“A company’s culture is the foundation for future innovation. An entrepreneurs job is to build the foundation.” Brian Chesky, Airbnb
Why Cultural Change Matters in Digital Transformation Age?
Deficiencies in an organizational culture are one of the main barriers of the organizational success in the digital age. Recent study has examined the most challenging aspects of digital transformation. Results were not surprised the researcher. Based on the findings below, cultural and behavioural challenges were the most significant.
Resource: McKinsey
With armed of the understanding of the cultural aspects in the digital transformation, researchers have examined the economical impacts as well. The results clearly demonstrated that cultural challenges have correlated significantly with negative economic performance.
Resource: McKinsey
Other study has examined the fully completed digital transformation initiatives (+40 initiatives). As a result, organizations which focused on the cultural aspect of the digital transformation and revamped their organizational culture from traditional way to the digital culture reported breakthrough or strong financial performance five (5) time higher then among those that did not focus on cultural aspect.
Empowering Employees. A Digital culture empowers people to deliver results faster. A digital culture allows employees to move fast, given the fact that empowered employees in a digital culture are able to make a on-the-spot decisions which directly upsurge employee engagement.
Attract Talents. A digital culture attracts talent. New generation of the employees (Millennials) are interested in the organizations where the main promises are a collaborate, creative environment and great autonomy that can allow them to do some sort of decisions by themselves.
Developing Winning Digital Culture
Organizational culture can be one of the most important competitive advantage which encompasses beliefs, assumptions, values and ways of interacting that contribute to the social and psychological atmosphere of an organization.
Organizational culture is an evolving paradigm. Each members of the organizations become part of a shared beliefs and common understanding of the way living, working and creating value for the organizations.
The future of the organizational structure will be designed horizontal than hierarchical. The reason of this change is very clear. Horizontal organizational structure allows the organizations to be more innovative and more adaptive in the competitive business environment. Of course, the organizations those have been born in 21st century are luckier then 20th century organizations as they were able to capture the future trends and their required business-as-usual. As a result, they have been able to embed the new generation cultural codes which we call digital culture into their organizations’ DNA.
Let’s talk about REENGEN which is one of the most ambiguous start-up organization in the field of energy analytics and IoT platform. I have been witnessed couple of times in their headquarter office that REENGENers (employees) have been sharing common understandings which encompass values such as being honest, sincere, constructive, creative problem solving, open communication with the existence of flat hierarchy. Regardless the positions they had in the organization, REENGENers were able to clearly, openly and directly talk, brainstorm and generate new ideas towards establishing customer satisfaction with unique services value.
I have worked at HPI approximately five years. During this period, I was also part of the silo organization with more than 100 thousand employees coded with entrepreneurial culture where “open door policy” was the most prominent cultural code allowing all employees to reach any of the executives immediately. This policy was removing barriers that could be arisen due to silo hierarchical challenges.
Regional dynamics also could be an important factors for an organizational culture. I have been working in the GCC region (UAE and Kingdom of Saudi Arabia) as both of them are eager to adapt their cultures and prepare themselves for the possible implications of the digital transformations in the age of AI.
As it can be seen below, GCC countries are ambitious to uplift their economies through digital transformation initiatives. They have also realized that an entrepreneurial, innovative and agile culture can be a critical competitive advantage in future’s business environment where increasingly rapid change and digital disruption will occur. Thus, digital culture could be key enabler for them achieving their challenging long-term goals.
Resource: BCG
In a nutshell, digital transformation isn’t really about technology it’s about organizational agility, hence the organization’s culture plays a vital role in the digital transformation journey.
Old Fashioned Culture Vs. Digital Culture
Beginning node team has endeavoured to make a comparison between old fashioned cultural codes those are mostly existed in the 20th century organizations and new age organizations those were born in 21st century. The comparison chart allows us to understand the paradigm change in the organizational culture.
| Dimension | Old Fashioned Cultural Codes | Digital Cultural Codes |
| Position | Defensive | Attack |
| Customer Orientation | Customers are distant | Put customer in the middle of business |
| Analytics | Data measures past performance | Data used for predictive and prescriptive analysis |
| Risk Taking | No risk is the best | Fail fast |
| Customer Feedback | Reactive – Focus group insights | Proactive – Frequent user testing |
| Hierarchy | Vertical | Horizontal (Flat) |
| Organization | Department silos | Cross-functional teams |
| External Interaction | In-house is best | Network of expertise |
Resource: Beginning Node
Let’s Talk About AI
Amidst the great discussion over whether AI will get human jobs, there are many opportunities to redesign the business-as-usual within all dimensions of the organizations. On the other hand, the claimed process off course requires a significant shift in the cultural codes which will be new code of conducts in a digital cultures.
AI will demand a radical cultural change, due to the fact that it disrupts and re-defines the relationship between humans and machines, changing machines from passive receivers of commands into informed collaborators.
Basically, the main value proposition of AI is to analyse huge amount of data and excerpt patterns, if any. By analysing behavioural data sets, organisations will develop a better understanding of their culture and be able to use real-time assessments that will help them to understand their current as well as prospective pain points, hence they will be able to develop necessary action plans in order to overcome identified pain points that could negative impact their organizations.
Let’s talk about the failure of Siri compared to its main competitor such as Alexa. One of the most prominent Apple analyst has clearly underlined that the failure did not happen because of the product and its feature, it happened because of the culture of Apple in which AI was not embedded. According to his point of view, Apple’s cultural code was created around commercializing physical products.
In my opinion, we should not scare from AI, instead we should focus on understanding of its potential benefits as it will help organizations to automatize their routine jobs tremendously. As a result, organizations will be able to focus on creativity and surround their cultures with creative-focused mindset.
Beginning Node Proposes “ Digital Culture Enablement Framework”
Cultural change requires disciplined actions with high level of attention and ownership of executive team member in the organizations.
Designate the New Norms for Digital Culture. Leaders of the organizations must determine the desired cultural codes which will be fundamentals of the digital culture. The identified cultural codes must be aligned with the organizations’ strategy, and objectives.
The next step must be translation of the cultural codes into the specific behaviour examples. As a result, “The Norm of Behaviours” must be communicated to the entire organizations.
Activate Role-Models Characteristics in the Organization. The success criteria of the high performing digital culture requires organizations’ executive team sponsorship and full support. Executive team of the organizations or other frontline team members must embrace the new digital culture in their behaviours and manifest these behaviours.
One of the most prominent UAE based technology organization’s CEO started to send a notes to his employees who were acknowledged as being customer success custodians in the digital transformation projects by their customers. This can be a good example where the top person of the organization manifest the digital culture’s designated behaviours.
Long story short, off course there are plenty of other tools which can help establishing a digital culture. Nevertheless, activating characteristics of role models in the organizations is a vital effort.
Embed The New Digital Culture Into Organizational DNA. Organizations must revisit their operating models by reviewing organizational aspects such as, organization design, performance management, human resources development practices, vision and values, and informal interactions amongst employees in order to make specific changes embedding new digital culture.
Organizations can embed digital culture in different way. For example, Loreal hired a chief digital officer for not only successfully run digital transformation efforts throughout the organization, but also act as a digital culture custodian. Examples shows that without having a change in organizational contexts that can support new norms, digital culture will never be successful.