Organizational culture shapes digital transformation




Knowledge@Wharton staff
Presented here for discussion is a summary of a current article published with permission from Knowledge@Wharton, the online research and business analysis journal of the Wharton School of the University of Pennsylvania.
When large organizations launch so-called digital transformation initiatives, it is often believed that integrating new technology with existing systems poses the biggest challenge. Often, however, grappling with organizational culture presents a bigger problem.
While some firms have a DNA that accepts change relatively easily, others are far more resistant.
In an interview with Knowledge@Wharton, Nik Puri, SVP of international IT at FedEx, said some of his peers view “digital transformation” as the continuing automation of IT, now including big data, cloud and artificial intelligence. But he believes it’s a business change-management journey.
Mr. Puri said, “It’s about adopting new technologies, but it’s also about adopting new ways of working and new mindsets to deliver new business value.”
It’s this new business value creation that differentiates the concept of digital transformation from what others may call digital optimization.
All the different parts, whether access to new data streams, organizational models or design thinking, have to work together to drive the new business value creation.
“The analogy I always use is that of layer cakes,” Mr. Puri said. “All three cakes have to be consistent, and they have to have a harmonization around them, for the user to have a delightful experience.”
At FedEx, hackathons, which bring teams together for two or three days to explore new processes, have been one way leaders have driven digital transformation.
Mr. Puri said, “We as a team of leaders have to ask ourselves: Are we empowering our teams to think about these ideas in ways where, if they fail, they stand up, find a new way of doing things and move forward? Is there a mindset for rapid prototyping? All these have to come together like layer cakes for us to be able to drive a new way of working and a new mindset, leveraging new technologies.”
Dan Alig, CIO at Wharton Computing and Information Technology, who spoke alongside Mr. Puri, likened the hurdles to the way e-mail at the Wharton School was initially rejected internally when it was introduced about 20 years ago but has since became a fundamental communication tool. He said, “When we look at the new technologies, it’s just a different way of thinking about how we empower everything around us and change the way we operate.”
DISCUSSION QUESTIONS: Do you agree that coping with organizational culture is typically the biggest challenge for retailers instituting digital transformations, or is tech integration the bigger challenge? What advice would you have for nurturing a culture that adapts more readily to new technology?
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11 Comments on "Organizational culture shapes digital transformation"
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Chief Executive Officer, The TSi Company
Principal, Retail Technology Group
The digital transformation (we need one definition) requires that organizations restructure many departments so that each department embraces and adopts new technology as it becomes established. Underlying this approach is an agreement, or a mandate from the leadership, that the digital transformation is, in fact, a benefit to the organization. Next, it is imperative that redundancy of function and silos be eliminated in a planned and thoughtful process as opposed to overnight. Changing people’s attitudes toward digitalization and technology is more difficult than implementing them. Unless their DNA specifically makes people thrive with change, nobody likes change.
President, The Treistman Group LLC
It’s always about employees and turf. Paranoia sets in when change is looming. It’s worrying about how my role and status, not to mention employment, will be affected. I’m not into the layer cake analogy. Bakers are able to trim away the portion of cake or cakes that stick out or make the layer cake appear less uniform. I don’t advocate that approach for corporations, but it’s exactly that image that makes for employee anxiety and consequently resistance.
Independent Board Member, Investor and Startup Advisor
Reluctance or inability to adopt new technology to evolve the business is a marker for a much deeper and often fatal flaw: a closed mindset anchored in an outdated view of the world by the C-suite and board.
Change, especially when it touches the very core of any organization, can disorient and challenge not only hierarchies and turfs but the most accepted common sense. Technology is the canary in the coal mine.
While Peter Drucker is credited with the saying that culture eats strategy for breakfast and Marc Andreessen about software eating the world, what we have here is that culture eats software for breakfast, lunch, and dinner.
Chairman Emeritus, Relex Solutions
Marketing Strategy Lead - Retail, Travel & Distribution, Verizon
An organizational culture that embraces technology is important for digital transformation success. However, from a store operations perspective, training is the most important driver of successful technology implementations. If store associates are not properly trained and do not understand the benefits of the technology, the technology will not be adopted and properly used.
For headquarters staff that are now expected to rely on AI to optimize their planning decisions, the key is to change their mindset. Many planners think their insights and experience are better than AI and they don’t trust the data. There is a lot of education needed to get planners to embrace AI.
Global Retail & CPG Sales Strategist, IBM
Presenting the “why” effectively to your staff is the first step in implementing new technologies. They need to know why what they’ve always done is no longer good enough.
Founder | CEO, Female Brain Ai & Prefeye - Preference Science Technologies Inc.
Vice President, Research at IDC
Digital transformation is such a misnomer. No matter the amount of tech involved, it’s always about cultural change, which inherently introduces a headwind. As others have identified, it’s about mindset and how much people are willing to make the moves from the top on down. Most important, that’s where you see real leadership — not when the ships coordinates are already punched in, but when you need to move it in another direction.
Also not a fan of the layer cake analogy. It misses the entirety of the culture piece and most important, the constant change in the culture. An organization is fluid, not a static entity. Not only internally but also externally with the market, customers and more. An adaptive culture means thinking about culture in a more dynamic way.
sales management consultant
Principal, KGS Business Services
I believe that we need to make a paradigm shift in our thinking about culture and how it is affected by technology. If we rewired the culture of the organization to look forward, down to the employee level, to identify new technology and its impending impact on the industry and the organization, we would be driving technology instead of reacting to it. Changing the culture, potentially a new role for HR, to a tech driver will mitigate the trauma experienced when new technology is an organizational surprise.