Today’s guest blogger is Laszlo Gonc. Read his bio at the end of today’s post.
We’ve all heard about the inevitability of digital transformation. Many of us are undergoing some type of digital transformation initiative ourselves. For others, it’s become part of the prolonged media din.
With less than 75 of the Fortune 500 since 1955 in existence today, change or die seems to be a good direction to be going. What is digital transformation? There is much talk about the process whereby an organization overhauls its business activities, processes, competencies and models to fully leverage the opportunities afforded by new technologies. Still no one has a clear definition.
Richard Foster, in his 2001 book Creative Destruction, applied Joseph Schumpeter’s theory of economic progress to the modern practices of management and innovation. The core lesson from all this is “how” companies go about change is critical to their survival.
When Corporate Culture Kills
There are many well-known examples of companies that resisted change despite the opportunities presented:
Blockbuster Video. Reed Hastings founded Netflix because he had paid a $40 late fee to Blockbuster Video. While Blockbuster collected $800 million in late fees in 2000, it declined to purchase Netflix for $20 million (it’s anti-late fee competitor).
Kodak. Founded in 1888 and its share price falling from a high of $80 in 1999 to 78 cents by 2010, Kodak demonstrates a company culture that failed to adapt for nearly 50 years. Steve Sasson went to work for Kodak in 1973 and invented the digital camera in 1975. His bosses were unimpressed, and the marketing department resisted. His camera never saw the light of day.
Borders. In 1971 Borders began as a single bookstore in Ann Arbor, Michigan. With its stock price at an all-time high of $44.88 in 1997, Borders closed its doors in 2011. Growing its well diversified stock of books, movies, music and e-reader sales, it was considered the envy of the industry with its innovative inventory management system. When it had an opportunity to significantly expand its online sales, Borders decided to outsource their website to Amazon.
Obstacles to Change
Jane McConell, renowned author, speaker and founder of NetStrategy JMC, has conducted global annual surveys on the internal digital work environments of organizations since 2006. She grouped the toughest obstacles to change into five categories (1):
- Slow or stalled decision-making caused by competing priorities, internal politics, or attempting to reach consensus
- Inability to prove business value of digital through traditional ROI calculations, resulting in lack of senior management sponsorship
- Too much focus on technology rather than willingness to address deep change and modify how employees work
- Lack of understanding operational issues at the decision-making level and difficulties in practical applications
- Fear of losing control by management or central functions
According to Jane, “The toughest challenge in digital transformation is not to define a strategy, but rather to make it tangible and actionable.”
Creating the Right Cultural Mindset
For organizations that rate high on digital maturity, Doug Palmer and Anh Nguyen Phillips found remarkable similarities when it came to corporate culture. The results of their work are highlighted in a 2016 report in collaboration with MIT Sloan School of Management, “Aligning the Organization for its Digital Future.”
Taken together, these four cultural characteristics provide the foundational ingredients for a super-charged recipe to go from “doing digital” to “going digital” (2):
- Value experimentation and speed. It’s not just about the agility of the organizational structure, but empowering employees, incentivizing them, and giving them the authority to enact and drive change.
- Embrace risk. Risk-taking is built into the fabric of how these organizations manage. They emphasize innovation and don’t get upset when something doesn’t work out. 87% invest in innovation at the early stages.
- Organize for collaboration. These organizations moved from vertical departments to a project-based approach. Think distributed, not hierarchical.
- Make data-driven decisions. These companies set very clear goals and measurable objectives, and then communicated them clearly. They get very specific and tactical on what they want to achieve and how to measure success.
Changing an organization’s culture is not easy. However, the ingredients to the recipe are not a secret either. Use the four proven characteristics above to foster a culture of change as your organization continues its journey.
Laszlo S. Gonc
Laszlo is responsible for helping organizations, corporate and non-profit alike, navigate the digital frontier advising on cyber security, IT risk mitigation, compliance and building digital technology strategies that drive performance and business value. He has experience across several industries advising boards, developing security strategies, evaluating IT risk and spearheading critical projects for senior leadership.