Thinking Aloud

To get digital transformation right, focus not on tech but on culture

Tech advances spawn cool new tools, but culture is what powers and sustains meaningful change

During a recent conversation with a friend who is thinking of taking up a digital transformation role in a big local organisation, I heard myself say: "Transformation is not about technology, it's about culture."

That's what I've thought for a while but never said out loud.

Some of you may agree but many of you, I suspect, will not.

After all, so much of what's written about digital transformation focuses on technology. And it's tempting for anyone under pressure to deliver results, to grasp at the latest shiny new suite of tech tools as a quick fix to problems weighing down one's organisation, especially when those selling those tools dangle a promise to help us work faster, better and smarter.

Here's a reality check: Those promises are rarely borne out by the outcomes of new technology roll-out.

A March 2019 Harvard Business Review (HBR) article reported that a survey of directors, chief executives and senior executives in the United States found that digital transformation (DT) risk was their No. 1 concern in 2019.

"Yet 70 per cent of all DT initiatives do not reach their goals. Of the US$1.3 trillion (S$1.7 trillion) that was spent on DT last year, it was estimated that US$900 billion went to waste. Why do some DT efforts succeed and others fail?" asked lead writer Behnam Tabrizi, a Stanford University professor who has been teaching organisational change for over 20 years.

"Fundamentally, it's because most digital technologies provide possibilities for efficiency gains and customer intimacy. But if people lack the right mindset to change and the current organisational practices are flawed, DT will simply magnify those flaws," he wrote.

The bottom line of Prof Tabrizi's article is summed up in its title: Digital transformation is not about technology.

Culture trumps tech

So what is culture?

By culture, I mean how people in an organisation do things, including their ways of working, values and mindsets, as well as how they communicate and make decisions.

By saying that transformation is about culture, I am saying that people and their behaviours - not tech tools - need to be front and centre in any bid to forge organisational change, assuming that you want that change to have lasting impact.

Microsoft CEO Satya Nadella is also of that view.

Since being appointed to the top job in 2014, at a time when the software giant had fallen behind competitors like Apple and Amazon, Mr Nadella has made it clear that for him, the C in CEO stands for culture.

He told Microsoft employees that "anything is possible for a company when its culture is about listening, learning and harnessing individual passions and talents to the company's mission".

He was also honest about the flawed organisational practices and problematic mindset he uncovered at the tech firm.

In his book Hit Refresh, he wrote: "Our culture had been rigid. Each employee had to prove to everyone that he or she knew it all and was the smartest person in the room. Accountability - delivering on time and hitting numbers - trumped everything.

"Meetings were formal. Everything had to be planned in perfect detail before the meeting. And it was hard to do a skip-level meeting. If a senior leader wanted to tap the energy and creativity of someone lower down in the organisation, he or she needed to invite that person's boss, and so on. Hierarchy and pecking order had taken control, and spontaneity and creativity had suffered as a result.

"The culture change I wanted was actually rooted in the Microsoft I originally joined (in 1992). It was centred on exercising a growth mindset every day in three distinct ways."

The first way was to "obsess about our customers" because "at the core of our business must be the curiosity and desire to meet a customer's unarticulated and unmet needs with great technology".

The second way was to "actively seek diversity and inclusion" because "inclusiveness helps us learn about our own biases and change our behaviours to tap into the collective power of everyone in the company".

The third way was to build a Microsoft that was one company, "not a confederation of fiefdoms" because "innovation and competition don't respect our silos so we have to learn to transcend those barriers".

Mr Nadella's culture-focused transformation has reaped results - Microsoft's value has grown exponentially with him at the helm.

Getting it right

What can we learn from organisations that have transformed successfully?

In his HBR article, Prof Tabrizi highlights five key lessons.

All resonate with me but none more so than lesson four, which is to recognise employees' fears of being replaced.

When employees perceive that digital transformation could threaten their jobs, they may consciously or unconsciously resist the changes, he writes.

He has often encountered employees who are sceptical of the whole operation. In response, he came up with an "inside-out" process to bring them on board. It involves getting participants to examine their unique contributions to the organisation, and "then to connect those strengths to parts of the digital transformation process - which they will then take charge of, if at all possible".

He explains that this process "gives employees control over how the digital transformation will unfold, and frames new technologies as a means for employees to become even better at what they were already great at doing".

Consistent with that approach is lesson two, which says it is better to leverage insiders than to bring in "an army of outside consultants who tend to apply one-size-fits-all solutions in the name of best practices".

Our approach to transforming, Prof Tabrizi writes, is to "rely instead on insiders - staff who have intimate knowledge about what works and what doesn't in their daily operations".

I hope that as we in Singapore push on with digital transformation, we will bear such lessons in mind.

They remind us that transformation is at its heart a human endeavour. And the ultimate measure of success is change that works for people, not people sacrificed at the altar of change.