Leadership for the Future: The Keys to Successful Digital Cultures

Rado Kotorov's picture
 By | November 18, 2016
November 18, 2016

Digitization is the new management philosophy. Like its predecessors Six Sigma and lean management, it is transforming organizations and promising more efficiencies and higher productivity. At this stage, however, I call it a philosophy rather than an established methodology as we are still formulating exactly how digital transformation will take place and what it entails.

While digital transformation is important and frequently discussed, creating a digital culture is hardly ever a topic of conversation. This needs to change.

Hence the questions for discussion today: What is digital culture? How does it differ from current enterprise culture? What is at the core of a successful digital culture?

Culture is generally defined as the beliefs and customs of a particular group; it is "a way of thinking, behaving, or working that exists in a place or organization (such as a business)."

Consider this: No management philosophy or methodology is ever firmly established without building a culture around it. A widely recognized example of this is found at Toyota. Kaizen, a continuous improvement philosophy, is embedded in nearly every aspect of Toyota – from production to customer service and its corporate social responsibility program. By constantly and consistently asking its employees to consider how they can do things better, Toyota has instilled a culture of change and improvement.

Why is it important? Culture helps change the behavior of employees and unify their efforts. And, as I discussed in a previous article, a digital culture is necessary for organizations to succeed in the future. No longer can we consider technology an added bonus or simply “nice to have” – it must be a core part of every organizational decision in order to remain competitive. Questions such as “How can technology enhance our business model or even create a new one?” must be a part of our daily discussions.

From this perspective, a core aspect of forming digital culture is instilling the belief that data and digital processes are strategic assets of an organization. This is easier said than done. For years, managers have been taught how to manage physical assets, financial assets and human resources. Now they must manage digital assets as well.

What makes this particularly challenging is that data assets are not “on the books” from an accounting perspective. Data has huge value but it isn’t represented by numbers on a spreadsheet. For example, a plant manager can easily point to a line item that represents their manufacturing facility’s worth and “shows” that they are responsible for hundreds of millions of dollars. Digital managers are the custodians of intangible assets, so they are not often perceived to have the same clout. Their team members simply have to trust him/her in the same way that people trust in the value of bitcoins – a digital asset that has no physical manifestation. Thus, the first step is to change this belief structure and embrace data as an asset.

Changing processes is easier. Every day, organizations are converting physical channels into digital ones. The obvious example is the retail sector’s efforts to establish digital store fronts. From a cultural perspective, there are still challenges ahead. Despite all the omnichannel discussions, in many instances, digital and brick-and-mortar channels operate as competitors and not as collaborators, therefore creating a divisive culture. Retailers that can blend the two worlds, creating an omnichannel experience and singular culture, are those that succeed and win customers. This leads to the second core aspect of successful digital cultures – digital and physical operations should be made to work together and enhance each other’s business. A collaborative model has to be built to make the co-existence synergistic.

A successful digital culture also centers on analytics. Digitization is all about collecting data and optimizing based on facts. Implementing digitization without analytics is the equivalent of building a physical process and taking the manager out. The role of the manager is to analyze the situations and improve it. Similarly, in organizations that have embraced digital processes, analytics help to spot trends, identify opportunities, and pinpoint problems.

Finally, building a talented workforce of digital managers is crucial for building a successful digital culture. With the rise of digital transformation, organizations need the right talent in place – individuals that can quickly interface with technology and feel empowered to make decisions.

There are three changes (happening now and in the near future) that necessitate the need for digital managers:

1.    Data technologies allow each employee to access information that they need faster than ever before. Hence chain-of-command type of coordination is diminishing in value and organizations are flattening.

2.    Employees can manage a larger number of processes that are interconnected because digital systems can point them quickly to cases that require their attention.

3.    Finally, digital managers can manage and control through devices rather than by commanding the actions of others. And not too far into the future, they will have to coordinate tasks with intelligent machines.

Organizations that can find individuals to serve as digital managers and examples for the rest of the organization are setting themselves up for success in building a strong digital culture.

In a follow up post, I will discuss the steps that organizations should take to start building their digital culture. In the meantime, I’m interested in hearing from you. What do you think is at the core of digital culture and why? Please leave your thoughts below.