Cracking the Culture Code for Successful Digital Transformation

Finding the right balance between continuity and change can help leaders better manage the cultural changes that occur during a digital transformation.

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Digital transformation transcends technology and business models. Organizational culture also plays a critical role in successfully leading an organization into the digital era; indeed, the success of a digital transformation relies on a deep understanding of the intricacies of culture. But few business leaders fully understand how a company’s culture changes during a digital transformation — and, more importantly, how it doesn’t change.

Consider the case of Maersk, the Danish shipping and integrated logistics company, which has been undergoing a significant digital transformation. Those efforts, which took off when Jim Hagemann Snabe became chairman of the board in 2016, entailed collaborating on blockchain with IBM and providing digital platforms to customers. Internal cultural tensions at Maersk became apparent late in 2021, when Søren Vind, a senior engineering manager and head of forecasting, had a public disagreement about the company’s identity with a veteran Maersk sea captain who serves as the employee representative on the board. In an interview with a Danish publication, Vind argued that Maersk “used to be an industrial company that had technology on [the] side” but had become “a technology company where we have some physical devices we need to move around.” Captain Thomas Lindegaard Madsen responded in a public LinkedIn post — subsequently edited to defuse his criticism — that read, “I am very sorry, but I will have to correct you.” Pointing out that the maritime business contributed 78% of group revenue and that the group has 12,000 seafarers, the captain declared, “We are NOT a tech company who ‘happens’ to operate ships.”

Of course, both the captain and the executive are right — and wrong — in their statements, which merely represent different perspectives on how digital transformation and culture interact. Where the IT executive views digital transformation from a cultural change lens, the sea captain views it from a cultural continuity lens. Both lenses are valid, both can coexist, and both need to be jointly managed for a transformation effort to thrive.

The Culture-Transformation Matrix

As the names imply, cultural change refers to how a digital transformation may alter an organization’s culture, and cultural continuity refers to elements of the culture that remain stable. In short, during any organizational transformation there’s always an interplay between cultural change and continuity as cultures evolve, but most digital transformation initiatives instead

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References

1. For related work on strategies entailing continuity and change, see D. Ravasi and M. Schultz, “Responding to Organizational Identity Threats: Exploring the Role of Organizational Culture,” Academy of Management Journal 49, no. 3 (June 2006): 433-458; S. Nasim and Sushil, “Revisiting Organizational Change: Exploring the Paradox of Managing Continuity and Change,” Journal of Change Management 11, no. 2 (June 2011): 185-206; S. Nasim and Sushil, “Flexible Strategy Framework for Managing Continuity and Change in E-Government,” in “The Flexible Enterprise,” eds. Sushil and E.A. Stohr (Delhi: Springer India, 2014), 47-66; and Sushil, “A Flexible Strategy Framework for Managing Continuity and Change,” International Journal of Global Business and Competitiveness 1, no. 1 (2005): 22-32.

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Comments (2)
Jeffrey Terry
Many firms face this challenge so well framed in this article!   For heavily regulated firms (banking/insurance) the challenge is doubled.  We must come together on a renewed identity and present that identity consistently to our regulators as we work through what it means internally for ourselves.  How does this matrix accommodate those outside the firm who are both influencers and to be influenced?
Jaideep Ghosh
Useful article, which made me think of some of the rapid digital led transformation initiatives that I am leading. Perhaps I emphasised too much on changing culture fast at the expense of a threatening cultural continuity at this 100 plus years old organisation.