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Company culture is a critical success factor in digital transformation initiatives, and digital transformation impacts three areas of innovation opportunities, in their order of importance: people, process, and technology.

Unfortunately, between IT organizations and their respective consulting partners, the focus has almost always been the last – technology. Why? Let me offer the following answers: technology is real, shiny and easily quantified. From a logical perspective, technology is usually evaluated based on financial metrics (e.g. ROI). Whereas, more mature organizations focus on both technology and process. While this is impressive, the potential to realize stated objectives and business value is still stymied. Technology modernization and process improvements alone will not be enough to implement a truly authentic digital transformation. The people aspect, specifically, the company culture, influences the engagement (or lack thereof) and thus, the adoption of new mindsets and behaviors inherent in change events. In order for businesses to succeed in digital transformation, the latter has to be a “culture-led” transformation.

Let us focus on company culture. How is company culture defined, articulated and demonstrated in business organizations? Who sets the company culture in business organizations?

The leadership team does.

Let’s face it: digital transformation is not focused on incremental change. Rather, its goal is to affect not just radical change (e.g. the way the company engages its customers) but also a fundamental change (e.g. the way the company does business). Digital transformation initiatives aim to reinvent the whole business. And while in principle, we accept the notion that change is the only constant, change is also an unwelcome guest. The current state, or status quo, usually prevails. The more successful a business is, the more challenging it is to introduce disruptive innovation in the organization. This is precisely the premise of Clayton Christensen, a Harvard professor, in his book, “The Innovator’s Dilemma.”

How can the leadership team help define and demonstrate a company culture that enables and propels the digital journey?

Vineet Nayar, writing on Harvard Business Review, discussed the opposite in his article. He proposed three traps that leadership teams must absolutely avoid while engaged in executing an enterprise transformation. What then must the leadership team focus on?

Let me offer the following:

  • The Power of “Why”. In a previous article, I mentioned Simon Sinek: he proposes that many organizations have failed to define their “why.” Why does your business exist? What really matters to the organization? Granted, there are times when the leadership has clarity and purpose. Unfortunately, the same leadership team may need to socialize the “why” to the rest of the organization more effectively. When employees understand the “why,” they become team members. They get more engaged with their work and with each other.
  • Shared Values. The next question then becomes: what’s truly important in the company? How do we get work done around here? In my advisory and consulting work with various companies, I have seen manifestos published on company wikis. In many startups, manifestos are actually printed as posters and installed in common areas like open work spaces. Again, here’s an opportunity for the leadership to “operationalize” core values. The leadership team can then demonstrate LBE (Leadership by Example). In my own work, I try my best to embrace the minimum of three values: trust, respect and transparency.
  • Focus on Sustainability. Is your business model sustainable in the long run? If you’re a public company, you’re under pressure to constantly monitor and increase shareholder value – on a quarter by quarter basis. By focusing on the company’s stock price alone, many businesses have missed the opportunity to truly innovate. We have to remind ourselves that sometimes, the really important business value takes time to realize.
  • Champion Stakeholder Engagement. The business landscape has become hyper-complex as it undergoes an astounding rate of change. The market has changed (and continues to) and so have consumers. Let’s prioritize stakeholders over shareholders. Stakeholders are your customers, employees, partners, regulators and suppliers. These are the actors in your business ecosystem. And they all have a stake in the business. They all have a stake in the success of the organization. Hence, their experience with the business brand matters. In the end, a business which engages all its stakeholders also become successful in rewarding its shareholders.
  • Become Agile. One of the key goals of digital transformation is business agility. Agile principles that originated in software development have now become a best practice management methodology. Startups like Uber and Airbnb are successful because they’re agile and digital natives. They can shift priorities and resources as they adjust to the constantly changing consumer behavior and market fluctuations.
  • Shift Mindset from Cost-Cutting to Investment. When I ask CxOs what keeps them up at night, most of them would answer: to keep costs down. We can all agree that cost optimization is important – it impacts the bottom line. But obsessing on costs can sometimes be costly (no pun intended). This mindset regards every budgetary spend as an expense. Moving to the cloud? No, too expensive. Are strategic initiatives like cloud computing and mobility really expenses? I don’t think so. Done right, they are strategic investments – that is, investment in the future. All we have to do is remember the recent disrupted: Blockbuster, Nokia and Blackberry.
  • Embrace an Intrapreneurial Mindset. At times, I think that the success of a business becomes the actual reason the same business fails. As the saying goes: “if it ain’t broke, don’t fix it”. And yet, in business and in these very chaotic and demanding markets, businesses which do not innovate will be doomed eventually. Organizations like Apple not only obsess about their customers; they stay one step ahead of them. We used to say: think outside the box. Now, I say: there is no box.

The business reality is that the leadership team is in the enviable position of defining and demonstrating cultural behaviors that will propel the organization into the future. And since we’re discussing digital transformation here, a transformational culture is a key success factor for businesses attempting to create and design their own future. A transformational culture is achieved when business leaders act humbly in their power and authority. This also means subscribing to the idea and practice of servant leadership.

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