MIT Sloan: Culture key reason digital transformation fails
Simply put, much about digital transformation is primarily about people. Unfortunately, more than 70% of enterprises fail to create any value from their digital transformation efforts, but what is interesting is that 62% of organisations cite culture as the number one hurdle to digital transformation. And while this may come as a surprise, the reality is that at its heart, digital transformation is a people transformation.
Many companies tend to focus on selecting and implementing the right digital technologies, however this strategy is not likely to lead to success. In my first feature for Business Chief, I talk about the three pillars of digital transformation: strategic, cultural and operational, however today I want to shine a spotlight on the cultural pillar and the importance of cultural transformation.
When I work with companies embarking on a digital transformation journey, I always ask them to consider if they have the right culture to adopt change?
So, what is the right culture for transformation?
Successful digital transformation requires a culture that accepts risk and tolerates failure, that supports new ways of doing things, the encouragement of innovation, and very importantly, a reverence for failing forward.
The digital culture is one that is aware that digital transformation requires different thinking, it’s a culture where employees are empowered to take on new challenges, they are compensated for learning new expertise and they are incentivised to break new ground and build new models.
I think by now we all know that the best way to respond to digital disruption is by changing or adjusting the company culture to be more agile, risk-tolerant, and experimental but more than anything, it demands that we realise that digital transformation will require a change in the leadership approach and changes to organisational dynamics, which is in many ways a more complex task than technology deployment.
What’s your advice for companies encountering cultural resistance?
Most behavioral change initiatives accomplish little because simply put, we humans don't like change. In a 2012 HBR article, Professor Rosabeth Moss Kanter [RMK, 2012] shares 10 reasons people resist change and many of these reasons are the same reasons why digital transformation fails when it comes to the cultural pillar. Her work in change management is extremely valuable for digital transformation with some of her reasons adapted for digital transformation below:
- Worse before better In most cases, digital transformation is ‘sold’ internally as a tool with immediate positive effect, but the truth is that in the deployment of digital transformation, things will get worse before they get better. Smart leaders prepare the organisation for this journey and don’t over promise immediate positive change.
- No champions of transformation Smart leaders will identify a fierce supporter of the project, engage her early in the journey and provide her with constant information and updates on the nature of the project.
- Not my job, why do I have to do it? There is a myth that digital transformation is the IT’s department job, but the reality is the implementation is everyone’s job! Rolling out DT initiatives will require an organization-wide effort and, in most cases, a reinvention of the organisation’s work mode. Smart leaders communicate constantly that ‘the ownership’ of DT lies across the organsation and constantly assesses the organiation’s sense of acceptance and responsibility in implementation.
- Loss of control [RMK, 2012] DT will interfere with the existing work systems that over time, brought autonomy in the organisation, giving people the feeling that they’ve lost control over their territory. Smart leaders leave room for those affected by change to make choices, invite them into the planning and give them ownership. To spark and sustain transformation, employee engagement and collaboration is critical.
- Loss of face [RMK, 2012] Any kind of transformation means a departure from the old way of doing things and for many of the people associated with the last version it’s a signal that their version didn’t work, or it’s obsolete therefore they will likely be defensive about it. Smart leaders will validate, celebrate and honour the elements of the past that brought the organisation to where it is today by making it clear that the entire world and not just their job has changed.
- Concerns about competence [RMK, 2012] People will resist DT when it makes them feel inadequate, stupid or that their current skills will become obsolete. Smart leaders should over-invest in structural reassurance; they will provide abundant information, education, training, mentors, and support systems and even run two systems simultaneously to ease transitions.
- Everything seems different [RMK, 2012] Change is meant to bring something different, but how different? Too many differences can be distracting or confusing. Smart leaders should try to minimise the number of unrelated differences introduced by a central change. Wherever possible, keep things familiar and avoid change for the sake of change.
- More work [RMK, 2012] Change is more work especially for those closest to the change. Smart leaders should acknowledge the hard work of change by allowing some people to focus exclusively on it, and reward and recognise participants — and their families, too, who often make unseen sacrifices.
- Excess uncertainty [RMK, 2012] Many of us believe in ‘Better the devil you know than the devil you don’t know’. Smart Leaders have to create some levels of certainty of the outcome and the process, and simplify the process, deliverables and timetables. A strong emphasis on ‘fast experimentation and prototyping’ is required.
- Sometimes the threat is real [RMK, 2012] When new technologies displace old ones, jobs can be lost, prices can be cut, investments can be wiped out. Smart leaders have to be honest, transparent, fast, and fair when the changes they seek pose significant threat.
Even though Professor’s Kanter’s work addresses specifically the area of change management as seen in the examples above, I strongly believe that her words and examples apply just perfectly to the world of digital transformation.
Allow me to end by quoting another extraordinary colleague, MIT Sloan Prof Deborah Ancona who says, ‘leadership often underestimates the importance of culture and yet, culture is one of the most important sources of competitiveness. And overlooking cultural change is the biggest mistake in a digital transformation’.
Because while culture is invisible, stumbling over it it’s painful.
About Prof. Loredana Padurean
Prof. Loredana Padurean is the Associate Dean and Faculty Director for Action Learning, Innovation and Entrepreneurship at Asia School of Business established in collaboration with MIT Sloan in Kuala Lumpur, Malaysia“. Her work focuses on 3 areas: entrepreneurship, innovation and digital transformation and “smart and sharp” skills. Prof. Loredana teaches in the MIT Sloan Executive Education program, she is a public and TEDx speaker, an enthusiastic mediocre gardener, a lover of animals and vegan food.