learning, adaptability, and innovation is crucial for staying ahead of the curve. By acknowledging the need for cultural change, you can future-proof your organization and position it for sustained success in the digital era.
Taking the Next Step — Creating Your Cultural Metamorphosis
Cultural change is essential in digital transformation because it aligns the organization’s values, behaviors, and mindset with the goals and requirements of the digital age. It enables organizations to adapt, innovate, and thrive in an increasingly digital and fast-paced business environment.
No culture is perfect, and there is always room for improvement. Engage in honest introspection and assess if your current culture aligns with the values and behaviors needed for digital transformation. Look for areas where your culture may fall short, and identify specific aspects that require attention and adjustment.
Here are just a few questions you can ask yourself and your leadership team to see if you might need cultural tuning.
1) Are people aligned with our values?
If there is a noticeable disconnect between the company’s stated values and the actual behaviors and practices exhibited within the organization, it suggests a gap between what is ideal and what is being practiced.
2) Are employees engaged?
If employees show signs of disengagement, such as lack of motivation, absenteeism, high turnover rates, or a general sense of apathy towards their work, it could indicate a culture that fails to inspire and engage its employees effectively.
3) Is there open communication and transparency?
A culture that lacks open communication channels, where information is not shared freely, or where there is a lack of transparency in decision-making processes, can create a sense of mistrust and hinder collaboration and innovation.
4) How are change and innovation handled?
A culture that resists change, is unwilling to take risks, or discourages innovation can be indicative of a stagnant culture that is not adaptable to new technologies, market trends, or customer demands.
5) How tall are your silos or hierarchy?
If the organization operates in silos, with limited collaboration and knowledge sharing across teams or departments, or if there is a rigid hierarchical structure that impedes agility and open communication, it can hinder the development of a positive culture.
6) How prioritized is learning and development?
In a culture that does not prioritize learning and development, employees may feel stagnant in their roles and lack the opportunity to acquire new skills or grow professionally, which can lead to dissatisfaction and hinder overall cultural development.
7) How hot is the environment?
High levels of conflict, negative attitudes, and frequent complaints can indicate a culture that fosters a toxic work environment which can undermine morale, collaboration, and productivity.
Remember, cultural change is a gradual process that requires commitment, patience, and collective effort. By recognizing the potential limitations of your legacy culture and embracing the need for change, you can position your organization for a successful digital transformation journey and stay competitive in the evolving digital landscape.
This blog originated from a Lean BYTES presentation given by Lean TECHniques Software Delivery Lead, Peter Chodakowski. Lean BYTES are short, 16-minute webinars where you can get the quick hits on a variety of development and IT-related topics. See what’s coming up and sign up to join our next Lean BYTES presentation.