“One Weird Trick” to Digital Transformation

An effective digital culture is critical to digital maturity.

The Internet is rife with ads and websites shilling the “one weird trick” you need to lose weight, obtain a lifetime of wealth, or attract the perfect date. While most of these promises are, of course, too good to be true, they do underscore the very human desire for simple solutions to the problems that plague us. And oddly enough, our research suggests that there really is “one weird trick” that may be critically important to successful digital transformation.

As a part of the research for our recent report on Digital Business, conducted in collaboration with Deloitte, MIT Sloan Management Review surveyed nearly 4,000 executives worldwide and interviewed 17 executives to assess the current state of digital business within the enterprise. As with our previous research, we asked respondents to rate how digitally mature they believe their company to be, on a scale of 1 to 10. We then examined how companies on the low end (which we called “early” digital companies), in the middle (“developing” digital companies), and on the high end (“maturing” digital companies) of this digital maturity scale are similar to and different from one another.

This year’s research yielded a plethora of rich insights, but one that may appear to be the least interesting ultimately could prove to be the most important.

This year, we asked survey respondents to evaluate the culture of their organizations on a series of five different scales that captured the company’s appetite for risk, leadership structure, work style, agility, and decision-making style. We then performed a statistical technique called cluster analysis, which groups similar types of responses together. We expected that our data analysis would reveal that companies could be characterized by certain “personality types” — for example, we thought we'd find that risk-averse, collaborative companies exhibit different approaches to digital maturity than centralized, agile companies.

I had hoped to develop catchy names for these differing groups and organize them under a heading like “the four paths to digital maturity.” In doing so, I hoped to move this year’s report beyond our compelling but relatively simple categorization of early, developing, and maturing companies to a more nuanced and variegated understanding of how companies engage in digital business. If we didn’t find these different personality types of digital companies, I at least hoped we might find a greater number of groupings that would allow a finer-grained analysis of our results.

Instead, our cluster analysis produced a very clear finding: The culture of digital companies could be broken out into three distinct groups that were almost a direct parallel to the early, developing, and maturing groupings. This new analysis essentially confirmed the three-tiered framework that we have been using for years. So why are these results so important and worthy of independent discussion?

  • We ended up getting nearly an identical result using an entirely different statistical method that didn’t incorporate any of the self-reported measures of digital maturity measures in its analysis. This result provides very powerful confirmation that our three-level model of early, developing, and maturing digital companies is the right way to talk about digital maturity.
  • It shows that technology is only part of the story of digital transformation. This analysis also did not account for the types of digital initiatives in which a company engaged and invested in. For companies struggling with identifying which parts of their business to make more digital first, developing a more digital culture could be a compelling place to start.
  • The findings did not reveal different types of digital cultures as I had expected, but instead demonstrated that a singular set of cultural characteristics typify digitally mature companies. There are not different roads to digital maturity, but one clear path that all companies can follow across company size or industry — at least in terms of effective digital culture. This finding provides a powerful road-map for executives trying to increase the digital maturity of their companies.

These results, however, have two important caveats. First, the responses used to categorize the company culture came from executives and employees alike, who were asked to describe how the company actually is operating — not what it aspires to. The implication is that any attempt to make one’s company more risk tolerant, more agile, with more distributed leadership, etc. must involve more than simple lip service from management on these issues. Many companies talk extensively about making their company more agile and amenable to failure, but the companies that are actually able to bring about these changes are far fewer in number. While the characteristics of effective digital culture are simple and clear, bringing them about is not necessarily easy.

Second, respondents at more mature companies are also more likely to report that their companies plan to engage in initiatives to further develop the cultural characteristics of digitally mature companies. Companies that are further ahead with respect to digital maturity are doubling down on these efforts to move their companies even further down this road. They are also actively recruiting employees who can fit into this digital culture. On the other hand, companies that are further behind are less likely to be considering these types of initiatives to develop a digital-friendly culture. And employees at these companies are also more likely to report actively seeking to leave their companies — many within the next year. Digitally mature companies are seeking to widen their advantage, and companies that are behind may need to move aggressively in order to keep up.

So for companies that want to start down the road to digital maturity, the “one weird trick” that will help is developing an effective digital culture. The cultural characteristics we identified — appetite for risk, leadership structure, work style, agility, and decision-making style — are by no means all your company needs to successfully compete in a digital world, but you cannot compete without them.

2 Comments On: “One Weird Trick” to Digital Transformation

  • Igor Ageyev | August 4, 2016

    Hello Gerald,

    Interesting result, isn’t it?

    It may be driven by the key question of the research:” imagine an ideal organization transformed by digital technologies and capabilities that improve processes, engage talent across the organization, and drive new value-generating business models.”
    In most cases answering your question managers probably imagined their companies somehow improved with digital technologies and because of that the companies would perform much better. Why would companies do better with those technologies and why those changes are so difficult for most of developed companies?

    Unfortunately at this moment there is no clear understanding or definition of what a digital transformation would do for a company, what a target state for that transformation would be and even what the digital technologies are.
    Is it more or less broadly adopted SMAC concept (or computing platform or IT architecture?), another style/way of doing business or the McKenzie’s digital disruption concept? Why that transformation is so critical now?

    These concepts, stiles, ways and other examples describe changes in company efficiency not effectiveness as Peter Drucker defined them. The efficiency improvement goal is one of the key management goals and familiar for good management. Means, technologies and tools to improve efficiency are always innovative and before were not less complex than the current technologies.

    And still there is something different now which cause problems for most of incumbent companies.
    Why risk appetite is low, innovations are so difficult, people are not willing to change, org structure and management not agile, a digital strategy does not exist or is weak etc. in mature companies comparing to new challengers? The digital culture is a universal and a bit unclear answer which could mean anything and everything hence recommendations are a bit unpractical.

    From my point of view the key questions are WHY changes are critical now? What is the main driver for those changes?
    The answers will allow provide recommendations for enterprise management how to change companies for new challenges, create a digital enterprise and will help to define strategy for the New Normal economic state.

    My view is presented in the Digital Enterprise concept I published on LinkedIn.
    https://www.linkedin.com/pulse/digital-enterprise-dont-obliterate-optimise-automate-igor-ageyev?trk=prof-post

    Any feedback is welcome.

    Best regards
    Igor

  • David Dunworth | August 7, 2016

    Gentlemen, Please return to your corners.

    Mr. Kane’s assertions re completely valid, as are Mr. Ageyev’s perspective. These two points of view, perspectives, beliefs or assertions are just that; individual. For those of us who do not play in a large sand box, digital transformation is all but a mystery as to where to start, or where to look for help to understand. Neither of you help the SMALL BUSINESS OWNER gain a foothold on understanding.

    Mr. Ageyev’s LinkedIn article (revised version) does an exemplary job of showing us the flip side of Mr. Kane’s enterprise coin.

    I enjoyed reading your respective articles, and congratulate you both on your position on enterprise transformation.

    David J Dunworth
    Chief Experiences Officer
    Marketing Partners LLC
    http://marketingpartnersllc.com

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