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Risk aversion, weak customer focus and siloed mind-sets – in a digital world solving these cultural problems is no longer optional.

Shortcomings in organizational culture are one of the most significant self-reported barriers to company success in the digital age. That is a central finding in a recent survey of global executives done by McKinsey. (1) The survey listed “Cultural and behavioral challenges” with 33% of responses as the most significant challenge, followed by “lack of understanding of digital trends” with 25% and “Lack of talent for digital” with 24% as number 3.

The three main cultural obstacles, negatively correlated to economic performance.

When risk aversion holds sway, underinvestment in strategic opportunities and sluggish responses to quick-changing customer needs and market dynamics can be the result. When a unified understanding of customers is lacking, companies struggle to mobilize employees around integrated touchpoints, journeys, and consistent experiences, while often failing to discern where to best place their bets as digital broadens customer choice and the actions companies can take in response. And when silos characterize the organization, responses to rapidly evolving customer needs are often too narrow, with key signals missed or acted upon too slowly, simply because they were seen by the wrong part of the company.

If you look at the history of corporate culture, you see that it’s about improving efficiency, increasing margins, and eliminating risk, But none of that works in an always-on transformation era we are entering. Here are a few aspects how to work on those challenges holding digital transformations back.

Taking calculated risk

In some sense, the digital era has complicated matters: one the one hand,  technology is making it easier to experiment and willingness to invest in new, potentially risky areas become critically important. On the other hand, taking risks has become more frightening because of transparency, eroding durability of competitive advantage and uncertainty about the future.

Building a culture where people feel comfortable trying things that might fail starts with senior leaders’ attitudes and role modeling. They must break the status quo of hierarchical decision making, overcome a focus on optimizing rather than innovating, and celebrate learning from failure. However, delegating authority only works if the employees have the skills, mind-sets, information access and tools to make good on it. Outside hires from start-up’s or technology companies might help inject disruptive thinking.

A culture of digital aspirations and bold decisions

Where organizations are used to marginal improvements through optimization, goals should reflect the pace of disruption in a company’s industry and should as such seen as being disruptive for status quo. Reducing the time needed to open a new bank account by 20% is shaking the established and long trained internal culture – reducing it to under 5 minutes or 90% will certainly do.

Customer centricity end-to-end

Although companies have long declared their intention to get close to their customers, the digital age is forcing them to actually do it – it is becoming a matter of survival. It was not Apple, which destroyed the music industry as we knew it, it was their failure to ignore the consumer wish to buy individual tracks instead of a full album. It was also not Uber destroying the taxi business in large cities, it was their inability to pick customers up within minutes at a market defined price. Of course those companies are using modern technology platforms, data and tools; the real difference: they used it to deliver more value and better experience for customers end-to-end.

At its best, customer-centricity extends far beyond marketing and product design to become a unifying cultural element that drives all core decisions across all areas of the business. That includes operations, where in many organizations it’s often the furthest from view, and strategy, which must be regularly refreshed if it is to serve as a reliable guide in today’s rapidly changing environment. Customer-centric cultures anticipate emerging patterns in the behavior of customers and tailor relevant interactions with them dynamically.

Breaking down silos

Some might perceive the existence of organizational silos a structural issue, rather than a cultural one. But silos are more than just lines and boxes. A narrow mentality of employees who hesitate to share information or collaborate across functions and departments go against the increasing interdisciplinary requirement of digital.

Infusion of a challenger mindset

The single most powerful element of culture most probably is mindset. No wonder successful digital leaders hire primary for the right “mindset” versus a CV full of positions in the same industry or skillsets or academic degrees. Open mindsets look at things differently, relentlessly try to see how things can be done differently, learn fast and move on. A challenger mindset on top is never really satisfied with a status quo, looks at a problem in a broader context, doesn’t accept a “does not work” easily. Some times back Ikea in the UK was running an ad looking for talents with the headline “We are looking for the WHY sayers” – a beautiful examples to focus on the one and most important aspect when hiring talent: mindset!

Culture is fluid

Culture is no longer “the way we do things around here” but fluid and changing with each collaboration (2)

In his 1966 book The Will to Manage, renowned management consultant Marvin Bower described a company’s philosophy as “the way we do things around here.” Those words helped to establish the role of corporate culture and solidify its purpose over the next 50 years. But we are embarking upon a time when the “way we do things” will be reinvented with each new collaboration. And in such waters, a tool meant to reinforce consistency of behavior over long periods of time transforms from a motor to an anchor.

(1) Source2016 McKinsey Digital Survey of 2’135 respondents; Note: parts of this article are taken from the corresponding McKinsey publication.

(2) http://sloanreview.mit.edu/article/the-end-of-corporate-culture-as-we-know-it/

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