The Role of Culture in Digital Transformation

As organizations seek to redefine how they create, deliver, and capture value, many are looking to digital technologies, which-in turn-are driving transformative changes across industries. In 2022, organizations are projected to spend nearly $2 trillion on digital transformation, according to the International Data Corporation, spurred by a proliferation of new digital technologies and a fear of disruption by tech-enabled competitors.

But digital transformation calls for more than just updating technology or redesigning products. Failure to align the effort with employee values and behaviors can create additional risks to an organization’s culture if not managed properly, whereas a comprehensive and collaborative effort can help shift the culture to understand, embrace, and advance digital transformation.

“When organizations undertake digital transformation and focus only on technology at the expense of culture, that can hinder progress in many areas,” says Carey Oven, a partner with Deloitte Risk and Financial Advisory at Deloitte & Touche LLP.

In Deloitte’s ” Future of risk in the digital era ” report, Oven points to the example of a financial services organization seeking to adopt robotic process automation despite an organizational culture wary of new technology. Due to employee reluctance, it was still unable to deploy a bot to carry out processes one year after initial implementation.

“Technology is definitely a part of digital transformation, but unless leaders can ‘win hearts and minds’ throughout the process, efforts can stall or be less successful than they could be,” she says.

Moreover, failing to align the goals of a digital transformation with employee values and behavior can create additional risks to an organization’s culture, such as low morale and inability to attract talent. Ensuring the transformation aligns with the culture reduces challenges and helps avoid roadblocks.

“Part of any successful transformation is having the appropriate tone at the top to champion it. It also requires support and buy-in by those in other levels of the organization,” Oven says. “Leaders would be wise to gauge the so-called ‘mood in the middle’ and ‘buzz at the bottom’ to help close the gap between the desired and actual state of organizational culture and behavior.”

Communication should be a top priority during the digital transformation process, notes Nancy Albinson, a managing director with Deloitte Risk and Financial Advisory at Deloitte & Touche LLP.

In addition to making clear the goals of the digital transformation and how it can help achieve the corporate strategy, C-suites and boards can focus on messages communicating the cultural attributes that may help the efforts succeed, including transparency, accountability, and a willingness to experiment, Albinson says. The messages can also underscore what the organization stands for, its values, and how its vision and mission are tied to those values.

As the digital transformation gets underway, the organization’s core values may need to be refreshed to embed desirable behaviors, such as cross-functional collaboration, continual learning conducive to digital transformation, and performance metrics and incentive structures aligned with digital culture goals.

Effective leaders will formulate a clear vision of the transformation and effectively communicate it throughout the organization on an ongoing basis. “Leaders should be clear about what the smart risks are and why they’re worth taking,” Albinson says. They can also address the challenges of balancing an experimental mindset with a risk-averse culture.

The Downside of Misalignment

The consequences for organizations that do not align digital transformation goals with employee values can range from slow adoption of digital technologies to loss of market competitiveness to ultimate failure of the initiative and lost productivity and revenue.

Furthermore, to pave the way for effective digital transformation and cultural alignment, the efforts can cut across HR, risk, finance, accounting, and other areas. And cultural alignment can also reach operations outside direct oversight, such as extended enterprise or temporary workers who may have limited understanding of the organization’s strategy and culture.

“With digital transformation, it’s vital to create a culture where everyone is tech savvy and where risk is everyone’s business,” Albinson says. “Senior leaders can communicate that message on a consistent basis. A strong culture aligned to business strategy drives an organization’s ability to accelerate performance and outpace competitors, especially in this digital era.”

When managing risk is viewed as somebody else’s problem or as a check-the-box compliance effort, Oven says, “There’s an increased likelihood of irresponsible behavior across the organization.”

Taking an Organization’s Pulse for Culture Risk

There are several steps organizations can take to understand and respond to the challenges of culture-related risks, including those that could jeopardize or derail a digital transformation. For example, some organizations are establishing a culture risk management program to help leaders better understand the prevalent culture and identify signs that highlight culture challenges.

Such programs use a range of tools such as employee behavior monitoring, social media sensing, and periodic “pulse checks” through talent surveys, town halls, and online platforms. “These efforts can be helpful in evaluating employee engagement and help team members connect more effectively with digital culture transformation initiatives,” Oven says.

Behavioral science techniques and training also can be deployed to prompt employees toward desired behaviors, which can be reinforced by monitoring high-risk activities. Additionally, risk-based decision-making and risk management concepts in digital proficiency programs can be embedded to enable a digital culture and equip frontline employees to take smart risks effectively.

With the proper attention to cultural alignment and ethical use of technology, organizations can better position themselves for a successful digital transformation.