Three Big Points /

A short podcast for busy leaders from MIT SMR.

How to Survive Digital Disruption

play Listen
Full Series Next »

The key to withstanding the disruptive forces of digitization and retooling your enterprise for a new era of competition will not be found in updated systems, snazzy algorithms, or the AI of everything. Yet all too many leaders have yet to recognize this.

Indeed, the mistaken belief that technology should be at the center of an organization’s digital transformation is so widespread that Jerry Kane gave it a name: The Technology Fallacy.

It may be forgivable to jump to the conclusion that you should battle technology-driven threats with more technology, but it’s a mistake that leaders must disabuse themselves of quickly, or the war for survival may be lost before it has even really begun. Kane, a professor at Boston College’s Carroll School of Management, says the real driver of a successful turn into the digital battleground is found in the soul of the organization: its people.

Kane’s longitudinal research on digital transformation demonstrates that what really drives organizations forward in today’s economy is implementing changes on the human side of the business — whether that means reorganizing the company, developing new talent models, or adopting new leadership skills. Simply stated, it’s the culture, stupid.

In this week’s episode, Kane emphasizes these Three Big Points:

  1. Leaders of successful digital transformations focus first on culture.
  2. They do more than simply identify culture as a priority — they invest in it.
  3. They go beyond just investing in building new cultures: They weaponize culture to drive further change and build competitive advantage.
For Further Reading
Gerald C. Kane is information systems professor at Boston College’s Carroll School of Management and a visiting scholar at Harvard Business School. For additional information, follow him on twitter @profkane or read his book The Technology Fallacy.

Transcript

Episode 1: Three Big Points About Surviving Digital Disruption

Jerry Kane: Success is really due to the effort of the individual. When we take this growth mindset and move it to the organizational level, it really is a big predictor of how companies are responding effectively to digital disruption.

Although all snowflakes are different (we’ve all heard), and all cultures are different (organizational cultures) — snowflakes actually exhibit a number of very common characteristics. They’re six sided. They’re symmetrical. They have a number of underlying features that really define what they are. And just like that, there are a number of underlying features that define what digitally mature companies are, what their cultures look like.

I’ve often said that digital transformation is far more about will than it is about skill.


Paul Michelman: I’m Paul Michelman, and this is MIT Sloan Management Review’s Three Big Points. In each episode, we take on one topic that leaders need to be on top of right now and leave you with three key takeaways for you and your organization. The ever-evolving threat of digital disruption has become one the biggest issues in businesses. And the organizations and people today’s guest studied spell this out.

Jerry Kane: By and large, the biggest difference was the pace of doing business, the pace of change. And that might not seem like rocket science or news to anyone. But the problem is, is that the organizations, the way they’re currently structured, aren’t able to respond to that change quickly enough.

Paul Michelman: That’s Jerry Kane, professor of information systems at Boston College and coauthor of the book The Technology Fallacy: How People Are the Real Key to Digital Transformation. Kane’s work looks closely at how companies — successful or otherwise — adapt to the new realities of the digital world. A lot of them, he found, get it wrong.

Jerry Kane: So what we think of as the technology fallacy is this mistaken belief that many organizations and managers have, that because the strategic challenges and problems they’re facing are caused by digital technologies, the solutions necessarily involve digital technologies as well. And, in fact, many of the best examples and most effective examples, frankly, that we see that organizations do to respond to digital disruption are not technological at all.

Paul Michelman: Kane points out that what really helps companies move forward in today’s economy is implementing changes on the human side of the business — whether that means a new org chart, new talent models, or adopting new leadership skills.

Regardless of whether or not the company and its leadership recognize the technology fallacy, those who manage and make it through to the other side tend to have some things in common. Stanford’s Carol Dweck’s concept of fixed versus growth mindsets helped Kane here.

Jerry Kane: Fixed mindsets are the belief that talents are inherent to people, and success or failure is largely due to environmental characteristics. The growth mindset, in contrast, is the belief that skills and success are a result of hard work, and success is really due to the effort of the individual. When we take this growth mindset and move it to the organizational level, it really is a big predictor of how companies are responding effectively to digital disruption.

Paul Michelman: Kane found key differentiators in how digital transformation was tackled depending on where the company was in its journey.

Jerry Kane: Early-stage companies — the way that they drive digital change is really mandating it from the management. The boss from on high says we’re going to do this, and employees are expected to fall in line. That doesn’t work really well because employees can find all sorts of excuses not to change, and simply having the boss saying “we’re going to do this” doesn’t always get the company where they want to go. Developing companies actually do it slightly differently; they implement the technologies and then just expect employees to adopt. It’s sort of the field of dreams — if you build it, they will come. This also doesn’t work really well because usually what happens is they implement these technologies and expect employees to do new digital things on top of their existing job responsibilities. However, what they do is they focus on developing this culture as a means of driving change, because they find if they’re organized differently, if their cross-functional teams have greater decision-making authority, they’re more able to be agile. If you have a certain level of risk-taking and experimentation, you’re more likely to innovate and come up with new initiatives and efforts.

Paul Michelman: You’ve heard it before — culture, culture, culture. And you’re hearing again now. Here’s why: In the battle against digital disruption, culture is the difference maker.

Jerry Kane: We see some great examples, like Salesforce in the tech industry. Salesforce spends an inordinate amount of time reinforcing their company culture. And when you go to Salesforce, which I’ve had the privilege to do, that culture comes through loud and clear. Contrast that to Uber, which arguably — as I’ve interviewed people with Uber — a lot of their struggles were because they didn’t pay attention to their culture, and they didn’t emphasize their cultural values. But this isn’t just a phenomenon in the tech industry. We’ve had a number of great examples in our research, from Walmart to MetLife to John Hancock, of very traditional, established companies that are making conscious efforts to move their culture in this direction.

Paul Michelman: So what does this all mean for you and your company? What can you do to avoid the technology fallacy and safely glide into the digital era? Well, I think you know where Kane will tell you to start.

Jerry Kane: I often recommend that a company start with their culture. And actually, what we found was there was one single set of cultural characteristics that really defined these digitally mature companies. And they were things like agility, being more experimental, engaged in continuous learning, recognizing and rewarding collaboration, accepting risk of failure, and organizing around cross-functional teams. And so when companies come to me and say, where do we start with digital? You know, I can’t tell them what technologies to adapt. I can’t tell them what their strategy should be, because that’s going to differ by company. But what doesn’t differ by company is the need to cultivate these cultural characteristics. And those are a huge driver of digital maturity. The example or metaphor we use in the book is that of a snowflake. And although all snowflakes are different (we’ve all heard), and all cultures are different (organizational cultures), snowflakes actually exhibit a number of very common characteristics. They’re six sided. They’re symmetrical. They have a number of underlying features that really define what they are. And just like that, there are a number of underlying features that define what digitally mature companies are, what their cultures look like.

Paul Michelman: Look, any change is easier said than done. And the kind of transformation that digital economy requires isn’t for the faint of heart. What leaders need to understand — and to really embrace — is that this is not a choice. It’s a matter of survival.

Jerry Kane: We could be facing a rich-get-richer scenario that as this virtuous cycle kicks in, digitally mature companies begin to pull away from their counterparts. The flip side of it, however, is this virtuous cycle can also benefit companies that are behind. The biggest challenge is often getting started, and once you can get these cultural aspects into place, oftentimes it begins to drive more change as this virtuous cycle kicks in. I’ve often said the digital transformation is far more about will than it is about skill.

Paul Michelman: That’s Jerry Kane, coauthor of the book The Technology Fallacy and a regular contributor to MIT Sloan Management Review.

OK, let’s bring this one home. Three Big Points about surviving digital disruption:
No. 1. It’s the culture, stupid. Begin here.

Jerry Kane: Digitally mature companies have a distinctive culture.

Paul Michelman: No. 2: Put your time and your money where your mouth is. The payoff on cultures is real.

Jerry Kane: Digitally mature companies are more likely to invest in cultivating this culture in terms of time and energy.

Paul Michelman: No. 3: It’s not just about creating a new culture. You also need to weaponize your culture to drive further change.

Jerry Kane: Digitally mature companies use the culture to further drive adoption and innovation.

Paul Michelman: And that’s this week’s Three Big Points. You can find us on Apple Podcasts, Google Play, Stitcher, Spotify, and wherever fine podcasts are streamed. We will be forever in your debt if you’d take a moment to rate our program or post a review on Apple Podcasts.

Three Big Points is produced by Mary Dooe. Music by Matt Reed. Marketing and audience development by Desiree Barry. Our coordinating producer is Mackenzie Wise. Special thanks to Deborah Gallagher, Lauren Rosano, Jennifer Martin, Richard Marx, Michael Barrett, Jinette Ramos, and Karina van Berkum for all they do to make this show possible.