There is no doubt that digital technology is a profound and disruptive advancement which is transforming not only business, but society at large. However, as I speak with corporate executives who are urgently (some would admit, desperately) trying to drive digital transformation agendas in their companies – many with very disappointing results – I wonder about the strange mix of déjà vu and amnesia that sometimes seems to afflict American management: It’s as if we’ve forgotten what we knew, all over again.
After all, “digital transformation” is, at its heart, the current iteration of “radical innovation.” Radical innovation was extensively researched and written about as early as the 1970s by, among others, Edwards Deming and Peter Drucker, two of history’s preeminent management gurus and business transformation luminaries.
Radical innovation, as opposed to incremental innovation, refers to an invention that destroys or supplants an existing business model. This is precisely what digital transformation is about: creating or responding to disruptive technologies that threaten entrenched business models. And, as Drucker warned as early as 1973, “…market success produces tremendous internal resistance against any innovation and thus makes adaptation to change dangerously difficult.” To be fair, we, perhaps, have never seen a technology whose tendrils of disruption are this pervasive or whose impacts have been felt this quickly. In this regard, digital transformation is new, but only by degree.
Digital transformation has created significant marketplace challenges and opportunities, as organizations must contend with nimble competitors that take advantage of the low barrier to entry that technology provides. However, it is important to understand that there is very little new when one considers digital transformation as simply another variant of radical innovation. We have almost 50 years of research and experience creating and navigating radical innovation; we need to use it.
Corporate Culture Accelerates or Restrains Digital Transformation
No lesson taken from the past 50 years of experience and research is more important than the critical importance of organizational culture when planning for digital transformation. An organization being transformed by digital technologies has two related challenges. First, it must factor the cultural changes it will confront as workers and organizational leaders adjust to adopting and relying on unfamiliar technologies. Second, it must create a culture of innovation capable of creating disruption with the intention of outmaneuvering competitors. Many of our clients are larger, well-established companies where digital transformation is among their top-three priorities. Essentially, they are attempting to out-startup the startups, and the stakes couldn’t be higher.
What we know is that corporate culture is a much more important factor in successful digital transformation than financial capital, government regulation, and even technology itself. Time and again, when we interrogate our research, we see that having what we name and measure as a Dynamic culture is the most critical factor for companies that are digitally transforming at or ahead of the pace of market change.