I was recently asked an intriguing question by the CEO of a financial services company. He knows the company must embark on a digital transformation journey. Given what we have learned from the experience of others, should he lead the effort with culture change or technology change?
The reflexive answer that I expect you want to give is “both,” in parallel. But many corporate transformations fail or struggle because leaders are overly ambitious. Organizations have a natural level of capacity for change. If you try to revolutionize a relatively sleepy, steady-state old company too quickly, it’s like putting a rocket engine on a bicycle — there will be a lot of noise and smoke for a short while, and no useful end result. Often then, it would be better to play a longer game. Build up the change, over a longer period of time and get somewhere useful. His company, like many, is not going to be disrupted out of existence in two years, but it might be in 10 years.
Disciplined CEOs know that strategic change management is often better done sequentially. Do one part properly, then once it’s rock solid, move to the next part. Nearly all digital transformations of incumbent companies start from a position of a weak and corroded legacy IT base and a culture that isn’t digitally savvy. So if we are forced to choose — which should go first, investing in the technology base or investing in the culture change?
If we invest in the technology base first, then the people in the company will start to be surrounded with the tools they need to make digital progress. As they learn to experiment with those tools, they could then ease into the needed culture change via bottom up learning.
If we invest in a big culture change program first, then people hungry to apply their new thinking and methods of doing business will start to demand digital capability investment and upgrading of the technology base.
My belief is that it would be better to start with the culture. There is a risk that the new energy and excitement will be wasted if the technology investment follows too slowly. However, if business people have a clear understanding they will start demanding the right kinds of tech.
The alternative is the old “if we build it, they will come” approach. Build a new technology platform and agile development capability and surely business people will start to exploit it. Sadly, too often, they just don’t. The new tech sits around — expensive and underexploited. Leading with the tech also presumes that a visionary IT leader knows what to build upfront. What if the IT leader decides the key to the future is a social media marketing analytics platform, but when the company culture changes so does its digital business strategy — and the needed critical capability becomes Internet of Things?
What kinds of culture change should a CEO consider that would drive toward the technology capability and digital business progress the leader wants to create? There are many options, and what follows are a few examples.
Genuine Customer / User Centricity — A real focus on unmet customer needs. This will uncover the true (and often shocking) extent of customer demand for digitally enabled customer value propositions.
Data-centric Decision Making — Where better data evidence and forecast model support wins big decisions and everyday decisions — not just “expert” judgment. This will cause talent to demand and drive for superior data from better digital capabilities.
Empowerment and Ownership — Throttling micromanagement and reducing complex performance measurement systems that cause unintended, perverse, introspective, risk-averse behaviors. This will unleash more natural digital innovation from the bottom up.
Mission Belief — So many mature organizations have become unwieldy, acquisition accreted, semi-conglomerates that have lost sight of any real sense of value purpose (other than to make money). Where there is a true mission, the organization will tend to strive more to exploit any new means of making progress towards it — including, of course, digital innovation.
I say, if it needs to be a sequence and a choice, then lead with culture change. Cause the creative energy and friction that will lead to the right kind of technology upgrade and digital capability demand.
What’s your view?
Mark Raskino is a Gartner Fellow in the CEO and Digital Business Leadership research team.