Building Digital-Ready Culture in Traditional Organizations – MIT Sloan Management Review

Written by George Westerman, Deborah L. Soule, and Anand Eswaran

Getting your company into digital shape doesn’t mean dumping everything that has made it strong.

Even though traditional companies find much to admire and learn from in the cultures of born-digital companies, some born-digital qualities are cause for concern. Amazon.com, for instance, launches new businesses quickly and drives repeated efficiency gains in operations. However, it is less admired for what can be seen as uncompromising relationships with publishers, partners, localities, and workers. Uber is revered for its ability to innovate services with agility. But many observers are dismayed by the ways it has seemed to dismiss regulators, exploit drivers, and, in a set of highly publicized incidents, fail to protect workers and customers from harassment.

When Jonas Samuelson became CEO of Stockholm-based home appliance maker Electrolux in 2016, he wanted to reignite innovation and growth by building a faster, more digital-ready organizational culture. Yet many of the practices of Silicon Valley did not seem appropriate for his 100-year-old company or the social and business culture of Scandinavia. Samuelson couldn’t ask 55,000 employees to work 70-hour weeks and couldn’t incentivize them with millions in stock options. He couldn’t fire people just because their core skills started to age. He couldn’t constantly redesign the company’s processes and products — Electrolux makes hardware, not software, and customers expect to keep their products for many years. However, he could drive a culture shift that would energize employees to generate more innovation and profitable growth. He believed strongly that this could change Electrolux for the better without losing what was already terrific about the company.

Electrolux is not alone in this quest. Many companies are trying to embrace aspects of digital culture without exposing themselves to the less desirable elements of Silicon Valley startups. Consumer electronics and appliances giant Haier has spent years transforming its culture in pursuit of greater speed and innovation while maintaining the efficiency and stability of its traditional manufacturing and logistics processes. KBC Bank is adapting to fight fast-moving fintech entrants while complying with strict European privacy and employee protection regulations. Leaders of Schneider Electric are pushing culture changes to play a major role in the rapidly evolving internet of things while still being a reliable provider of devices upon which thousands of office buildings and data centers depend.

For many legacy companies, culture change is the biggest challenge of digital transformation. How can a company become more agile and innovative without alienating its best employees or wrecking the best of its existing practices? And what does it mean to have a digital-ready culture?

We’ve been studying these questions for the past three years. (See “About the Research.”) Based on our findings, we’ve developed a framework to guide traditional companies in any industry. The process begins with understanding the four critical values of digital culture: impact, speed, openness, and autonomy. It then involves adopting or refining a set of digital-ready practices, grounded in these values, which will shape employee actions and organizational performance. We also offer suggestions for getting started.

Contrary to much that’s been written, incorporating the best of digital culture into a legacy culture doesn’t mean sacrificing integrity, stability, employee morale, or a company’s heritage. And traditional companies aren’t the only ones that can benefit from this framework. The insights also apply to startups striving to become mature and thriving businesses for the long haul.

Defining Culture

Culture is what happens when the boss leaves the room. This workplace truism is particularly useful for leaders contemplating a significant culture shift. Often described as “the way we do things around here,” culture is a set of values and norms that guides human interactions. It’s present in the espoused values of management, the unspoken assumptions of employees, and the commonly accepted behaviors that have helped an organization succeed in its chosen environment.

The good thing about culture is that it provides coherence and continuity. The bad thing about culture is that it can root a company in past practices that no longer fit a changing world.

Culture is harder to change than strategy, because much of it is unconscious. What’s more, leaders need to understand a company’s prevailing culture before seeking to modernize it. If they suddenly direct people to do things that run counter to deeply held values, rational discussions can quickly devolve into moral diatribes.

It’s equally important that legacy leaders understand exactly which digital values and practices they hope to embrace. At first glance, it seems that there are many values to choose from. At one point, Netflix published a deck of over 100 slides to describe its culture. But a few core values, such as high performance, freedom and responsibility, and context over control, drive the practices that power the company’s innovation and growth. Boston-based software company HubSpot has a similarly thick “culture code” deck, but a few characteristics stand out. The company “commits maniacally” to its mission and metrics. It always strives to “obsess over customers.” The company is “radically and uncomfortably transparent” and asks employees to be “unreasonably selective about our peers.” These dictums reinforce a hard-driving, constantly innovating workplace culture.

Microsoft has redefined its culture around fostering a growth mindset in both individuals and groups. Company leaders worked extensively to shift from solely rewarding people for their individual contributions to recognizing the importance of leveraging the work of others. Other important changes include championing curiosity, actively seeking to drive greater diversity and inclusion, and fostering a “one company” approach over a confederation of fiefdoms.

The Four Key Values

A slew of books and articles purport to reveal the cultural secrets of digital titans. Yet behind this tower of corporate babble, we find a small shared set of cultural elements that are essential to help companies become agile, innovative, and fast-growing.

We reviewed the management literature on culture, examined published frameworks and stories of digital companies’ cultures, and interviewed dozens of executives to identify a small set of self-consistent values and practices of digital culture. We then conducted a survey of more than 500 digital and traditional companies to validate the culture framework and assess how the various elements of digital culture correlate with different types of self-reported performance. Ultimately, four key values of digital culture stand out: impact, speed, openness, and autonomy. (See “The Four Key Values of Digital Culture.”)

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By Maria Ordonez
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