Organizational culture shapes digital transformation

@andreeas via Twenty20
Aug 21, 2019

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?

Please practice The RetailWire Golden Rule when submitting your comments.
"Changing people’s attitudes toward digitalization and technology is more difficult than implementing them."
"There is no doubt that organizational culture shapes all IT transformation."
"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."

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11 Comments on "Organizational culture shapes digital transformation"

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Art Suriano
It is no doubt a bit of both; however, probably one of the most significant issues which falls under tech integration is the lack of customization when it comes to software. I see this as a significant problem because we all do things differently, and we get used to how we do them. Too often, a company dictates the software we are now going to use, but it doesn’t allow the user to have information that person has become used to having. For example, looking at CRMs, you can’t expect salespeople with years of experience to give up how they keep notes or enter information about their clients and sales calls. Much of the software does not allow the user to customize and create fields that meet the individual’s needs. Software limitations become a frustration for the user and cause more negative feelings within the company culture. Software customization is a critical need. Many software programs are getting better at providing it, but the more customization a software might offer, the more expensive it may be for the company purchasing it… Read more »
Bob Amster

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.

Joan Treistman

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.

Mohamed Amer, PhD

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.

Andrew Blatherwick
There is no doubt that organizational culture shapes all IT transformation. If the technology is not wholeheartedly welcomed and embraced by the company, then it does not get used effectively and can often be rejected in favor of the old and likely less productive practices. A lot of people do not like change and would rather stick with what they know than learn and embrace something new. It is, therefore, critical that senior management, the very top of the organization, sponsor the change. What is also critical in retail is breaking down the silos between the various departments and channels. How often have we seen retail and online businesses running separate and different technology which prevents them from providing one single brand to the consumer? Similarly, the supply chain is often suboptimal because the silos do not operate in concert and will fight for power and dominance. Merchandising and supply chain struggle for who owns the process. Store operations fighting for control over inventory or merchandising and much more. If management creates silos and worse… Read more »
David Naumann
David Naumann
Marketing Strategy Lead - Retail, Travel & Distribution, Verizon
2 years 11 months ago

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.

Ralph Jacobson

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.

Cynthia Holcomb
The new internal PR campaign: corporate lip service pontificating the “cool factor” of digital transformation. Yet after all the meetings are over, most staff go back to their jobs knowing corporate leadership, to be relevant, desires to keep pace with the digital conversation with little or no intention of addressing digital transformation head-on. To do so would require a complete upheaval in the face of the human reluctance to change. Which is why after years of the digital transformation conversation and its counterpart, technical integration, things are much the same as 10 to 15 years ago. Very, very few corporations “can alter the direction of a big ship” as told to me by the President of a top U.S. retailer, while at the same moment his innovation team assured him “we already do these technologies.” A complete disconnect at the highest levels. Bottom line, new technologies or even older technologies create fear of exposing an employee or C-suite’s lack of digital knowledge. So the dance continues. As long as people are tech-savvy enough to order… Read more »
Ananda Chakravarty

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.

gordon arnold
The use of information technology is now rarely absent from any part or aspect of a corporation. The problems are almost always software integration and or compatibility. This is the result of application data file structure variations as well as integration of third party macros and assists that over time related updates, become incompatible. There were many more interruptions from in-house and consulting interests during the latter half of the 20th century than exist today. Experienced companies as well as those new to market with experienced staff are now searching out individuals that are of like mindset and goal orientation. This leaves us with software issues that cause so many communication engineers, programmers and system analysts to run around with their hair on fire. These very same incompatibility issues are the cause for file/data redundancy giving us all “Big Data” running unbridled. With an end of software complexity nowhere in the near or intermediate future, the need to govern environmental and application add-ons is at mandatory levels if we wish to keep control of business… Read more »
Ken Silay

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.

"Changing people’s attitudes toward digitalization and technology is more difficult than implementing them."
"There is no doubt that organizational culture shapes all IT transformation."
"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."

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