Culture change in the digital age

Introduction

In this book, we share our experience, tools and perspectives on how organisations can change to be successful in digital age.

We will discuss:

  • Why culture change is such an important response to the challenges of digital.
  • The characteristics of a digital culture and how it differs from pre-digital cultures.
  • How leaders, teams and organisations can develop and change.
  • How individuals can develop a digital mindset.

PART 1

The challenge for your culture

 

“What got you here, won’t get you there.”

                                                  Dr. Marshall Goldsmith, What Got You Here Won’t Get You There, Hyperion Books, 2007

We constantly need to learn and use new skills to progress; as soon as we rely only on what we have or what we know, we stagnate. That’s the thinking behind this well-known expression, and it’s more true for organisations and their leaders now than ever before.

According to Yale’s Dr Richard Foster, the long and traditionally robust life of a top business is endangered:

“The average lifespan of an S&P 500 company has decreased by more than 50 years in the last century, from 67 years in the 1920s to just 15 years today.”

                                                                                                                    Kim Gittleson, BBC News, 19th January 2012

 

That means that by 2020, more than three-quarters of the S&P 500 is likely to be companies that we haven’t heard of today. It’s a sobering thought for all CEOs and senior leadership teams.

What’s causing this disruption? In short: digital. Businesses like Airbnb, TransferWise and Uber didn’t exist before 2008. But now they’re the multi-billion dollar poster children for digital disruption.

How have they been able to do this? Again, it’s digital. It creates new and faster ways for businesses to access data, talent and customers. It provides customers with access to new products, information and services that improve their lives.

The challenge for organisations is how to respond to the digital revolution right now. Leaders need to work out how to lead change rather than suffer through it. Digital is the context for rapid change, and it is leaders that must provide the response.

What is culture?

For something so vital to the success of a company, culture can be a fuzzy concept for many. It’s best to make sure everyone has a common understanding of the word. Here’s our preferred definition:

Culture is how things get done around here.

It encompasses:

  • ways of working
  • processes (and whether we use them well)
  • peoples’ attitudes to customers and to one another
  • what we believe in
  • how we reflect that in our everyday work.

Digital disruption and the leadership imperative

A recent IBM survey of over 3,000 business leaders put technology at the top of the list of external factors shaping the future of companies. Identifying and investing in the right kind of digital transformation is keeping some senior leaders up at night.

That doesn’t sound like a leadership problem, but more of a technology issue. Digital is undeniably a technology that requires significant and considered investment. But can an organisation simply invest in the latest IT system and consider its digital transformation complete?

Recent Capgemini research looked at companies that invested in digital infrastructure. It found that those didn’t invest in the transformational leadership needed to support it became an average of 11% less profitable as a result. Without strong management, leadership and buy-in from the right people, no amount of new technology will work.

What does it take for an organisation to become digital? Mark McDonald, Managing Director of Accenture Strategy believes that:

“a digital business is one that takes an information intense and connected sets of resources – customers, products, services, business processes, events, information, etc – and combines them in new ways to create new sources of value.”

                                                             Mark McDonald – ‘Being a leader in a digital world’, Accenture, 15th April 2014

 

He’s saying that businesses need to evolve their ways of working in order to respond to the new digital landscape. This includes engaging and transforming every part of an organisation, from its customers, people and culture through to its products, services and supply chain.

There’s no quick fix for this type of change – for most businesses it’s transformation on a grand scale. The challenge is even more demanding because of the relentless, increasing pace of change. Renowned Silicon Valley investor and technology entrepreneur Marc Andreessen believes that, at best, we can only see six months into the future. If Andreessen – who invented Netscape Explorer, was an early investor into Twitter, Facebook and Pinterest, and is widely considered a technology sage – can only see six months ahead, then this doesn’t bode well for the average CEO and senior leadership team. Watch an interview of Andreessen talking about this here.

CEOs and senior leaders are facing shorter timelines, increasing complexity, shifting consumer behaviours and disruptive competition. Leaders live in a world where it is practically impossible to have all the information. At the same time, they are being asked to take greater risks, more often.

Deloitte’s Global Human Capital Trends 2015 revealed the two main challenges facing global businesses are leadership and culture. 86% of the 3,000 plus global business leaders questioned cited leadership and culture as the most important issues for their organisations. Only 6% said they felt equipped to respond to the leadership challenges they are facing.

That leaves the bulk of organisations scrambling to develop the leadership and culture they need to survive, and thrive, in the digital age. The temptation for business leaders is to default to ‘command and control’, with technology deployed as a crutch to gather as much information as possible, as quickly as possible. This kind of risk-averse behaviour requires functioning hierarchies of subservient employees, willing to unquestioningly carry out frequent management instructions.

Unfortunately, this approach is unlikely to yield success in the age of digital. Let’s take a closer look at the difference between digital and pre-digital, or analogue, cultures.

From an era of stability to an era of disruption

No Ordinary Disruption, written by McKinsey’s Richard Dobbs, James Manyika and Jonathan Woetzel, is a helpful account of the great shift we are living through. It argues that there are four forces reshaping our world:

  1. Digital
  2. An ageing global population
  3. Globalisation of trade
  4. Urbanisation

It cites economists Mark Watson and James Stock’s phrase “Great Moderation” to describe the 25-year period preceding the 2008 financial crisis. This relatively stable time meant that leaders and organisations learned to work with predictable models for business planning. They could look at data about their company’s performance and extrapolate into the future. The primary tool for business planning was the spreadsheet – perfect for taking historical data and creating predictions that would come good. These days however, even with the worst of the crisis behind us, things are anything but stable.

Today, the Lean Canvas is a more apt tool for business planning. Drawn from ideas in the seminal book by Eric Ries, The Lean Startup, and fusing its ideas with the Business Model Canvas, the Lean Canvas is a lightweight tool for building an idea into a plan to create a product or service – or to identify that it isn’t viable.

In the era of disruption, speed to market isn’t just an advantage, it’s a survival ploy.


PART 2

Developing a culture for the digital age

 

There’s a existing dominant culture in every organisation, regardless of size or sector. It informs ‘the way we do things around here’. It’s difficult to pin down and describe, yet we know that culture is powerful. So powerful that Peter Drucker apocryphally said that: “culture eats strategy for breakfast”.

What does a thriving digital culture looks like in practice? Hint: it’s not defined by technology spend and isn’t related to whether your CEO tweets.

A thriving digital culture is adapted to the opportunities and threats offered by technology, the disruption of markets, changing customer behaviour and ways of working.

 

What does a strong culture look like in the digital age?

At Brilliant Noise, we would say that a digital culture means having the ability to act like a disruptor, even if the organisation is an incumbent.

Culture table

So what is it like to work in a culture that has adapted to the digital age? You will be a lot more interested in the customer, whatever department you work in. You will be used to making decisions quickly, rather than waiting for them to be approved elsewhere. You will be focusing more on results than on pre-set processes. Your value as an employee is going to be more about being motivated, adaptable and proactive rather than reliable and experienced in one area. Where people once set their sights on linear career progression, you’ll be experiencing unpredictable, sometimes rapid career progression.

We have noted four cultural characteristics of companies that are succeeding in the digital era:

  1. Customer-centric: they organise around the customer and understand their needs.
  2. Networked: they are outwardly and internally highly connected, usually with less hierarchy.
  3. Biased towards action: they have devolved decision-making and responsibility that encourages speed to market and supports rapid learning and change.
  4. Purpose-driven: they align their efforts through a clear understanding of what they are all about.

Let’s explore how each of these work in practice.


1. Customer-centric

Change has flattened the power relationships in markets as well as the structure of companies. In No Ordinary Disruption, the authors say that “finding ways to capture value from the consumer surplus” is a priority for organisations. In non-strategist terms, that means that customers are getting more value from internet disruption than companies are. Organisations need to get close to their customers to work out what they want and how they might better serve them.

Simplification is another reason for being customer-centric. Digital disruption makes for an extremely complex environment of trends, new competitors and new technologies. Focusing on the customer simplifies decision-making and priority-setting down to a single criteria: is it right for our customer?

What does business with a customer-centric culture feel like? Last year one of our team used Zipcar (well, Zipvan actually) to collect furniture for their new home just after their wedding. At the last minute, they realised the booking was for the wrong day. They were astounded when Zipcar not only didn’t charge them to change the booking, but also sent them a hand-written wedding card and an Ikea voucher.

How did it happen? Was it that a wonderful, kind person in Zipcar customer services took it upon themselves to do this? Well yes, but that’s not the whole story. Zipcar has oriented its business around the customer to such a degree that an incident like this is routine. It blends digital technology with a very personal touch. As a result, many people become loyal customers and advocates, recommending it to everyone they know.

Compare this to incumbent organisations, which spend big to push products and services to customers. These organisations are often seen as self-serving, more interested in their own sales than the needs and welfare of their customers.

It doesn’t have to be this way. ING Bank is a Dutch multinational bank, with over 48 million clients and 75,000 staff. The CEO, Ralph Hamers, is presiding over a major digital change process. ING seeks to respond to the disruption of the banking sector (by new technology-led businesses such as TransferWise), while simultaneously rebuilding customer trust. Trust that has been eroded by the banking crises, dubious commercial practices and associated negative headlines of the last few years.

Hamers describes customer needs as:

“changing very rapidly – because of the trust factor – but also because of technology and the way that brings change to the way they can access information. It’s these trends which mean we need to change how we deal with customers as well.”

                                                                              ‘Straight Talk with Ralph Hamers, CEO ING Group’, ING, 1st October 2013

 

So how will ING respond and rebuild trust with its customers? Hamers says it is both about what the services do and how the business is organised. This means a shift from an analogue culture that pushes ideas to the market, to a digital culture that pulls in ideas from the market and responds to customer needs. It’s a challenging, yet powerful shift for any organisation to make.


2. Networked

Successful companies in the digital age recognise the power of networks, both internally and externally, to spark ideas and innovation and to get things done faster.

Hierarchies don’t work when it comes to quickly getting vital information to leaders and all the other places it needs to go in a modern organisation. Arguably, this has always been the case – though the problem is exacerbated by the challenges of fast-moving markets and customers. For instance, Churchill established the Office for National Statistics during the Second World War, because he couldn’t rely on the government departments to give him the raw truth. At Pixar, Ed Catmull found that no matter how good the intentions of his executives, they would find it hard to show him the unvarnished truth. He needed to emphasise the need for candour and openness and constant ask “what am I not seeing?”

Twentieth century businesses favoured hierarchies because they allowed them to scale reliably. We’re not suggesting that hierarchies should be done away with completely, but it’s important to recognise when and where they become restrictive, and to find and test alternative approaches that provide flexibility and speed.

The pace of change in this digital age is so rapid, that an open network of interconnected people will move information more rapidly than in a closed hierarchy. It will also mean you can respond to opportunities faster, supporting rapid decision-making and action.

This was brought to life brilliantly in the best-selling Tribal Leadership, by Dave Logan, John King, and Halee Fischer-Wright. Their extensive research identified a defining characteristic of exceptional leaders: their ability to develop ‘triads’. Despite the name, these are not shadowy subculture movements, but relationships where the leader connects two or more people together, removing the reliance on the leader. Organisations with what the authors termed ‘tribal leadership’ were the most successful and profitable, with super-charged staff who were fully engaged with the organisation.

Let’s look at an example from the digital disruptor Spotify. Spotify has fundamentally changed how over 60 million people consume music and in the process has disrupted the entire music industry. How has Spotify managed to achieve this? It claims it is, in large part, due to its “agile culture”.

Spotify says:

“Culture tends to be invisible, we don’t notice it because it is there all the time. But if everyone understands the culture, we are more likely to be able to keep it – and even strengthen it as we grow.”

                                                                  Spotify engineering culture (part 1), Henrik Kniberg, Spotify, 27th March 2014

 

Let’s take a look at how this culture is transmitted through the organisation’s structure and how Spotify benefits as a result.

The company’s organisation is structured into what it calls squads, tribes, chapters and guilds:

  • Squads: small teams, located in one place, acting like a mini startup. While the team has a long-term mission given by the organisation, it is self-organising and sets its own working styles and approach.
  • Tribes: cluster of squads, usually about 100 people in total, that make sure the environment and resources (“habitat”) are optimal for all of its teams.
  • Chapters: small groups of people from the same tribe who do the same kind of work and share skills, best practices and ideas.
  • Guilds: guilds bring people together from across Spotify. They are groups for sharing code, ways of working, ideas and case studies.

Spotify describes that the structure as:

“…letting decisions happen locally rather than via managers and committees. This helps us to minimise hand off and waiting, so that the business can scale without getting bogged down with dependencies.”

                                                                 Spotify engineering culture (part 1), Henrik Kniberg, Spotify, 27th March 2014

 

That’s great, if you’re a tech startup like Spotify. But that kind of approach wouldn’t work in a bigger, corporate environment, would it?

Let’s return to ING’s CEO Ralph Hamers. According to Hamers, innovation is driven both by the technology and “the culture around it”. He says:

“I’m a big believer that you have to disrupt yourself. If you feel that you can disrupt markets, you don’t stand around and wait for somebody else to do so.”

                                                                                                                                                           David Rogers, The Australian

 

This doesn’t sound like the kind of statement you’d expect from a banking CEO. But ING is walking the walk, and disrupting its organisation to create a culture that fuels innovation. In May 2015, ING announced that it was reorganising its entire Dutch business operations along the Spotify model of squads and tribes. Nick Jue, CEO of ING Netherlands, said:

“We see three underlying drivers for this change – changing customer needs, the speed of change in the market and the rapid pace of technology development. Actually, everything is constantly changing. This has huge implications for traditional banking organisation hierarchy and handovers from one department to the other. We need to work much more quickly. And there’s a different way of working and developing, which is why we are doing this.”

 

Changing your organisational structure is a big deal. It’s costly, time consuming and painful. So why are businesses like ING making these changes? A shift to a networked approach can offer significant competitive advantage. It may even be essential for survival. When former Procter & Gamble CEO Bob McDonald was asked how he prevented managers slowing the implementation of P&G’s $5.4bn digital transformation project, he responded:

“You dismantle the hierarchy so people don’t have time to micromanage.” 

                        ‘Procter and Gamble Minimizes Management Meddling’, Michael Schrage, Harvard BusinessReview28th July 2011


Bias for action

If a company has a bias for action, getting things done is prized above getting permission or consensus. A bias for action allows companies to lean forward into the future, rather being nervous and waiting to see how things pan out.

In the digital age, people want to participate more, not less. Employees don’t want to be micromanaged – they expect to contribute and shape decisions. Author Daniel Pink explores human motivation in his insightful book Drive. He provides overwhelming evidence that we are motivated by the desire for autonomy. In this respect, Pink likens management itself to an outdated technology that simply gets in the way of people producing extraordinary work.

The challenge he lays down to managers and leaders is:

“create the conditions for action – then move out of the way.”

 

Organisations that miss this fundamental point risk alienating the most important resource a business has – their people’s energy, insight and commitment to get the job done.

Let’s take a look at an example of a wasted opportunity: the recent history of Sony. The electronics giant has seen its market share erode across nearly all key product categories. Televisions – the original cornerstone of the Sony brand – made a loss for ten consecutive years to 2014. Commentators cited the hierarchical ‘command and control’ culture as a factor that prevented the necessary collaboration and integration across business units.

While Apple was launching a business model that encouraged collaboration through its integrated hardware and digital platforms, Sony continued to operate in highly rigid business units that eschewed collaboration in favour of internal competition. The results have been catastrophic, with the company still searching for an identity and clear purpose in the digital age.

Compare that with Google’s now famous 20% time, where employees were allowed up to one day per week to work on whatever they wanted, with whoever they chose to. Debate exists about how formal this policy was (we might also suggest the lack of formal policy is another reflection of a digital culture) but there is no disputing the innovation resulting from it. Gmail, AdWords, Google News and Google Talk were all successfully incubated as a result of employee innovation.

The value of these initiatives isn’t just found in the results. It’s also in the culture they build and the staff engagement they deliver that creates the real, long-term value. Providing even a tiny dose of autonomy for people creates a huge bias for action. And organisations that integrate that into their DNA see even greater returns.

By providing a direction of travel, and then handing over ownership to your people, you automatically create this bias for action. What would be possible for your organisation if everyone was motivated and able to make change happen?


Purpose-driven

 

In the digital age, the most successful organisations are united and animated by a clear sense of purpose, for both employees and customers. This is more than having a vision and a mission; it goes to the heart of why your organisation exists in the world.

Digital organisations disrupt traditional markets by drawing on a deep conviction about the validity of their purpose. Take TransferWise, a company founded in 2011 which has already had a big effect on its market. The business is driven by a purpose that is almost a moral crusade: to right the wrong of large transfer fees charged by many banks.

As publicity stunts, TransferWise organises flash mobs in cities around the world, featuring placard toting semi-naked men and women, exclaiming that it – unlike banks – has nothing to hide. Its logo is a flag inspired by the French Revolution. The message is not about using TransferWise’s services, it’s about joining the cause. This purpose unlocks a brilliant marketing strategy, and partly explains why TransferWise is closing in on a $1bn market valuation.

The challenge for existing organisations is to rediscover and integrate a clear sense of purpose into everything they do. We’re not suggesting that every organisation reengineers its business model. It’s about finding your purpose and expressing it clearly: to your people, to your customers, to the world. This is the ‘why’ that great leaders and organisations start with, explained by Simon Sinek in his famous TED Talk. And in the digital age, aligning your organisation’s ‘why’ with that of your customers is what creates true impact.

How do you change your culture?

There was a problem with the way we thought about change in the analogue age, the era of moderation and stability: it was too slow and too steady. Grand plans for change were too often safe and steady ways of doing things, rather than high-risk/high-stakes bets on what is needed now, guided by a clear strategic purpose. When we don’t know what the future will look like in six months, taking 18 months to move from one way of working to another begins to sound like a shot in the dark from a moving train.

To continue with the rail analogy, in some companies change (often expressed as reorganisation) is like painting the Forth Bridge – a task that’s never complete. It doesn’t change the culture. It doesn’t make the organisation more adaptive, customer focused or action-oriented. It just changes the org chart. When there are disruptive competitors and threats arriving at an unprecedented rate, it’s a kind of departmental deckchair rearrangement on the Titanic of incumbent organisations.

Conversely, a culture that has a bias for action is customer-centric, highly-networked and guided by a galvanising purpose requires something different.

To break free from the past – to grow a new culture where the old one has stalled – we think you need three things:

  1. Fast change: examples of change that inspire the rest of the organisation and build the case for others to follow.
  2. Leadership: people to get change moving quickly, scaling successful new ways of working and lead by example.
  3. Collaboration: everyone must be able to collaborate across the company – some of this is about process, but a lot is down to habit, to values, to culture.

Fast change

At Brilliant Noise, we believe in getting change started as soon as possible. We begin our work assessing the digital maturity of an organisation, and identify what approach will have the biggest impact in the shortest period of time.

A fast change project or pilot can show the rest of the organisation how brilliant things might be if they did things differently. For example, if they prototype new products or processes as a collaborative team rather than going through long-winded inter-departmental planning and approval processes, how would that feel? What would the results be?

Fast change projects become practical examples of how an organisation can behave more like a disruptor than an incumbent. It’s an example that offers inspiration and evidence to do things differently and generate long-term value. An instance of change creates a light bulb moment, as one clients puts it ,that shows people that digital transformation is a powerful force, not just an interesting management theory. It’s when they actually feel what it’s like to be in a digital organisation.

Creating instances of change can spark wider digital transformation. The phrase ‘instances of change’ came from looking back at work we had done for clients like the Financial Times, TUI Travel and American Express. The projects were all different but shared common elements that we – and our clients – had found hard to articulate at the outset. There was a stated need – developing content operations or learning programmes for digital culture – but there was also a sense that there was a bigger prize which the work would move them closer to.

The benefits of a fast approach are:

  • Immediate results leading to lasting change. Tangible value delivered by projects means that it’s not speculative thinking. They demand wider attention from a business.
  • Ability to scale success quickly. New ways of working can be captured and passed on to colleagues elsewhere in the organisation. Better, faster ways of innovating and problem-solving generates demand for more investment.
  • Hitting the innovation/value sweet spot. Moving faster than big consultancy thinking, and with clearer strategic, commercial relevance than typical agency approaches.
  • Efficiency savings. Large digital investment projects carry a burden of waste and duplication. A pilot and scale method means that investment can follow lessons learned from experience, and the needs of customers.

The concepts of ‘fast change’ and ‘instances of change’ connect with two ideas we’ve used for a long time at Brilliant Noise.

The first is ‘pilot and scale’. We’ve always thought of every project as a kind of pilot, or prototype, that will either make its own case for scaling due to its success, or simply leave behind lessons for the next project.

The second is from the Chip and Dan Heath book Switch, in which they discuss the problem-solving technique of looking for ‘bright spots’ in challenging situations. Rather than focusing on how to change everything at once, they look for the answer in rare examples of things working well and learn from them. Creating powerful, small examples of change is like creating the right conditions for one of those bright spots to emerge. We might think of this as the organisational equivalent of what screenwriters call ‘show don’t tell’ – let the audience see what is happening and work out the narrative for themselves. Audiences in cinemas, just like your colleagues, hate it when they are treated like idiots who need every plot point and development pointed out to them explicitly.

Fast change projects initially sound small, but their scale is what makes them powerful. They are the momentum for change, the first step that can start an avalanche.


Collaboration

If fast change projects are about getting things moving quickly, collaboration is about changing how people work together. Collaboration is, and will continue to be, a feature of the most successful companies in the age of digital. It should be the default mode of working.

Collaboration is how you realise the value in networks. It’s about connecting people in different areas or departments and being able to work formally and on an ad hoc basis with anyone in the organisation. It’s also about being able to have unstructured time to meet and develop relationships outside the organisation.

Collaboration loosens the hierarchy of an organisation naturally, allowing the people with the best ideas to find those who can help them make things happen. Cross-team working on projects weakens silos and increases the flow of ideas, energy and information.

Fast change projects demand collaboration. They connect people from different functions and make an outcome their major focus. Cross-departmental training also increases collaboration. Giving everyone basic training in each other’s departments means that project managers get to learn the basics of finance, creative or purchasing, while sales people can learn the ropes of customer care or supply chain. As well as giving insight into how the organisation works, it can help people understand what their colleagues’ needs are, demystify their decision-making and even the different jargon and terminology they use.

Collaboration is a leadership issue. Modern leaders can’t know everything. They must develop their own collaboration skills, developing strong networks and ways of working with people at all levels, both inside and outside their organisation and industry. As well as setting an example for collaborative working, they must create an environment in which collaboration can happen for everyone else. This means focusing on three things:

  1. Autonomy: ensuring that briefing and delegation gives people the latitude to develop their own solutions and work with who they think will be best to help them.
  2. Trust: individuals and teams need to know that they are trusted to work in their own ways to get results.
  3. Transparency: providing visibility on projects and decision-making will build trust and cut down on the overhead of communications (and of miscommunication). It will also encourage collaboration and spark new ideas. People can see when it would be a good idea for them to get involved with a project or bring their knowledge and expertise to the table.

Collaborative culture increases the opportunities for innovation by creating more connections.

If people from different parts of the organisation bring their knowledge and perspectives together they will find new ways to apply it to everything, from process improvement to coming up with ideas for new products and services.


Leadership

It’s an interesting juxtaposition that in talking about moving to flatter organisations we are emphasising the vital importance of leadership. Without strong leadership it’s unlikely that any organisation will make a successful transition from analogue or incumbent status to one fit to compete in an era of digital disruption.

Change is hard. Purpose can drive it, but someone needs to own that purpose and be relentless in upholding it and communicating it consistently. The role of leadership is essential, but it must be reimagined.

Leaders reinventing themselves isn’t new. Great leaders have always done it. Warren Bennis, who sadly passed away in 2014, founded leadership studies in his classic On Becoming A Leader in the 1950s. In 1989 he wrote:

“It is the individual, operating at the peak of his or her powers, who will revive our organisations, by reinventing both self and them.”

‘On Becoming a Leader’, Warren G Bennis, Addison-Wesley, 1989

 

He clearly didn’t write that for leaders experiencing digital disruption, but it’s an insight that stands the test of time.

There is no such thing as a ‘digital leader’, there are only leaders that are right for the digital age.

Organisations need strong leaders who understand the dramatic changes that digital is bringing to the world and to their businesses. Leaders who understand the need to reinvent themselves first and then their organisations, in order to be fit to prosper in the 21st century.

One of the best-selling leadership books of the last 25 years is The Leadership Challenge by Jim Kouzes and Barry Posner. In it, they identify the most important traits that convince us to follow a leader. The data is compelling, having been generated from over 100,000 people worldwide, over a 25 year period. In every country, and in every year to date, the expectations that people have of their leaders hasn’t changed. The top two characteristics are firstly to be honest, and secondly to be forward-looking.

What is clear from their research is the need for leaders to ‘walk the talk’, or to ‘role model the way’ as Kouzes and Posner call it. As Steve Ballmer, CEO of Microsoft, says:

“Everything I do is a reinforcement, or not, of what we want to have happen culturally … you cannot delegate culture.” 

 

         ‘Building a digital culture: How to meet the challenge of multichannel digitization’, Ashley Harshak, Benedict Schmaus,           Diana Dimitrova, Strategy& PWC, 2013

So what do our leaders need to meet this challenge? Taking the classic leadership modes of leading oneself, leading others and leading organisations, it looks something like this:

  • Leading oneself: developing a digital mindset and ways of working, understanding the key elements of the digital world, creating an example of change.
  • Leading others: spreading mindset, encouraging collaboration.
  • Leading organisations: setting clear vision and communication, creating a culture that is flexible and open to change.

We’ve mentioned the concept of a digital mindset – in the next section we’ll explore in detail what that means and why it’s so important.


PART 3

Developing a digital mindset

 

Evolving an analogue culture into a digital culture is a challenge with risks. Get it wrong and you can easily be left with a group of confused and disaffected employees who no longer trust management decisions. Usually, this occurs when leaders make the mistake of believing that culture change is something that can be done to others. This is actually the opposite of what works; creating a digital culture can only be achieved with the full participation of others.

Leaders who operate with a digital mindset understand this. They’re able to focus on and manage change simultaneously across four critical, connected domains:

  • Personal: how you and your team work with digital.
  • Organisation: how to turn innovation and agility into habits.
  • Customers: how customers are using digital, how that use is affecting their expectations and behaviour.
  • Context: understanding the macro trends that are driving change, and prioritising resource and attention on new technology, competitors and trends that will affect your business.

By working simultaneously across each of these four domains, leaders are able to better equip themselves and their organisations to respond to the changes in their markets and with their customers.

The digital mindset

Effective leaders of digital change are able to operate across a wide domain, managing and developing themselves while simultaneously engaging with their teams and wider organisation, integrating customer needs and scanning for upcoming digital trends.


Personal: how you and your team work with digital

Leaders must focus on their own use of digital for two reasons:

  1. They must be an example and inspiration for change in their organisation.
  2. Understanding digital tools will deepen their understanding of the context in which their company and customers exist.

As an added bonus, developing digital skills will help them to overcome some fundamental issues of the modern workplace, such as information overload, the tyranny of email and how to be effective in a world where interruption and distraction lurk around every corner.

At Brilliant Noise, we work with all levels of leadership to support their personal development, building their capacity to manage themselves and to lead others through digital change. Our approach is practical and action-based. Ultimately, we believe that however good our theories and models are, individuals learn and grow through practical experience. This ‘learning by doing’ method is also a great metaphor for a digital approach to learning.

These are the elements we encourage leaders to look at developing in themselves:

  • Critical thinking about tools: Thinking about what tools are right for what tasks and understanding the effect they have on the way you work can be transformative. Writing a plan or report in Excel or PowerPoint can change the way we structure and express our thoughts. Using calendar software can encourage us to make all our meetings fit to hour-long chunks, with no breaks in between. Having email notifications turned on can make us distracted from work that requires deep thinking. Trying new tools, understanding their strengths and weakness and when they should be used can help us be more critical and effective.
  • Asking ‘who is in charge?’: It’s easy to slip into a master-servant relationship with our technology, where the tech is in control. Ever heard someone just back from holiday say: ‘I’m going to have to spend all day getting through emails?’ That’s an example of email calling the shots. Better to say: ‘How do I quickly find what’s happened while I was away, so I can prioritise?’
  • Understanding how you work: Despite our use of machine metaphors like ‘multi-tasking’, ‘hard wired’ and ‘download’ to describe thinking and communicating, our brains are very different to computers. Rather than thinking of ourselves as machines, we need to think about how best we can work with machines – how our attention works, how we think analytically and creatively, and where our tools can help us do things faster and better. The book we created for Nokia, Design Your Day and Dr David Rock’s Your Brain at Work are both useful for finding out more about this.
  • Designing the way you work: Thinking critically about how we work. We can borrow from the heavy-lifters of the knowledge work world to improve our personal productivity and performance. Coders, writers, designers all have to maintain deep focus on cognitively demanding work for hours at time, in order to get their work done. They share approaches and workflows with one another – the most efficient ways of organising a series of tasks to get a job done. Wherever possible, they use digital tools and advanced features to automate or speed up repetitive work. We could all do with breaking down tasks into work flows, thinking about the different phases of work, the different modes of thinking, and the tools that are most useful at each stage. Again, for more on this idea take a look at our book Design Your Day.

Organisation: innovation and agility

“If you can’t move [fast] – you’re dead … you want the muscle of a big company, but the soul of a small company.”

Jack Welch, former CEO of GE.

 

Agility and the ability to innovate are two traits that every digital organisation needs. Much like the axiom ‘people are our greatest asset’, they are easy to agree with, but hard to put into practice.

Earlier we discussed how ING and Spotify have developed highly agile structures. Elsewhere, companies like Zappos, the feted online US footwear and clothing retailer owned by Amazon, are experimenting with the holacracy model (now trademarked and licensed by its creator).

Rather than pick one of the systems or follow radical experiments still in progress, it’s better to learn what can be borrowed from each example and find ones that will help your organisation be more agile. As Andrew Smith of the Financial Times said in his critical review of Brian Robertson’s book Holacracy:

“Holacracy is one of several alternative management models, including good old employee ownership. None will instantly “obsolete” traditional workplace structures, to use a typical Robertson turn of phrase.”

                                                                          ‘Review: ‘Holacracy’, by Brian Robertson’, Andrew Hill, FT, 27th May 2015

 

Agile is a project management approach for complex projects like software or service design. It’s not that whole companies should be run like an agile project, it’s what they can learn from the techniques and insights of disciplines like this to create their own ‘agile-ish’ approach and culture.

One key reason to develop agility in your organisation is to allow the opportunity for real innovation to happen. Innovation is a hollow word in many organisations’ cultures, so it’s useful to be clear about two connected concepts that every leader and their teams should understand:

  • Combinatorial innovation: There are a huge number of technology and business models. Combining two of them in a new way can create businesses or products with immense value. For instance, Airbnb was a combinatorial innovation of a trusted on-line marketplace like eBay, combined with property rentals (OwnersDirect) or a spare bed (Couchsurfing.com). All the elements for Airbnb already existed, they just hadn’t been combined in that way before.
  • Disruptive innovation: Clayton Christensen’s Innovator’s Dilemma thesis suggests that disruptors initially have lower quality products and new business models that initially look unthreatening. But the disruptors get better over time, and then displace the incumbent. For example, Toyota’s entry into the US car marketplace with small cars, which eventually beat Detroit’s auto companies hands down.

Leaders need to tell the disruptor/incumbent model story to their organisation to emphasise the urgency of being innovative.

One company that disrupted its own business model in a dramatic way and that continues to do so is Netflix. Beginning as a DVD rental-by-post service, the company anticipated the streaming revolution in home entertainment and developed a service which cannibalised its existing business model. And now it sees its job as to go beyond delivery, into creating original content.

Ted Sarandos, Netflix’s chief content officer, stated in 2013:

“The goal is to become HBO faster than HBO can become us.”

 

                                                                                            ‘Review: ‘Holacracy’, by Brian Robertson’, Andrew Hill, FT, 27th May 2015

This is a brilliant, concise statement of strategy, encompassing a sense of urgency, speed, direction and a clear goal.

We recommend two practical techniques that can help any leader or team begin to develop their innovation approach, their ability to operate in a more agile way and their capacity to turn ideas into real projects:

  • Unless I hear differently…’: A fantastic way to speed up decision-making and create a bias for action in any team is to introduce the term ‘unless I hear differently…’. Instead of asking for permission, people explain what they are going to do unless they hear differently. This cuts down on delays, stops buck-passing around owning risk, and speeds up management decisions. We’ve been using this approach at Brilliant Noise for a couple of years and it has been really liberating. Hear more about this idea from its champions at Unless I Hear Differently.
  • Lean Canvas: A variation on the business model canvas approach, the Lean Canvas allows people to quickly develop an idea and test it against a number of criteria. They end up with either an understanding of why the idea wouldn’t work, or a one-page plan to create a prototype, or minimum viable product (MVP).

Customers: how your customers are using digital

If we were to sum up the challenge for companies in the digital age in a single phrase it would be this:

Customers are moving faster than companies – try to keep up.

Too often, executives’ perceptions of how their customers are using digital are out of date. Sometimes their own use of digital skews their ideas about how real customers are using the web to get things done.

As we discussed earlier, a focus on customers above all else is a characteristic of many successful companies in the digital age. To have the whole organisation develop a customer-first approach, it’s important that there is a common understanding of customers’ identity and needs.

We recommend using a high-level customer journey mapping approach to explain how customers are experiencing the company at each touchpoint.

The customer decision journey

For example, at each stage of the customer journey, we ask: where is the customer, how are they feeling and what do they need from us? At the evaluation stage of choosing an insurance product for instance, can they easily find answers to the questions about how one product compares to another? Are they looking for that on a smartphone, a tablet or a PC? Are they using a comparison website, reviews or the websites of the companies they are deciding between?

Customer decision jounrney

Once the customer has purchased a product, what are the first few days of the experience like for them? If they have problems or questions, can they get in touch or get what they need from the website? How are they using digital tools to get this done? Are their needs met?

While the emphasis is on the digital experiences of customers, we must remember that offline experiences, like visiting a shop or showroom, often have a digital element. People use their smartphones for show-rooming (comparing online prices and reviews while they are in store) or to canvas friends’ opinions. Ten years ago people might visit a car showroom several times before buying – today they tend to arrive fully decided on what model they want and how much they think they should pay for it. A similar effect is seen in house-buying, where average viewing numbers have fallen as people do most of their research online.

Given these new types of customer behaviour, organisations need to plan around the customer, giving them useful digital tools and experiences at each stage.


Context: reading the digital landscape

Howard Schulz, CEO of Starbucks, said that:

“any company that embraces the status quo is on a collision course with time.” 

 

In the digital age, the time until that collision happens is getting shorter. Sitting on the sidelines to see how it all plays out is no longer a viable option.

You need to take action, and the first step is to decide what to do. It’s vital to gather the right information. Leaders with a digital mindset are confident enough to accept they do not have all the answers, and are able to identify the people and processes they need in order to read, prioritise and act on digital trends affecting their organisation.

At Brilliant Noise, we help leaders understand what’s affecting their organisation, customers and marketplace. Once they have clarity about the trends that matter, we help them articulate the challenge and create viable strategies in response.

We look at the macro-trends that are driving change and the tactical trends that are emerging: new technologies, applications, customer behaviours and business models.

There are many explanations of the macro-trends that leaders need to be aware of, but the most compelling is described by MIT business experts Erik Brynjolfsson and Andrew Mcafee in the The Second Machine Age. They describe three connected trends that are driving the digital revolution:

  1. Digitisation: everything that was analogue (information, transactions, content, objects) is being digitised and connected.
  2. Combinatorial innovation: new technologies and ideas are being generated at an unprecedented rate and can be combined to create new value (faster than in the pre-digital age, because the web makes it easier for innovations to spread).
  3. Exponential growth: many technologies (bandwidth, processing power, computer memory, cloud storage, sensors) are getting better and lower in price at an exponential rate.

When it comes to tactical trends, it’s very hard to keep track of all the new ideas and technologies that are emerging. We help clients by creating a trends radar to filter the noise and prioritise what’s important for them. Below is an example of a trends radar we published about financial services companies.

The radar process works like this:

  • Decide on vectors: categories of trends that are important to your department or organisation. These might include things like competitors, technology, customers or channels.
  • Note down trends you are aware of: if you’re planning with a team you can do this on Post-it notes, a Google doc, or any other collaboration tool.
  • Prioritise the trends: place them in the radar diagram as either:
    • Aware: we know about it, but nothing needs to be done yet.
    • Analyse: we need someone to look at this and understand what it means for our business.
    • Act: we need a team working on a project about this right now.
ccitda-image-trends-radar

 

 

 


PART 5

Conclusion

 

We’ve looked at how the world is changing for large businesses and organisations of every kind. The rate of change is incredibly fast and the nature of the change is complex and unpredictable. The age of stability and moderation will not be returning. We know that we must adapt and evolve.

Culture change isn’t always quick or easy. But it is essential for success in the digital age. It’s not too late to start. Challenging the status quo is best done in a spirit of ‘pilot and scale’, creating fast change with lasting impact – beginning the process of transformation with bold first steps and projects that inspire others to follow.

One small step can move you towards a customer-centric, networked, action and purpose-driven culture. A culture that understands and is ready for the opportunities and threats offered by technology, the disruption of markets, and rapidly changing customer behaviour.

We hope you now have an idea of what a first step might be. It’s now up to you to keep going and lead change in your company.