Realising the need for digital transformation doesn’t mean ditching your company’s long-held values, write George Westerman, Deborah Soule and Anand Eswaran for MIT Sloan Management Review.
There is much to admire about the culture and success of Silicon Valley, and if you want your company to continue to thrive, you must learn from these “born digital” companies. But the key to “digital transformation” is embracing the new without jettisoning everything that’s good about your company today.
Amazon is one of the most admired companies in the world – and there is a lot to learn from the way the tech giant goes about its business. But it has also been criticised in the past for its treatment of its partners and, like fellow digital native Uber, its workers.
“Many companies are trying to embrace aspects of digital culture without exposing themselves to the less desirable elements of Silicon Valley startups,” write MIT’s George Westerman, Deborah Soule and Anand Eswaran.
How can your company become more agile and innovative without alienating its best employees or wrecking the best of its existing practices? What does it mean to have a “digital-ready” culture?
Westerman, Soule and Eswaran have spent three years researching digital companies, traditional companies and companies undertaking the process of digital transformation, and have produced a framework to guide traditional firms through this transformation.
WHAT IS CULTURE?
Culture is the way your company goes about its business. You have probably heard the adage, “culture is what happens when the boss leaves the room”. That doesn’t mean you don’t have responsibility for fostering your company’s culture, creating a set of values and norms that guide staff interaction with each other, with your partners and with your customers.
Your company already has a culture. It provides “coherence and continuity” but it’s likely that some aspects of it are holding your company back and need to be replaced. It’s your job to decide which elements to keep and which elements to drop, as well as to understand what digital values and practices your company should embrace.
THE FOUR KEY VALUES
The authors have identified four shared “cultural elements” essential to helping your company become agile, innovative and fast-growing:
1) Impact. Digital leaders focus first and foremost on achieving revolutionary change through constant innovation. They believe if they do things differently and shake up industries (rendering the old guard obsolete), power and profit will follow. The other three values support this mission.
2) Speed. Staying ahead of the competition and responding rapidly to customers’ needs is vital.
3) Openness. Your employees should be willing to listen to and work with anyone and anything that can help them achieve their goal. Encourage them to challenge the status quo and to share information.
4) Autonomy. Your employees won’t achieve anything if they have to constantly ask permission from somebody higher up the chain of command before they act. Set them free to innovate.
THE SEVEN KEY PRACTICES
“The values of high-performing digital companies frame their essential practices: rapid experimentation, self-organisation, data-driven decision making and an obsession with customers and results,” write Westerman, Soule and Eswaran.
Traditional companies share the final two practices. They also follow three unique practices: acting with integrity, seeking stability, and strictly conforming to rules.
To achieve your successful digital transformation, there’s no need to throw the baby out with the bathwater. You can combine the new digital practices with the best traditional practices:
1) Rapid experimentation. Forget perfection. Encourage experimentation. Iterate. Try, fail, learn, repeat.
2) Self organisation. Remove all obstacles – functional, geographic, hierarchical, organisational – to collaboration.
3) Data-driven decision making. Collecting accurate data and analysing it effectively is vital.
4) Obsession with customers. Everything successful digital companies do is customer focused. Who are your customers? What do they want? You can no longer be satisfied simply with meeting your customers’ current needs; you must also anticipate their future needs and aim to “delight” them with innovation.
5) Focusing on results. What does success look like? Always strive for measurable results, and make your employees accountable.
6) Acting with integrity. Your company should care about all stakeholders. Honesty and ethical behaviour will create a positive working environment for your employees and boost your reputation with your partners and customers. Create guidelines and ensure they are followed.
7) Seeking stability. When it comes to stakeholder interactions and your employees’ work life, predictability and reliability should be your goal.
HOW TO GET STARTED
The authors have identified the first seven steps on the path to digital transformation:
1) Reframe the vision around radical impact. Provide your employees with a sense of purpose with a grand vision. Nike makes trainers, but it doesn’t just make trainers. Nike is a lifestyle. It strives to be part of its customers’ lives with innovations such as the Nike Run Club in order to be part of the conversation and encourage brand loyalty.
2) Visibly promote new values and practices. You must be the primary ambassador for your company’s new culture, “live the change”. Talk with your employees, listen and address their concerns.
3) Be selective in choosing where to start. Digital transformation is more important in some departments (e.g. product development) than others (e.g. finance). Focus first on the departments where change us urgent.
4) Give people the chance to make an impact. Your employees are busy, so even if they want to innovate, they might not feel they have the time. You must give them the time they need.
Google encourages its employees to spend 20% of their time to side projects they believe will benefit the company. You could follow Google’s example or try regular innovation contests.
5) Look to IT (if appropriate). In many companies, IT departments have already embraced practices such as rapid experimentation. If your IT department is ahead of the curve, hold it up as an example to other departments.
6) Provide the right tools. You must invest in the equipment and systems your employees need to embrace the four key values and seven key practices. “Don’t set up your employees to fail by asking them to engage in 21st-century practices using 20th-century tools,” warn the authors.
7) Be transparent about goals and performance. Transparency boosts productivity, promotes better understanding across different departments and encourages collaboration – but you don’t want your employees to feel like Big Brother is watching them all the time. You can avoid this trap by creating truly meaningfulKPIs and by leading from the front to build trust.
TAKE YOUR TIME
Digital transformation is a marathon not a sprint. “Developing a digital-ready culture does not mean doing away with all that is good in a traditional company’s culture,” write Westerman, Soule and Eswaran. “Instead, it’s a matter of communicating the desired values and then introducing some new practices while fine tuning others.”