The ebb and flow of new themes that Boards are dealing with today continues to oscillate, and the pace is picking up. Climate and the broader ESG agenda, conflict and crisis, social and geopolitical shifts to name but a few – and that’s on top of the day job. But there is one persistent theme that’s emerged at every board table, and that’s digital. Every organisation is working through what the gifts and the perils that the fourth Industrial Revolution has brought to bear. Or if not, they certainly need to be although my experience is that such entities are now in the few.
What is Digital, and Why do We Talk About Transformation in the Same Breath?
The third Industrial Revolution of the 1950’s brought us computer science, and we quickly put it to work, using it to digitise our day-to-day communication and workload. At the turn of the millennium, chip advances coupled with networking, device and algorithm technologies built on what went before and sent us hurtling towards Industry 4.0. But the biggest acceleration came through the introduction of the smartphone as we turned into the first decade of the third millennium. The power of a super computer was now in our pockets, and developers and tech entrepreneurs pursued it feverishly.
As this has all happened in such a short space of time, in particular when you look to previous ‘revolutions’, it can appear that it has happened in a blur. Looking through an organisational lens, digital technologies have been put to work across five ‘layers’ of the organisational architecture:
- Engagement layer – using digital channels to dial up connection, campaigns ,and customer experience.
- Proposition Layer – using digital to create or redefine customer journeys to make it easier to do and fulfil business.
- Process Layer – the automation and digitalisation of processes to remove cost, waste, and risk.
- Workplace Layer – tools and methods to make work easier to accomplish, insightful through analytics and creative through innovation.
- Technology and Operational Layer – migrating from monolithic or using cloud-based systems to access faster, more efficient, and more adaptable applications and infrastructure.
And this has been done to either create new value, capture latent value, or defend inherent value. Digital, therefore, is about using the latest technologies, and employing it to harness or hold value across various components of a business. Making inroads into any one of these layers is a big enough job. But making changes to all five at the same time, which is often the ambition, that’s transformational. And why we call it digital transformation.
Does Harnessing Digital Need a New Culture – Is it Everything Not Just the Same as Before, Only Digitised?
Digitisation is about converting what was physical to digital. Digitalisation is the (re)creation of new value chains or entire customer journeys. Digital transformation is the reformation of the organisation across the five layers, as explained above. So, depending on the degree to which digital is employed and where, there needs to be somewhere between a little or a lot of new skills and practises. And the ability to chaperone the degree of change in the organisation, into the market and across the stakeholder set, also needs to be cut to size. So, I would like to suggest that it’s not the same, it’s very different, as are successful digital organisations.
We know in the culture iceberg that skills and practises are what we see above the waterline. The 90% of culture that sits below the waterline, often unseen, are attitudes, beliefs and values. This is where it’s absolutely different - digital businesses don’t just act differently (above the waterline), they think differently (below the waterline).
Defining a Digital Culture
The businesses that define the landscape today, are a mix of old and new of course. But corporate longevity is declining – according to Innosight, the forecast average tenure of the S&P will shrink to 15-20 years this decade, compared to 30-35 years in the 1970’s.
So, the new are cannibalising the old at an accelerated rate. And these new businesses are inherently and holistically embracing digital. So how have they done this, and what can we learn:
- First and foremost, they start with the customer, not the product – the latter doesn’t define the former. The former defines the latter.
- They believe in a purpose – they have a defining rallying point that connects discretionary effort with value creation.
- They don’t use data to measure success, they define success (e.g. solving customer jobs, an inspiring Purpose, market disruption) and measure progress.
- They don’t have a digital strategy – it’s not a separate thing. They have a strategy and digital is a way to get it done, faster, cheaper, and more effectively.
- They are nimble and curious – they insatiably look for new pools of value, and focus on getting there first.
- They don’t treat risk as a boundary, they calculate risk carefully, push the boundaries and elasticate their resources and interpretations.
- They are constructively dissatisfied – they never acquiesce and always believe it can, and should be, better.
In my experience of working in or on digital transformations, these core traits are what define a Digital Culture. And what enable a differentiating and dominating brand as well as employee experiences.
How Do Boards Host and Hone this Digital Culture?
The tone is always set from the top. My recent participation in the Chartered Director Programme taught me that, and my experiences uphold it. Setting that tone, and hosting and honing a digital culture requires board members individually, collectively, and persistently to:
- Set a purpose, not for, but with the organisation and hold it out as the perpetual guiding north star – one that is inspiring, not commercial, one that feels right, not sounds right.
- Be curious about and spend time with customers, and help the organisation to see and hear what they think, and work with them on how to respond – feedback is the breakfast of champions.
- Look for data, look for insights and look for perspectives not reports – go and spend time with the teams on the front line, and see the world through their eyes. See where digital can help or is needed – they have the 20/20 vision.
- Don’t put digital in the corner – it’s not a sideshow, make it a persistent and enabling part of strategy. Make it central, and make it collective.
- Be ready for failure as its inherent in big change - it’s only from our toils and exploits that we learn what to do, and how to do it. Create time, capacity and supports for failing forward – another way to describe innovation.
- And be ready to push some boundaries, but in a calculated way.
- If you can’t code, learn to or sit with coders and see what they do – see the agility that modern technology unlocks, see how digital tools and analytics can present real time decision opportunities and see how digital people are passionate about that and the end user (there might be a few outlier’s mind!).
- Look at where the chokepoints to progress are in the organisation – old operating models were established for a different era. Identify where bureaucracy and fear of change is or will hold ambition back.
My encouragement to my fellow directors is therefore to participate rather than subjugate, to be curious rather than content and experience rather than observe. I believe this stance, and the ‘below the culture waterline’ encouragements above, are what defines the ‘Digital Board’.
Transformation is not easy. Change is always hard. And at the scale we are describing, it’s immense. That’s why according to BCG 70% of digital transformations fail and that’s why scope and sequence is critical. But at the same time given it’s all around, it doesn’t seem like there is much choice. The choice I would suggest is investing in culture – it does eat strategy for breakfast.