The Technology Fallacy: How People Are the Real Key to Digital Transformation
280 pages, The MIT Press, 2019
Many leaders fall prey to the mistaken assumption that just because digital technologies cause much of the business disruption that their organizations are experiencing, implementing digital technologies is also the best solution.
In fact, many of the cultural, organizational, strategic, leadership, and talent responses are far more important and far more difficult than the technological ones. Cutting-edge technologies implemented in organizations with outmoded organizational practices are unlikely to get organizations to where they need to go.
Developing an effective digital culture may be the first and most important step that an organization takes with respect to digital transformation. A common set of cultural characteristics are important for operating effectively in a digital world - agile, experimental, risk-tolerant, and collaborative. Indeed, before an organization even begins talking about whether and how to implement a new digital platform, it may be well-served to think about whether it has the right cultural characteristics.
When we talk, “culture,” we often focus on the artifacts of culture – how employees dress, the layout of the building or its furnishings, the degree of formality among employees – that are easy to observe. Or we look at what Edgar Schein calls “the espoused values” – what the organization says about itself. But, for culture to have an impact when it comes to digital transformation, we need to get at the unconscious, taken-for-granted beliefs about the organization and its work, its purpose, its approach towards people, and its implicit rewards. A focus on transforming digital culture that only focuses on cultural artifacts and espoused values is doomed to fail.
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We live in a world in which most business leaders readily subscribe to the admonition attributed to management guru Peter Drucker: “Culture eats strategy for lunch.” Unsurprisingly, culture is important in almost every discussion of digital transformation. Organizations struggle with understanding the ingredients of a digital-first culture.
Digital culture is often described as being “in the air” or part of the “vibe” of a place. Because culture feels nebulous, it’s often viewed as “icing on the cake.” As we discovered in our research, however, culture is not optional in the quest for success. In fact, we find that culture is a critical element of digital maturity, even if it is a bit hard to pin down. So, what is culture? It is often defined as the social behavior, norms, and beliefs of a group. It represents “the way things are done around here.” Culture is not just what is written in a mission statement or a code of ethics; it is what people in the organization believe to be the accepted patterns of behavior. In this way, culture can be a strong enabler (or a huge hindrance) to digital maturity. In fact, in our study, an inflexible culture, complacency, and lack of agility are cited as the biggest threats companies face because of digital trends. In other words, an organization’s culture can stunt or enable growth of its talent and leaders, as well as its overall digital growth and maturity.
But culture can be challenging to address. It is intangible, complex, and nuanced. Whole books have been written on creating the right kind of culture or environment in your organization (a good one to start with is Ron Friedman’s The Best Place to Work).
Over four years, 16000 surveys, and 75 interviews with market leading organizations, we’ve come to understand that:
- Digital culture is critical to driving digital business adoption.
- Digital culture is distinct and consistent, associated with digital maturity.
- Digital culture is intentional.
Digital Culture Drives Adoption
One way to think about digital culture is to think about creating the right kind of environment within your organization—an environment that is necessary to get the most out of your people, your talent, and your leaders.
Culture can be compared to water in a fish tank. If you do not get the chemical balance of the water exactly right, your fish will die. As Wilhelm Johannsen, the evolutionary botanist, discovered with plant seeds, environmental factors can have a large effect on an organism’s characteristics, growth, and ability to reach its potential. In addition to helping get the most out of your people, culture is also an effective and important way to drive digital adoption and engagement in your organization. Companies at the three stages of digital maturity—early, developing, and maturing—have different approaches to leading change. While the difference between how early and developing companies accomplish this is nuanced, the difference between these and the most advanced maturing companies is far more striking.
Early and developing companies push digital transformation through managerial directive or by technology provision. In contrast, maturing companies tend to pull digital transformation by cultivating conditions that are ripe for transformation to occur. This culture-driven, bottom-up approach is one we are actively exploring in our ongoing research. Our findings suggest that the top-down directive approach many companies are taking may be misguided.
Mandate From Management
Respondents from early stage companies reported that their primary method for driving digital adoption and engagement is to mandate initiatives from management. In this situation, organizational leadership decrees the nature of the next digital initiative, and employees are then expected to fall in line. A central problem with this approach is that top-down directives can often be surprisingly ineffective tools for driving adoption.
The academic literature is replete with examples of employees finding various ways to avoid digital mandates when they want to, ranging from simply dragging their feet to actively sabotaging initiatives. Employees can also use technology in unanticipated ways, which may or may not align with the mandate’s business objectives. Even without these problems, mandating all the necessary behaviors to derive the desired business value from technology can be difficult.
Digital leadership requires approaches that differ from the entrenched command-and-control structures of traditional manufacturing age companies.
Expect Employees to Adopt
Developing-stage companies follow a different approach. These companies expect employees to adopt digital platforms by building them—not dissimilar to the mantra “If you build it, they will come,” from the 1989 Kevin Costner movie Field of Dreams. While managers know that employees will not be driven by magical forces urging them to adopt new initiatives, they often don’t provide the type of time, support, and motivation to adopt that would be necessary in other settings.
Instead, companies often spend considerable time, money, and energy implementing digital platforms, expecting that the value of this technology will become so apparent to employees that they will be naturally drawn to use them to perform their work. And certainly, designing a user-friendly tool or platform with obvious value to the user is undoubtedly important. But companies that simply expect employees to adopt generally emphasize the technological side of implementation—and often execute that implementation well—while forgetting to accompany the new digital infrastructure with the organizational change management initiatives required.
Not only do employees need to be trained to use new technology, but they also need to be given time to figure out how to integrate these tools into their work. In research conducted with Lynn Wu of Wharton, we found that adoption of a new digital platform actually hinders employee performance for the first few months. Only after about six months of use do organizations observe significant performance improvements.
Simply expecting employees to learn how to work with new technology while performing at preadoption levels puts employees and their organizations at a disadvantage for successful digital transformation. Such expectations are unrealistic, yet unfortunately quite common.
Driving Transformation Through Culture
Maturing companies drive digital transformation in an entirely different way, by focusing on creating environments where digital transformation can occur. Nearly 60 percent of respondents to our survey noted that their companies drive digital efforts by cultivating a strong culture that prizes risk taking, collaboration, agility, and continuous learning. Once the organizational conditions are ripe for digital transformation, leaders may discover that they have a much easier time engendering the types of strategic and technological changes that they need to compete.
Once companies have cultivated an appropriate risk tolerance for the organizations, people are often far more willing to try new things. For example, although Google has gotten rid of its famed “20% time,” during which people were encouraged to experiment, employees still retain a spirit of experimentation and risk tolerance in the culture which allows them to continue innovating.
Yochai Benkler, of Harvard, argues that employees are inclined to be more collaborative and cooperative, depending on the environmental conditions. He notes that in behavioral experiments involving the classic prisoner’s dilemma game, 30 percent of people always cooperate, and 30 percent always act self-interestedly. The remaining 40 percent of people will decide based on signals from the environment regarding which approach is dominant. If they were told that they were playing the Wall Street game, this 40 percent acted according to rational self-interest, but if they were told that they were playing the community game, this 40 percent worked together and acted cooperatively. Sending the right cues to employees becomes an effective way of cultivating the right environment.
Digital Culture Is Distinct
So, what kind of culture is needed to enable talent and leaders and to help drive digital adoption and transformation? It turns out that digital cultures are like snowflakes—no two are exactly alike. But just as snowflakes share a common set of distinct characteristics, such as their precise hexagonal array (or six-fold symmetry), digital cultures also share common and distinct traits.
Our data show that a single set of cultural characteristics is associated with digital maturity, and these characteristics are consistent across industries and company size. Specifically, digitally mature organizations are:
- less hierarchical and more distributed in leadership structure;
- more collaborative and cross-functional;
- encouraging of experimentation and learning;
- more bold and exploratory, with a higher tolerance for risk;
- and more agile and quick to act.
These findings suggest that all organizations can begin the process of digital transformation in a single place, by working toward developing these hallmark characteristics of a digital culture. They provide further evidence for what we have already argued, that technology is only part of the story of digital transformation.
Digital Culture Is Intentional
The results of our research lead us to frame our theme even more strongly, suggesting that technology is, in fact, not even the most important part of digital transformation. If cultural characteristics are associated with digital maturity independent of an organization’s efforts, and if digitally maturing organizations are driving digital transformation through cultural change, the most pressing challenge may be really more about shifting the organization’s culture to be more adaptable to change. If companies can get the culture right, then resulting changes in technology and business processes can more easily follow.
Many companies talk a good game about digital transformation. Just as they can talk extensively about digital strategy, so can they say all the right words about making their companies more agile and more risk tolerant. The companies that are actually able to bring about these changes, however, are far fewer in number. While the characteristics of effective digital culture are simple and clear, bringing them about is by no means easy. Yet, companies are succeeding in building cultures that are nimble, agile, collaborative, bold, and exploratory. How are they doing it?
This leads us to the third important point we learned about digital culture: that it’s intentional. Many digitally maturing companies make culture an intentional part of their efforts. Salesforce grapples with the cultural challenges every startup faces when it grows—retaining the values and beliefs that were its essence at its founding. Salesforce preserves its digital culture through calculated efforts. “We’re very intentional with our culture,” says Jody Kohner, vice president of employee marketing and engagement. “Culture is not something that happens to us.” Being intentional about the culture starts with an emphasis on ‘ohana, the Hawaiian cultural value of extended family. “The concept is about an extended group of people that are bound together and responsible for each other,” says Kohner. “We reinforce that sense of family from day one through actions, programs, and initiatives.” Building trust and empowering career advancement are also intentional elements of Salesforce’s culture.
What Can You Do?
As your company considers (or reconsiders) its own digital transformation initiatives, you should ask yourself whether you are approaching it in the right way. Are you pushing digital transformation on your organization, either through mandating adoption or by providing technology? Or, are you pulling transformation by cultivating the conditions that will elicit the types of change you desire? What aspects of a digital culture does your company lag in the most, and what are some steps you can take to remove those cultural aspects that may inhibit digital growth? Are your efforts at developing a digital culture intentional? These differences may determine the ultimate success or failure of your digital transformation efforts.