Corporate Culture Dictates the Success or Failure of Digital Transformation

62 percent of employees consider culture as the number 1 hurdle to digital transformation. This is one of the many startling statistics uncovered in my latest culture research report  “The Digital Culture Challenge: Closing the Employee-Leadership Gap.

Corporate culture is one of the most important and misunderstood pillars of any organization. This isn’t news. What is news however is the extent of which companies need to but can’t fully invest in digital transformation to compete in an era of volatility, uncertainty, complexity and ambiguity. Said another way, digital transformation is critical to the survival of incumbents and their ability to digitally transform is greatly hindered by the lack of a digital culture, digital literacy and digital vision. Yes, that’s a lot of “digital” in one sentence, but each element in its own right requires understanding, empathy and mastery to navigate complicated and often counter-intuitive paths.

“Culture is the glue that either keep sus doingthings well or keeps us doing things poorly.” – Professor Etha Bernstein, Harvard Business School

This is why building not only a culture of innovation but also a digital culture is a prerequisite to competing for the future.

Culture Should be at the Top of any CXO Agenda

So what is culture vs. digital culture?

Corporate culture is the result of how a company works and operates. It is composed of the collective experiences of employees; what they believe in and what they value. Leadership, purpose, and how work can implement a vision also play a role in describing a corporate culture.

A digital culture harnesses an engaged culture and focuses growth on set of seven key attributes.

Innovation: the prevalence of behaviors that support risk-taking, disruptive thinking, and the exploration of new ideas.

Data-driven Decision-Making: the use of data and analytics to make better business decisions.

Collaboration: the creation of cross-functional, inter-departmental teams to optimize the enterprise’s skills.

Open Culture: the extent of partnerships with external networks such as third-party vendors,startups or customers.

Digital First Mindset: a mindset where digital solutions are the default way forward.

Agility and Flexibility: the speed and dynamism of decision-making and the ability of the organization to adapt to changing demands and technologies.

Customer-Centricity: the use of digital solutions to expand the customer base, transform the customer experience and co-create new products

We also applied the lens of employee experience across these seven dimensions, for example, the engagement of employees and their empowerment or the weight of bureaucracy and hierarchy.

The Digital Culture Challenge: Closing the Employee-Leadership Gap

In our research, we surveyed 1,700 executives and employees in 340 organizations across eight countries. Almost immediately, we found that the gap between boasting a culture digital prowess and the need to invest in it was stark. For example, 40% of senior-level executives believe their firms have a digital culture, only 27% of the employees surveyed agreed with this statement. This is just the thread that begins to unravel the real story behind why companies can’t move at the speed of market evolution. There’s a disconnect between where companies are and where they need to be, but no one can seem to agree where those points lie and whether or not, there’s a gap between them at all.

We asked leaders and employees whether they think there is high prevalence of digital culture across multiple facets. The perception gap between the two perspectives is telling…

We easily collaborate across functions and business units: Leaders: 85% Employees: 41%

We have a culture of innovation, experimentation and risk-taking: Leaders: 75% Employees: 37%

We have a culture of openness to the outside world, we work closely with start-ups and partners: Leaders: 65% Employees: 34%

My organization has a culture of flexibility and agility: Leaders: 56% Employees: 40%

Leadership acts as role models in displaying openness to change and adopting new behaviors: Leaders: 71% Employees: 41%

Redesigned company core values to include digital culture attributes: Leaders: 65% Employees: 46%

Organization has a digital vision which is well communicated through the company: Leaders: 61% Employees: 40%

The rest of the stats, which cover everything from vision and strategy to cross-functional collaboration to innovation are just as eye-opening. Please download the report to see the range and extent of the leadership-employee gap.

“The big moment for an organization is when they have embraced the fact that digital transformation isn’t a technical issue, but a cultural change. And, culture change is a prerequisite of digital transformation.” – Ian Rogers, Chief Digital Officer, LVMH

You can’t lead digital transformation if you don’t know where to start or where you’re going. Nor can you bring to life a digital culture with an analog mindset. And it’s that lack of new perspective that leads to an overall “out of touchness” preventing targeted, integrated and accelerated digital transformation. You either have leadership and employees that get it or you don’t. Closing the gap in between is where many companies either prioritize or not. This results in the effectiveness, extent and speed in which they do or do not change.

This is one of the many reasons why my colleagues at Prophet are investing in Culture, Capabilities and Engagement (CCE). They found that competing for the future starts with aligning leaders and employees around purposeful efforts to transform and grow. People play a pivotal role in business success and change requires harnessing the hearts and minds of employees.

“As drivers of business success, marketing, corporate strategy, communications and HR departments are increasingly collaborating to develop a holistic strategy for sustainable performance. With the combination of the changing world of work, multiple generations in the workplace and a more fluid approach to organizational loyalty, the need for a dedicated focus on employee engagement and recognition are stronger than ever before. By connecting employee understanding with motivation and behavior, companies can surface deeper insights, build stronger relevance and create the experiences that power people.” – Prophet

As Deborah Ancona, MIT Sloan School professor, noted, “Leadership often underestimates the importance of culture.” Yet, culture is one of the most important sources of competitiveness. Having a culture that empowers staff and gives them a sense of purpose has become crucial. Without laying a strong foundation for culture and aligning employees to a digital vision, it will be extremely difficult to make any meaningful progress on digital transformations.

The time to act is more important than ever before. When it comes to change, leaders can come from anywhere. That’s why heroes are so special. They rise up in time of need.

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