Digital transformation rarely succeeds without a corresponding change in an organization’s culture and the way management teams and employees think about operations and dealing with customers in the context of digitalization.
There is no question that digital transformation is necessary for businesses. The need to digitize is particularly important during a pandemic that requires people to maintain physical distance and reduce contact with things that may carry the coronavirus.
Going digital, though, requires more than the switching to digital solutions. It also needs a corresponding cultural change and refreshed perspectives. Members of an organization do not always welcome change or find it difficult to adapt to modifications. For digital transformation to become successful, it must be embraced by the people who will be using the new system.
In an interview with the ARC Advisory Group, John Kovac, Director for Manufacturing at Microsoft, shared insightful ideas about the digital shift.
“To really permeate the entire organization and expand it on a global broad scale, it requires a cultural shift. It requires leadership at the very top willing to make the change and driving that change through operation,” Kovac shared with us.
We Need to Embrace a Digital Culture
Writing for the Boston Consulting Group (BCG), Jim Hemerling et al made compelling arguments on why digital transformation requires a digital culture. “The behaviors that embody a digital culture represent a major shift from long-standing norms–and particularly challenge traditional power structures, decision-making authority, and fundamental views of competition and cooperation among employees,” Jim Hemerling et al asserted in their research.
Business leaders cannot ignore the culture factor. It is necessary to recognize how much of a fundamental strategic paradigm shift digital transformation is. Based on a BCG analysis, nearly 8 out of 10 companies report sustained strong or breakthrough performance in their digital transformation after addressing culture change explicitly. This success rate is five times better than what was achieved by those that failed to take culture into account.
Culture is the set of behaviors and attitudes that characterize the way things are conducted in an organization. It can either help or hinder digital transformation in a company. According to Hemmerling’s team, a digitalization-friendly culture has the following attributes:
- Promotes an external instead of internal orientation
- Prioritizes delegation, not control
- Emphasizes boldness, not caution
- Focuses on the action, not planning
- Prefers collaboration, not an individual effort
Only a few businesses possess the above-mentioned characteristics. Many businesses are more cautious than ever considering the COVID-19 pandemic and recession. Most companies tend to suspend or forego plans to avoid risks and focus on surviving.
True digital culture is comparable to what aggressive FinTech companies show. An analysis report of 2020 strategies and trends in digital currencies, exchanges, and trading lists arbitrage trading as one of the prevailing strategies.
According to a study published by Prance Gold, “a triangular arbitrage strategy involves three trades, exchanging the initial crypto for a second, the second crypto for a third, and the third crypto for the initial.”
By using AI trading bots and automation in the trading system investors can quickly spot and grab arbitraging profit opportunities. “In the world of digital currencies where speed is of the essence, technological advancement has ensured that all arbitrage trading is executed successfully within seconds,” the study explains.
It’s Time to Ditch Hindering Cultures
A Mckinsey Digital survey reveals that cultural and behavioral challenges are the leading barrier to digital effectiveness. The report highlights three problems: functional and departmental siloing, aversion to taking risks, and the difficulty in forming and acting on a single view of the customer. These problems are associated with negative economic performance.
Aside from identifying the barriers in digital transformation effectiveness, the Mckinsey research explores the question of whether to actively change an organization’s culture or to wait for change to take place on its own. The study finds that the former option is better. “In our experience, executives who wait for organizational cultures to change organically will move too slowly as digital penetration grows, blurs the boundaries between sectors, and boosts competitive intensity,” the Mckinsey study writes.
Europe-based consultant Jane McConnell shares similar ideas in a case study published in the Harvard Business Review. “Many companies struggle with digital transformation. It goes against the grain of established ways of working and is a threat to management practices that have existed for decades,” McConnell writes.
Based on her years of experience in working with numerous businesses, McConnell groups the biggest obstacles in successful digital transformation:
- Slow decision-making brought about by internal politics and conflicts in priorities
- The failure to determine business value, which leads to the lack of senior management support
- Excessive focus on technology and lack of effort in addressing deep change and the rethinking of how people work
- Inadequate comprehension of operational issues at the decision-making level
- The management’s fear of losing control and the pessimistic thinking that employees will only be wasting their time
These obstacles need to go if a company were to achieve successful digital transformation.
Anything But a Zero-Sum Game
Vikram Pandit, Chairman and CEO of The Orogen Group, offered a poignant thought on digital disruption in GIC Insights 2017. “The future does not belong to one or the other; history suggests that disruption is not a zero-sum game – modernised businesses can co-exist with disruptors as long as the customer experience is at the centre of the strategy,” Pandit said.
A change proponent’s gain does not necessarily result in the incumbent’s loss. In the digital era, collaboration makes complete sense as it is possible to achieve mutual success between disruptors and the disrupted. Going digital boosts competitiveness and accelerates business success if everyone in an organization is on board with the idea of transformation.