New study: Culture determines digital transformation success

Singapore Management University – Executive Development (SMU-ExD), Tata Communications, DBS Bank and KPMG in Singapore have launched a new study entitled ‘Cultural Transformation in the Digital World’ that looks at the digital transformation journeys of major businesses. The study provides a deeper understanding on how business leaders view their journeys towards digital transformation, the culture within their organisation and what challenges they encounter as they seek to propel their businesses forward in the digital age.

The study was conducted in partnership with Fons Trompenaars of Trompenaars Hampden-Turner (THT) and is based on quantitative and qualitative insight from 48 C-suite leaders and 401 anonymous executives.

Culture determines transformation, not technology

The study found that leader effectiveness is directly correlated with perceptions of organisational readiness for digital transformation and that transformation initiatives will only succeed if they are championed by the actions – not the words – of an organisation’s leader.

87% of respondents agreed that culture created bigger barriers to digital transformation than technology and 70% agreed that their leaders had the ability to lead on digital transformation, but only 50% believed that they were appreciative of implementational challenges.

CEOs must assume the role of ‘chief evangelist’ of digital transformation to persuasively, persistently and convincingly articulate and communicate the “why” behind each initiative and champion changes, to create positive business impacts.

Digital transformation only succeeds if it’s rooted in behavioural change

The study identified that teams will only embrace change if they understand why transformation is needed and if they have faith in their leaders.

Interestingly, 100% of C-suite level executives agreed that digitalisation is the “new normal”, with a universal belief that embracing digital transformation was urgent and critical for the organisation to survive and thrive.

Furthermore, 80% of C-Suite interviews highlighted the importance of purposefully focusing on ‘people aspects’ during digital transformation journeys, suggesting an emphasis on the importance of inclusiveness.

“Readiness” was perceived to transcend well beyond technological readiness into the realm of organisational culture, new mindsets and leader behaviours. The “readier” the organisation was perceived to be for digital transformation, the greater the need was felt for cultural change and for embracing conducive leadership behaviours.

Open, flexible and agile organisations are better able to innovate

Each transformation journey is unique, but the research suggests common cultural attributes for those who are successful – openness, flexibility and agility. Today’s winners are focused on incremental change, flatter structures and experimentation. 71% of mid-level respondents acknowledged that they needed to adopt new leadership behaviours including agility, risk-taking, accountability, leading change and digital adoption.

The creation of small, agile, nimble-footed teams that are highly empowered to drive digital transformation, as opposed to making large-scale enterprise-wide changes that could be intimidating for employees, is a preferred implementation tactic. However, only 41% of those surveyed believed they had the skills that are necessary for the digital age, suggesting there is a pressing need to increase access to training to plug the ever-present skills gap.

Dr Fons Trompenaars, Founder, THT Consulting said: “There are so many changes happening in our current times that are linked to the introduction of ever more powerful digital tools and machines. Our focus is often technical and there is not so much attention devoted to the human and cultural side of digitalisation. I think that this research will reveal many of those insights and also how they relate to the technical side of digitalisation.”

Dr Katharina Lange, Executive Director, SMU Executive Development said: “Many leaders described the digital age as another change phase. Interestingly, the digital change process forced them to eventually address the many challenges that sometimes get pushed aside in daily work life: integrating more diverse views, becoming truly customer-centric, reconciling cultural dilemmas, speeding up innovation cycles. The underlying binary code of the digital age shapes the way humans and machines work together. Managing the interface of human machine interaction becomes critical for future success in business - and life in general.”

Vinod Kumar, Managing Director and CEO at Tata Communications said: “In a fast-changing world, this research shows that business leaders must lead from the front and focus on building an innovation culture, where staff can become life-long learners. Today’s transformation leaders have focused on sparking a change in mindset by championing cultural traits like openness, flexibility and agility. As a result, they have more engaged teams that are better able to flex to market trends, spot opportunities and react fast.”

Lee Yan Hong, Managing Director and Head, Group Human Resources, DBS Bank said: “Our focus is on saving people rather than saving jobs. Jobs will become redundant, but people are capable of learning and reskilling. We embrace digital tools as it helps eliminate mundane transactional work, creating capacity for our employees to do higher value and more interesting work. It is also important for leaders to champion traits of a start-up culture, focus on agility and continuous learning, have a relentless focus on the customer and leverage data in their transformation journey. We hope this research will provide invaluable insights into the human and cultural dimensions for all who are also on this transformation journey.”

Ram Lakshminarayanan, Head of People and Change, KPMG in Singapore said: “A closer look at organisations that have undergone or are going through digital transformation will show that more attention is needed to address the people and cultural aspects of change management and change leadership.  What is needed for true transformation is to combine technology, mindset and processes to remain competitive. The growing awareness and recognition of the impact of transformation underscore the urgency to place cultural change as the focal subject of this study.”