Are you underestimating the role of culture in digital transformation?

Learn why culture needs to come before technology.

Posted December 6, 2018

In today’s competitive market, digital transformation is a requirement in almost every industry. There is barely a process or business function that isn’t teeming with tech tools to enable greater efficiency, connectivity and effectiveness.

However, as companies embark on their digital transformation journeys, simply applying new technology to old processes often doesn’t achieve the intended outcomes. According to Deloitte, the rate of failure of organizational transformation projects has remained constant at 60–70 percent since the 1970s (where failure is defined as not achieving the objectives and benefits of the transformation).

While any type of company transformation initiative — HR, strategic and so on — is already difficult to implement, digital transformation is doubly challenging. That’s because it’s not a one-and-done solution; rather, it requires ongoing change and continued adoption of ever-emerging technologies and skill sets.

Digital transformation starts and ends with culture

Given its ongoing, continuous nature, digital transformation requires a culture that supports innovation. An article by McKinsey titled Culture for a digital age explains that “functional and departmental silos, a fear of taking risks and difficulty forming and acting on a single view of the customer” make up the three biggest cultural issues preventing more companies from succeeding in digital transformation.

Put simply, “shortcomings in organizational culture are one of the main barriers to company success in the digital age,” the article continues.

The history of business is littered with brands that were unable to adapt to a changing technological environment. Just think of Blockbuster, MySpace and Blackberry. “I believe culture has to be constantly spoken about and invested in, for any company that wants to keep up with the rapid pace of change,” says Daniel Newman, principal analyst at Futurum Research and CEO of Broadsuite Media Group, who writes extensively about digital transformation. “The words may be spoken by management,” he says — but if it’s not backed up by day-to-day commitment and clear actions, then “strategy falters and the culture stagnates.”

Conversely, companies such as Amazon, Facebook and Apple that have succeeded in fostering a digital-first, highly innovative culture have seen outsized returns. For everyone else, avoiding culture change when embarking on a digital transformation initiative is risky at best.

In fact, for companies that successfully implement new technologies, fostering a strong, open culture is a prerequisite. “Given the scale of digital transformation, leaders must proactively address culture before trying to introduce a large-scale technology change in their organization,” says Torben Rick, managing director for Danish energy company Verdo A/S and author of one of the top online leadership blogs. “This can take more time than they expect, but the time investment pays off in a better outcome.”

The attributes of a digital transformation culture

In one of his blog posts, Rick outlines nine key cultural differences between traditional (analog) cultures and digital cultures. Taken together, they enable management to build “a new momentum and rhythm” that takes continuous change in stride.

For instance, where analog companies are reactive, the pace of change now demands they become more proactive in seeking out innovation and anticipating wholesale shifts in their market. When failure is embraced rather than discouraged, innovation becomes quicker and less dependent on long research cycles.

Above all, cultures absolutely must become more customer-centric rather than product-centric, says Rick. Discouraging silos and hierarchy are two marks of a culture that can embrace continuous change, since cross-functional, flat teams are best able to quickly respond to customer needs.

How Starbucks became a tech company through culture

A great example is Starbucks’ mobile rewards program. The app has a 4.8-star rating, and more than 23 million people used it to make a purchase in 2018. Customers love the app for its convenience, discounts, easy payments and other perks. The app, says Futurum’s Newman, “[has] changed user behavior, made products and services more accessible and changed Starbucks from a coffee company to a tech company that serves coffee.”

So how can a company like Starbucks — what’s more analog than coffee? — become a digital-first company? “I believe they prioritized customer experience. Understanding what the customers will want in the future and building an application that changes the experience,” says Newman.

Starbucks has worked hard to create a real sense of place and belonging in its stores. Many of its customers feel a connection to the brand, and their drink order has become a part of their day-to-day identity.

The same is true of Starbucks employees. The company has long offered health insurance to employees, stock, education assistance, along with training and development opportunities. With engaged, passionate employees, rolling out a new technology platform gets significantly easier.

The ‘transformational’ value of an empowered team

When chatbots first entered the scene, it was a heady time, and companies raced to implement the technology without strategic consideration of its impact on the customer journey. Shortly after, headlines changed from proclaiming chatbots to be “the next big thing in customer service” to highlighting the “bot backlash.”

It wasn’t all failed attempts at digital transformation, however. Brands who recognized chatbots as a tool for enhancing the customer experience rather than as a cost-saving device disguised in flashy technology, continue to prove successful today.

What was the biggest takeway from early bot implementation? For many customer service inquiries, consumers need human support in addition to chatbot support. Besides careful planning of where, when and how those handoffs occur in the interaction, agents that intercept need to be equipped with the ability to connect with customers, go off script and do what it takes to address their concerns.

That’s a uniquely cultural issue where the right technology can actually help fuel an environment of trust and empowerment. “A lot of times, corporate cultures can force people to act robotic rather than creative,” says Michael Ringman, TELUS International CIO. “Our use of technology and AI in the contact center these days is often geared toward helping that frontline team member be a person — to help understand the problems of the individual on the other end of the phone, computer or mobile device.”

When team members are empowered through technology, says Ringman, it not only enables them to better help customers but also increases their engagement on the job. This in turn increases agent tenure and experience level, further boosting service levels. On top of that, team members in a more innovative, empowered culture tend to stick around longer.

Putting culture first creates a virtuous cycle. When this mindset is embraced by digital-first companies, it enables the ongoing transformation required to compete, and thrive, in the digital age.

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