Agile & Digital

Cultural and behavioural challenges are the biggest barriers to digital transformation

Jeff Bezos briefly topping the world’s richest person list symbolizes just how far reaching Amazon now is. Amazon is, and always has been, a company driven by data and powered by software. It’s seemingly unstoppable rise is just one example of how digital firms are leading the way, with more traditional firms desperately trying to implement their own digital strategy to keep up. But many are finding it’s not that easy.

Cultural and behavioural challenges are the biggest barriers to meeting digital priorities, according results recently published from McKinsey’s 2016 survey of 2,135 global executives (see Figure 1).

 

Figure 1: The most significant challenges to meeting digital priorities according to Global Executives (source: McKinsey Digital 2016)

“Executives must be proactive in shaping and measuring culture, approaching it with the same rigor and discipline with which they tackle operational transformations. This includes changing structural and tactical elements in an organization that run counter to the culture change they are trying to achieve”, say the digital experts at McKinsey.

The McKinsey survey identified three digital culture deficiencies: silos, fear of risk-taking/too much central control and lack of customer-centric thinking across the business. These also give leaders a clear plan for how to update their culture for the digital world.

We couldn’t agree more. We’ve observed many attempted transformations to more horizontal, cross-functional and digitally enabled ways of working stymied because of legacy cultures of centralized control and decision making. Digital is supercharging the move to more matrixed ‘horizontal’ ways of working.

So how can companies relax control and break their legacy power structures? The McKinsey report gives us some ideas.

First a change in escalation procedures is required. For example, the CFO at one global FMCG has now empowered business units to take their own large investment decisions and now only authorizes expenditure over $250,000. Before this change, the limit was $1,000.

Secondly, managers and leaders need to learn to let go. For example, at ING, ‘agile coaches’ have helped managers set the overall direction and then get out of the way.

Thirdly, empowering others further down the business also involves giving them the information and tools to make smart choices. For example, giving call-center employees real-time analysis on account profiles or data on profitability allows them to modify offers or deal with complaints on the spot – and makes the job a lot more engaging than just reading from a script. Technology augmentation can help too – in manufacturing predictive maintenance algorithms mean the front line can decide what needs to be done without the authorization from senior managers.

Finally, ‘thoughtful management rotation’ can help. Getting managers and leaders to work in different areas of the business builds their internal and external networks, broadens their perspective and means they can get things done without having to resort to legacy power structures.

A lack of understanding of digital trends was the second biggest barrier to meeting digital priorities. This is backed up by a benchmarking survey conducted by technology specialists MuleSoft with 802 IT directors, with 82% of them highlighted ‘going paperless’ as one of their top initiatives in their digital transformation. But as MuleSoft argue, “It’s not about going paperless; it’s about the IT team enabling the whole business to innovate faster than the competition and adapt quickly to market changes.” Just like Amazon did (and still does).

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