Empirical evidence has long shown that transparent, collaborative and adaptive cultures empower business and financial success by enabling innovation.[i] Now companies are learning that if they do not have innovative cultures their digitization strategies languish.
According to McKinsey’s 2018 Global Survey on digital transformation, 80% of the nearly 1800 respondents have launched digitization efforts in the last five years. McKinsey’s research shows that only 16% succeed with digitization.[ii]
According to The Wall Street Journal, spending on digital technology by U.S. businesses alone is skyrocketing and is expected to reach nearly $732 billion in 2019, growing at a compound annual rate of more than 16%.[iii]
As companies adapt to new digital technologies such as cloud storage, data analytics, Artificial Intelligence, and the use of more mobile apps to better communicate with customers and among employees, they are finding they must change the way they operate.
Companies such as Equifax, P&G, and Liberty Mutual are learning they must move away from traditional top-down cultures and organizational silos to open, collaborative cultures.[iv] By eliminating layers of approvals and paperwork they are empowering teams to move faster, change directions on their own and reallocating resources. Such change gives these companies the advantage of speed.
The Boston Consulting Group in 2018 discovered that companies that invested in their cultures were much better at implementing digitization. BCG assessed roughly 40 digital transformations and found that the proportion of companies reporting breakthrough or strong financial performance was five times greater (90%) among those that focused on culture than it was among those that neglected culture (17%). According to the BCG report, “The case for fostering a digital culture is even more powerful if we look at sustained performance: nearly 80% of the companies that focused on culture sustained strong or breakthrough performance. Not one of the companies that neglected to focus on culture achieved such performance.”
In addition to improved company and financial performance, BCG found that these companies also had better success in attracting Millennial digital talent.
McKinsey and Company found that there are 21 best practices for successful digitization that fall into five characteristics. They are the tool box of improving culture: leadership, capability building, empowering workers, upgrading tools, and communication.[v]
Based on the research of InnovationOne[vi], here are nine traits of highly innovative, transparent and adaptive cultures, the kind needed for digitization:
- Executives have an external focus and excellent understanding of customer needs and engage their customers constantly.
- Executives embrace innovation and digitization, create a strategy, and relentlessly communicate and support it.
- Strategic planning is changed to be less bureaucratic and more action orientated.
- Employee creativity is unleashed and nurtured. Leaders align their teams to strategy and then empower their teams.
- A clear process exists to move ideas forward. Experimentation, analytics, learning from failure, and boldness is encouraged.
- Digital innovation knowledge management systems are in place.
- Dedicated investments are made in hard capital, such as facilities, labs, and software platforms, and the soft capital of skills, time and organizational learning.
- Talent management systems are changed to attract employees with the right skills and behaviors and to encourage and reward innovation.
- The innovation process is thoroughly measured, to determine what works and what doesn’t work.
How is your digitization strategy working? Are you investing in your culture? Would you like to scientifically and accurately assess your culture? To learn more about innovation cultures, download out free reports at http://innovationone.io/research. Alternately, contact me at [email protected] or call 707-331-6740.
Victor Assad is a managing partner of InnovationOne and the CEO of Victor Assad Strategic Human Resources Consulting.
[i] Dobni, C.B., (2010). “The relationship between an innovation orientation and organizational performance.” In-press, International Journal of Innovation and Learning; And John Kotter and James L. Heskett, Corporate Culture and Performance, 1992.
[ii] “Unlocking success in digital transformation,” (Oct. 2018), McKinsey & Company. Found at https://www.mckinsey.com/business-functions/organization/our-insights/unlocking-success-in-digital-transformations?cid=other-eml-alt-mip-mck-1811&hlkid=4794607c2f1f4d0390e98684d7fbead6&hctky=9459176&hdpid=6657bb5b-54ff-4819-bc7f-cb2029b2c8af.
[iii] Agnes Loten and John Simons (Jan. 3, 2017, 10:00 AM ET), “Leaders Evolve Amid Tech Changes,” Equifax, P&G, Liberty Mutual embrace digital tools, managers shift toward shorter development cycles,” The Wall Street Journal. Found at: https://blogs.wsj.com/cio/2017/01/03/tech-is-transforming-how-businesses-are-run/.
[iv] Ibid.
[v] “Unlocking success in digital transformation,” (Oct. 2018), McKinsey & Company. Found at https://www.mckinsey.com/business-functions/organization/our-insights/unlocking-success-in-digital-transformations?cid=other-eml-alt-mip-mck-1811&hlkid=4794607c2f1f4d0390e98684d7fbead6&hctky=9459176&hdpid=6657bb5b-54ff-4819-bc7f-cb2029b2c8af.
[vi] ‘Innovation Nation? Innovation Health Inside the Fortune 1000;” and “Insights from Highly Innovative Companies: Results from The Conference Board and InnovationOne Global State of Innovation Survey 2017.” Both found at http://innovationone.io/research/.