A lot of research has accumulated that highlights the importance of culture in the making of an organization. Things have changed a lot in the 21st century and the digital era and still the value of culture in the context of organizational performance has remained intact. On the contrary, the importance of culture has continued to rise in the digital era. Cultural deficiencies become barriers to success. In the digital age, these cultural deficiencies can prove even costly and organizations that intend to go digital must nail these obstacles first.
Cultural transformation is an imperative and executives need to take it just as seriously as operational issues. Research shows that these cultural deficiencies are related directly to negative economic performance. Some of the main cultural deficiencies that can become obstacles to success include aversion to risk, siloed mind-sets and a weak customer focus. Customer choices are increasing with faster digital transformation but the companies that lack a unified view of the customer continue to struggle with resource allocation and mobilization.
As per McKinsey’s research, these three cultural deficiencies can take the form of major risks and hinder growth. Digital transformation has led to higher competitive pressure. However, siloed mindsets and risk aversion are causing organizations to miss important opportunities and signals leaving them unable to respond to changing customer needs and market dynamics. In a recent survey of global executives carried out by McKinsey, it was found that cultural and behavioral challenges were the leading barrier to achieving digital objectives. Executives should not wait for cultures to change all by themselves but instead work proactively to shape culture. Those who wait for the culture to change remain behind their competitors as digital continues to blur boundaries and mount competitive pressure. Unless they really want to fail or lag behind they would focus upon culture and bring about the transformation that fosters a digital and risk taking mindset.
Creating a culture of risk taking:
In most cases, it is the fear of failure that becomes an obstacle. However, senior leaders must encourage employees to try and experiment. They must be role models if they want to build a culture where risk taking is the norm and employees do not fear to actions despite chances of failure. Failure offers chances of learning and senior leaders must learn to celebrate failure. After having set the budget, deadlines and objectives, the senior management must get out of the way and allow the frontline workers to make decisions. However, letting the frontline employees have the authority to make decisions will only work when they have all the right skills, the mind sets as well as the information and tools they need to make good of the available opportunities. Disruptive thinking can become the source of innovative energy and empowerment and to achieve this purpose the organization can bring people from outside form digital start-ups and established technology brands.
A better way to empower the frontline employees is to equip them with the right information that allows them to make quick, bold and on the spot decisions. This helps the company connect the frontline employees with its strategic vision and objectives. The results can be observed in terms of improved customer experiences as well as faster resolution of issues throughout the organization. It does not just improve customer satisfaction but also brings down costs since issues are spotted and resolved faster and much more efficiently. Risk taking on the frontline is also good for accelerated innovation since improved decision making supports agiler test and learn approaches. In this way, irrespective of the industry, the critical thing is that the executives trust the employees.
Inside many organizations the Chief Financial Officers trust the employees with financial decision making and resource allocation except in case of the big bets. This was not the norm always because even small checks of thousand dollars required the approval of the CFO himself. However, as executives and organizations are learning the value of risk taking culture, they are letting the employees handle more. Apart from letting the employees have some decision making authority the senior leaders must also work to encourage bold and decisive actions that churn things faster and several times at very large scales. This requires risk taking apart from aggressive goal setting.
Companies have long aspired to remain close to their customers and the digital age has forced them to achieve it apart from giving them the tools to make it possible. Companies like Amazon and Apple have showed what good customer service is like. Customers are now used to best in class service and expect the same of the others too. It is why a superior customer experience is now more important than ever. They want the services tailored to their needs and their enquiries are responded to at the earliest. The relevance of customer focused organizational cultures is not limited anymore to just profitability. In this competitive world, it is the key to survival. Moreover, getting closer to your customers and inviting their participation only works to accelerate innovation. When customers co-create products, it helps bring change faster.
So, instead of launching a product and then waiting to see what works about it and what not, companies now make real time adjustments and include features through input from end users. This is true about both small products like Legos and large products like aircraft engines. Utilizing this process does not just reduce the risk involved in production but also provides valuable insights about how customers think of a product or how they use it.
Creating a customer centric culture requires use of various innovative tools and data. You need to build a common understanding of the customer and make it a central part of the organizational culture. Connect the right data with the right decisions and this will reinforce the customer centricity. One of the significant factors that has made Amazon as successful is its ability to use the customer data to make fresh purchase suggestions. Apart from including customer reviews, Amazon also uses algorithms to pair purchased items with other items and show what items the other customers bought together. It has also invested in robotics and automation but the central concern is still to maximize customer satisfaction and make faster deliveries.
Customer centricity plays the role of a unifying force and becomes a core element of the culture guiding all the major and minor decisions. A major strength of the customer centric culture is that it helps anticipate the customer behavior patterns and tailor products and services.
Busting organizational Silos:-
Organizational silos for most is a structural issue rather than a cultural one. However, organizational silos are dangerous for organizational culture. Narrow mentality and hesitation to share information with others or collaborate with other functions can corrode the culture and damage the overall organizational productivity. Silos are an old problem but in the digital era they have become costlier because digital requires higher cross functional collaboration. In such a scenario organizational silos become an obstacle to digital and accelerating innovation.
The new possibilities created by data and digital require higher cross functional collaboration and making customer centricity a part of everyday organizational operations. However, not all the organizations have been successful at unlocking the potential. This is because siloed thinking and behavior have become obstacles to a healthy digital culture. In the survey McKinsey conducted, executives agreed that siloed thinking and behavior were obstacles to the creation of a strong digital culture.
In a siloed culture, accountability is also generally lacking among the employees. A problem is mostly someone else’s responsibility. This problem can best be countered through cross functional collaboration and by deploying flexible teams. A shared view of the customer is also necessary. Executives should start with finding mechanisms which help build a common understanding of the business priorities and their importance.
Moreover, you cannot always anticipate upcoming changes and sometimes it start from absolutely unpredictable corners. Giving your employees more context allows them to make better decisions when change happens. There are several barriers in the way of cross functional collaboration including red tape and bureaucracy. Organizations must work on eliminating these obstacles.
At last the cultural changes inside organizations are mostly slower and more complex than the the technological changes behind them. It is why it becomes even important for the executives to become highly active in this regard. The speed and agility needed to bring technological changes cannot be achieved unless the leaders can build a culture of risk taking and focus obsessively on customers.