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How culture change has to underpin success in digital transformation

Digital transformation has been in vogue in recent years. Success depends as much, if not more, on deep-set culture change, as RSA and The Economist Group have discovered

Even though buzzwords such as “digitisation” are somewhat discredited after having been appropriated by so many people in the IT market for their own ends, digitally driven change is nonetheless starting to make itself felt in the UK economy.

Although one could simply link digitisation with technology, the organisational and cultural side of the question is just – if not more – important to successful transformation.

James Parsons, co-founder of digital transformation consultancy Arrows Group Global, says: “There’s a lot of organisational and behavioural-based cultural change going on as the lines between tech, marketing, communications and the like begin to merge.

“It’s having an effect on the type of people being employed and the roles they do, which is why it is such a seismic shift, but there aren’t any standard models to really define it yet. It’s too early.”

What we are starting to see instead is the creation of smaller, more agile and often more global cross-functional teams than has traditionally been the case. “These are put together and dismantled quickly as the product delivery timeframe is shortened,” says Parsons.

“We’re talking about virtual and blended teams built from internal capabilities and third-party experts. Blended is becoming the ‘new normal’,” he adds.

While high-tech and e-commerce organisations are leading the way here, Parsons sees the biggest gap as being between large, established companies with big, legacy teams and startups that have been designed from the ground up for the digital market.

“They don’t have the legacy management and behavioural product delivery issues that more established companies do, which are having to go through a lot of change and adopt new ways of working,” says Parsons.

Kevin Sealy, people consultancy Korn Ferry Hay Group’s (KFHG) CIO and IT officers’ practice leader for Europe, the Middle East and Africa (Emea), agrees.

He points out that much organisational change at the IT-level in big firms has come about due to the adoption of agile “fail fast, learn fast” ways of working to speed development on digital projects – but agile tends to be the norm in digital startups anyway.

In a handful of pioneering organisations, such as retail chain Tesco, however, this approach is starting to expand more widely across the business.

“It’s about streamlining the decision-making process, but a flat management structure and less bureaucracy are also vital to ensure decision-making works,” says Sealy. “We’re at the start of the process and there are some early adopters, but few have tried to do it at any great scale yet.”

Such an approach may prove useful as digitisation activity matures, however. According to Vera Loftis, managing director of IBM’s Bluewolf consultancy, most UK organisations are only dipping their toe in the water today, working with just one or two departments to get a feel for what they need to do.

“But digital transformation is really about looking at the business in its entirety, so the real work is in bringing it all together and creating a broader scope to link everything to the overall business strategy,” she says.

As a result, “going through a transformation journey as a pure technical implementation exercise” is unlikely to succeed, Loftis believes.

“It’s more about taking a step back to ask about our goals and objectives over the next three to five years, our strategy for getting there, and how we validate that with data,” she says.

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Taking this kind of approach not only forces the business and IT to develop closer relationships, but requires change to be led by no less an individual than the chief executive.

“Digital transformation can be a bit of a political battle depending on how well departments work together and how their individual key performance indicators conflict, which is why direction has to come from the top,” says Loftis.

However, Arrows’ Parsons says certain C-suite roles are starting to morph themselves as a result of digitisation activity.

“Historically, CIOs were more gatekeepers and controllers,” he says. “But they’re now innovators as well, and tech has gone from being peripheral to being square in the centre of company strategy.”

Despite this situation, chief marketing officers (CMOs) are more than twice as likely to lead digital transformation projects than their CIO counterparts – a scenario that is creating tension not only between the two roles, but also in relation to how the company structures itself internally.

As a result, Parsons says he is seeing the role of CMO and CIO start to merge, with a “new skillset emerging”.

According to Fiona Vickers, senior client partner and leader of KFHG’s digital practice in Emea, this is not the only skillset that needs attention. To ensure that digitisation is accepted at every level of the organisation, education is necessary to help create a tech-ready “digital workforce”, with access to all of the technology it requires to perform tasks effectively.

But all of this complexity has to be set against the backdrop of a widespread digital skills shortage.

“Digital transformation requires a big change management exercise involving cultural and organisational behaviour shifts, which is a particular issue when you set it against the shortage of digital and software engineering skills. But it’s why it’s proving so challenging to adapt the business of new ways of working,” says Parsons.

Case study: RSA Group

“Digitisation is driving our business transformation,” says Darren Price, group chief information officer at insurer RSA.

“The goal is to ensure we do business with our customers in the best possible way and provide market-leading consistency in terms of the quality of our products and customer service.”

The multi-national insurance company started on its digital transformation journey aroundt two and a half years ago and has introduced change in a number of key ways.

For example, it has implemented a “two-speed IT” approach, which involves adding a digital front-end to ageing mainframe, off-the-shelf and custom applications, while simultaneously working on “replatforming” them by rewriting some and moving others to the cloud. The entire process is expected to take between 18 months and two years.

In the UK, the primary focus so far has been on reworking the firm’s personal insurance lines, which comprise home and motor insurance. In Canada, another of the key countries in which RSA operates, activity has been concentrated on the claims business.

“We benchmark across the market and our own capability and prioritise effort based on customer and business output and need,” says Price. “It’s then about sharing best practice across the group to build cross-fertilisation.”

But to do so requires building a global community and collaboration across the business. RSA did this by introducing new ways of working supported by tools ranging from Microsoft’s Sharepoint document management system, its Yammer enterprise social networking tool and desktop video conferencing.

To cope with the swift pace of change required in an increasingly digital world, the IT department has also made changes to its own working practices. The tech team was integrated with the digital team, which saw its ranks greatly swelled.

The number of people with enterprise architecture skills was likewise expanded, but the entire group now employ agile development methods to flesh out requirements, build, test and make changes as quickly as possible, especially in relation to applications and processes dealing with the customer journey.

Interestingly though, Price believes the technical element of the initiative is the “easy bit”. But he warns: “It’s not just an IT project or a set of tech-driven digital projects. What you’re doing is changing the culture of the business and so there has to be very clear business desire, along with ownership and accountability, to get this right.”

As a result, he spent a good 18 months before commencing the digital transformation programme itself in helping the business understand what it would mean and what customer opportunities would be opened up to ensure buy-in.

“It was about winning hearts and minds and demonstrating the art of the possible. So there was an element of education and knowledge-sharing – what you have to do is make it all come to life with real examples of where other organisations have succeeded so that people can really understand the potential,” says Price.

Case study: The Economist Group

Changes in the digital marketplace over the past few years have meant publishing houses such as the Economist Group had to alter their sales models to fit.

In the past, the publishing house focused on selling advertising space into its eponymous print publication and later on its digital platforms. Recently, the market has shifted towards offering more integrated marketing campaigns, which includes a mix of everything from customised content to special events.

Because such an approach is less about taking a short-term stance to selling individual products and more about consulting on a longer-term portfolio sale, it was necessary to retrain everyone involved to support them in working more collaboratively.

As a result, the Economist Group introduced its “FastForward” initiative, which was targeted not only at the sales team, but also at support staff ranging from finance and programme managers to events organisers, bringing the total of employees involved to 277.

The scheme was based around a web-based learning platform with a social media look and feel that was developed by Nomadic and consists of five customised “field manuals”.

These manuals cover key areas for staff development such as “enquiry share”, which includes questions previously asked by clients to help employees understand the problems they face, and “solutions”, which is about the necessary steps to take to sell solutions more effectively.

An initial “cohort” of 30 handpicked people was invited by the head of their individual business unit to take part in a pilot to provide feedback and check for system bugs. Once the trail was complete, a couple of cohort members were then assigned to cross-departmental teams of 25 to provide support and encourage participants to comment or share content related to each field manual.

Each team chose a name and individuals were asked to spend five to six hours per week over five weeks completing the online course. The learning platform also included a gamification element in the shape of leader boards to encourage competition between teams.

Michael Thomas, the Economist Group’s training director, was more than happy with the results.

“It really pushed people to work collaboratively and to build relationships across different functional parts of the business. So we had sales working with events and finance and programme managers – it was very successful,” he says.

But a key secret to that success was communication, which, Thomas advises, must be led from the top to be effective. “You can never under-communicate – you have to be very clear about why you’re doing something like this and the benefits it can bring as you undergo a digital transformation,” he concludes.

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