When it Comes to Digital Transformation, Humans Are the Hard Part
Much has been said about what it takes to enable a successful digital transformation — the right strategy, a seamless customer experience, modern technology and data architectures, and aligned and automated operations are all essential factors.
However, humans are still the leading cause of failure. According to Gartner, nearly 65% of CIOs perceive culture as a barrier to achieving their digital ambitions. This has only been heightened by rapidly-shifting customer expectations in the wake of the pandemic, as well as a growing number of digital-native upstarts. The saying that “culture eats strategy for breakfast” is truer than ever as these headwinds increasingly demand a product mindset that prioritizes speed and flexibility.
Of course, changing human behavior is incredibly difficult. For instance, one study found that 80% of New Years’ resolutions are abandoned by February. People get used to certain ways of working that have made them successful, and typically don’t want to give them up for something new. Still, success is achievable. Capital One effectively transitioned from a bank to a technology company that sells financial service products, for example. It achieved this by initiating a top-down shift in culture, starting with the CEO. The company clarified roles and responsibilities, empowered teams to own their delivery to production and even established an internal Tech College to develop the right skill sets. In sum, they started thinking of themselves as a technology company at every level of their organization.
Your business can make this transformation, too. The paragraphs that follow will outline the product mindset culture that today’s organizations need, as well as provide practical steps to ensure you can make it a reality.
What Is a Product Mindset Culture?
At its core, a product mindset is grounded in keeping up with the ever advancing/shifting customer expectations. In today’s fast-paced market, it requires agility, flexibility, adaptability and a willingness to experiment without fear of failure. A recent survey by my firm found 83% of companies claimed these factors will become more important in the next two years.
Here are the key components of a product mindset culture:
Today’s companies need to move quickly. This means eliminating self-imposed operational silos and pushing down decision-making to empower teams to be agile. It also means thinking about a launch as a viable product that can be rapidly improved over time. If you wait until every aspect of that product is complete, the market will have already moved on — leaving you with an obsolete solution.
Approximately 60% of the top performing companies utilize a highly-flexible structure that allows for swift adjustments. By being nimble, these companies can quickly incorporate new information about customer desires, newly maturing technologies and new competition entering the market, to name a few.
- Iterative Work: Companies that are afraid to experiment will never effectively innovate. By frequently testing, listening, and responding with new solutions, an iterative test-and-learn approach enables companies to efficiently address customer expectations, needs and pain points on a continual basis. This proven approach is used by more than 80% of leading companies.
- Collaboration: Expert digital products are not made in isolation. Encouraging and reward-based cooperation allows different functional areas to be in sync with one another. In fact, 90% of high-performing companies choose to explicitly recognize employees for collaborative work.
- Risk Tolerance: Achieving digital excellence and differentiation doesn’t happen by playing it safe and following the status quo. Companies must become a place where experimentation and a fail-fast mentality prevails. This is a fact recognized by 87% of leaders. All great innovation comes from risk taking, but not enough companies have adopted the patience and perseverance to allow this strategy to pay off.
With a willingness to grow, learn, and change — and recognize the old way of doing things may not be the best way — companies can use the product mindset culture to stay ahead of the curve in an ever-advancing world.
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How to Make the Product Mindset Culture a Reality
A product mindset may sound good in theory, but if you’re not a digitally native business, how do you achieve it? Try adhering to the following principles:
Start Small and Move Fast
Begin with a few small but well-crafted teams. Staff them properly, teach them adaptable methods, give them real opportunities to learn and adopt and move quickly. You’ll be amazed at how quickly the penny drops for employees. They realize this new way of working is actually more fun, more rewarding, and yields better — and faster — results. For example, after supply chain management company Li & Fung had its employees transition to six flat, cross-functional teams, they realized they could more efficiently receive leadership input, experiment with data analytics and foresee problems with tech implementation. Perfection is the enemy here; instead, get it 70%-80% right and move forward. Once a small set of employees are comfortable with this approach, pass it to the next set and build incrementally.
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What would happen if every member of your team came to work focused on finding solutions and creating better results?
Drive Change with Early Success
Nothing creates change better than successful results from new ways of working. For every effort, establish key performance indicators and success criteria, then measure how much value is being created against those metrics. Use this data to ‘show off’ the new approach to the broader organization, allowing employees to see the benefits the new processes can generate.
Create an Informal Change Network
Employees who recognize the advantages of this new approach effectively become a ‘friendly virus’, organically spreading enthusiasm and generating buy-in with their friends and colleagues. It’s a bit like customer reviews for products: I may not believe the company’s advertising hype, but I will believe what my neighbor has to say about it.
To support and sustain these guiding principles, consider the following practices:
Break down silos to encourage collaboration: Silos slow the decision-making process and lead to problematic gaps in communication. Facilitating a more seamless flow of information across the enterprise can have a big impact. For example, Northwestern Mutual combatted problematic information siloes by moving to fully horizontal, cross-functional teams with all necessary capabilities unified in one “pod.” These pods are laser focused on a particular portion of the customer journey and rewarded based on how much value they create for their customers.
A product mindset alone is not enough. Companies must also develop an in-depth understanding of customer and employee needs, as well as a strategy for satisfying them. Our research has found 90% of leading organizations claim they are effective at putting customers at the center of their work. They make customer needs the driving factor behind how they prioritize and focus their business efforts. To do this yourself, create a North Star vision for what you’re trying to achieve/value you’re looking to create for your customers, then ensure everyone is focused on it -– regardless of their function. DoorDash, for example, requires all non-delivery employees to make a food delivery once a month. This enables them to understand customer experience firsthand and spot ways to improve it.
Build Digital Literacy
Employees must understand digital technology and keep up with the latest changes. This can be done by hiring digital natives to imbue the organization with expertise, as well as through comprehensive re-skilling. For example, Coca Cola created a Digital & Data Academy to continuously train and equip workers with core digital skills like automation, data literacy and analytics. In addition to attracting top talent to the company, this program boosted productivity by more than 20%.
Related Article: Digital Proficiency: Literacy, Fluency and Mastery
Ensure Support From the Top
If the CEO and executive leadership team aren’t enthusiastically promoting these changes, their people will never follow. We saw this with Capital One’s digital transformation — and some companies like Google have gone so far as to create a Chief Culture Officer role to prioritize cultural efforts. With a 20%-30% differential in company performance in relation to effective culture, the importance of executive support for cultural change cannot be underestimated.
When asked about the Model T, Henry Ford famously said, “If I had asked people what they wanted, they would have said a faster horse.” In today’s accelerating digital landscape, it’s simply about faster horses.
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About the Author
Nick Hahn is a Director in West Monroe Partners’ Digital practice, working with clients nationwide to realize digital business transformation. He has more than 30 years of experience as a senior-level strategist, line manager and business leader for global organizations.