International Data Corporation (IDC) reported that global spending on the digital transformation (DX) of business practices, products, and organizations is expected to hit $1.8 trillion in 2022, an increase of 17.6% over 2021. According to the latest update to IDC’s Worldwide Digital Transformation Spending Guide, DX spending will sustain this pace of growth over the 2021-2025 forecast period with a five-year compound annual growth rate (CAGR) of 16.6%. This study covers 9 regions, 12 technology markets and 19 industries. The pandemic has accelerated DX, after a minor slowdown during the pandemic period, we’re seeing a boom in DX in a post-pandemic phase. These include investments in internal operations that are focused on improving efficiencies and also customer experience transformation. The biggest challenge in digital transformation is not integrating new technology but navigating organizational culture while making this transformation.
Digital transformation defined
Digital transformation (DX) usually refers to operational, cultural and organizational changes of a company or an industry through an integration of digital processes and technologies across multiple levels and layers of an organization. These changes need to dovetail into the company’s strategic goals and market dynamics. This definition underscores the importance of an optimal Organizational Culture in a digital transformation strategy.
What is organizational culture
Organizational culture is the way in which people in an organization relate to each other, their work and the outside world, in comparison with other organizations. Your Organizational Culture shows how your organization works: how things get done, the interactions between people, and employee relationships to their work and the outside world. The best organizations often place equal emphasis on strategy and culture. Such organizations create a culture that motivates their teams. Organizational Culture is what differentiates your business, so it is important to know the various factors that contribute to your company’s culture.
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Culture is the biggest roadblock in digital transformation
A Capgemini survey themed around the ‘Digital Culture Challenge’ found that ‘Cultural issues’ were the number one hurdle to digital transformation. This outscored other factors such as IT systems, lack of digital skills and lack of clear leadership vision. Capgemini surveyed 1,700 people in 340 organizations across 8 countries. 62% of the respondents picked culture as the primary challenge in digital transformation.
Organizations that ignore building an Optimal culture risk transformation failure
A BCG study of 40 digital transformations revealed that companies that focused on culture were five times more likely to achieve breakthrough performance than companies that neglected culture. An optimal culture is the foundation for a successful DX strategy. It helps a company attract better talent and employees to deliver results faster. BCG analysed digital champions and digital laggards among close to 2,000 companies in Europe and the US and found that the impact of culture was even greater than other factors like investing in digital initiatives and recruiting digital talent.
Hofstede Insights’ Six steps to build the ideal Organizational Culture
We work closely with organizations across the world to build an optimal Organizational Culture
Define your strategy: the vital first step. Even before you are able to align your Organizational Culture with your strategy, you have to clearly define what that strategy is.
Understand your current Organizational Culture: it’s important for you to get an impartial understanding of how your Organizational Culture is today. You can do this by seeking inputs for different areas of your organization before you establish an overall view of the situation.
Identify areas of improvement: Once you have clearly defined your strategy and have an overview of your current Organizational Culture, you are ready to identify the gaps where improvements could be made.
Create an action plan: once you put together the big picture, you are now ready to create an action plan. In most cases you will have too many gaps to address at one time and that is why we suggest starting with the most beneficial ones to your organization.
Monitor the progress: In order to ensure consistent monitoring, we recommend creating what we call Culture Squads. This means tasking a group of people with driving and monitoring change. Hofstede Insights provides training and mentoring for this as well.
Re-evaluate regularly: Consider evaluating and re-evaluating your Organizational Culture on a regular basis in order to make sure you are continuously moving in the right direction. This also helps you to understand if the actions you are taking are having the desired impact on your Organizational Culture or if different actions could have more impact.
Reach out to us to find out about our programs and solutions that can help you build an optimal organizational culture that can complement your DX strategy.