HBR: The Company Cultures That Help (or Hinder) Digital Transformation

…… Originally published on the Global Peter Drucker Forum Blog and on the Harvard Business Review in August 2015 ……

Many companies struggle with digital transformation. It goes against the grain of established ways of working and is a threat to management practices that have existed for decades. Digital tools free people throughout the organization to share information easily. Communication managers no longer have total control over message, target, and timing of news and announcements. Horizontal and bottom-up information flows become stronger at the expense of the traditional top-down.

Digital lets expertise emerge naturally as people ask and answer questions peer-to-peer. People build up reputations across the organization as the “go to” person for topics even if they are not the official experts. This bypasses HR’s system and procedures for validating experts.

IT management risks losing control over enterprise technologies because in a fast-paced business world, teams — unwilling to wait for IT to rollout official solutions — solve their own needs quickly by resorting to cloud-based, consumer tools to manage projects and share information.

Personal branding worries management, as people who are active on the internal social network become “stars,” with greater name recognition inside the company than certain top managers. These de facto thought-leaders become a force to reckon with that is completely outside the hierarchy.

And yet despite all of these “threats,” some companies embrace the changes digital offers. What sets them apart?

To figure out what makes the transition easier for some companies than others, I have conducted several surveys with organizations around the world over the past nine years. I have grouped the toughest obstacles to change — those considered to be serious and holding us back — into five categories:

Slow or stalled decision-making caused by internal politics, competing priorities, 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 rethink how people work.
Lack of understanding operational issues at the decision-making level and difficulties when going from theory to practice.
Fear of losing control by management or central functions, and fears that employees will waste time on social platforms.

Work cultures can either accentuate or alleviate these obstacles. The 2014 survey participants rated their internal work cultures on a five-point scale for the following opposing characteristics:

Strong, shared sense of purpose vs. weak, inconsistent sense of purpose
Freedom to experiment vs. absolute compliance to rules and processes
Distributed decision-making vs. centralized, hierarchical decision-making
Open to the influence of the external world vs. internally focused and closed to the external world

These characteristics are not mutually exclusive, obviously, but data show that organizations tend to be stronger in one area rather than the other three. Out of 280 organizations, 66 indicated the highest level for one of the four characteristics,19 for two characteristics, eight for three, and none for all four. This minimal overlap lets us refine our understanding about which characteristic alleviates or accentuates which obstacles:

A strong, shared sense of purpose alleviates many obstacles, especially those of internal politics.

A strong sense of purpose alleviates political resistance: people are moving in the same direction driven by shared values. A low sense of purpose makes it difficult for people to come to agreements and decisions. They are five times more likely to face obstacles from internal politics, five times more likely to be concerned about employees wasting time and three times more likely to suffer from lack of senior management sponsorship than organizations where there is a strong, shared sense of purpose.

Freedom to experiment helps people prioritize, make decisions, and rethink how they work.

Freedom to experiment helps organizations prioritize. When people are not free to experiment or take initiative, it is difficult to consider different ways of working. Without experimentation, there is little basis for prioritizing and making decisions. These organizations are twice as likely to suffer from hesitation to rethink how we work and twice as likely to be held back by fears by management of losing control.

Distributed decision-making gives people at the edges of organizations a voice in digital transformation.

Organizations with distributed decision-making rarely face resistance to rethinking how they work. In contrast, centralized decision-making puts control in the hands of people the least likely to be in touch with the reality of the edges — the front lines where people interact with customers. Removed from operational issues, they worry about losing control and fear that if given too much autonomy, employees will waste time. They’re also more comfortable talking about technology as opposed to the actual work processes technology enables. They are three times as likely to resist rethinking how they work. Organizations with highly centralized decision-making have the highest proportion of obstacles considered to be “serious and holding us back” and is the work culture with the most negative impact on digital transformation out of those studied in the survey.

Organizations that are responsive to the influence of the external world are more likely to understand the value digital can bring.

Organizations that are open are more exposed to what is happening in the external world. They have a broader perspective helping them focus on their own priorities and be clear on ROI. Organizations that are closed to their external environment are twice as likely to report obstacles of competing priorities, slow decision making, hesitation to rethink how work is done, and an inability to make a compelling business case for digital.

If one of the obstacles described above is getting in the way of your company’s digital evolution, consider how the obstacle correlates with work cultures. Then find ways to transform your work culture using digital as a lever. Digital transformation is coming to us all, and understanding the relation with work cultures will help you optimize your change initiatives and actions.

Drucker Forum 2015: Managing in the Digital Age

This post is one in a series of perspectives by presenters and participants in the 7th Global Drucker Forum (2015).