Why Culture Comes First in Digital Transformation

According to IDC FutureScape predictions, by the end of 2017, two-thirds of the CEOs of Global 2000 companies will have digital transformation at the center of their corporate strategy. Getting everyone in the organization excited and working together in support of that strategy, however, can make not only for a challenging start – but a challenging long-term focus.

Current Gallup data shows a startling statistic: that only 13% of employees worldwide are engaged at work. For many organizations, a cultural transformation will be needed before digital transformation can begin or succeed – one that not only engages its employees, but:

  • encourages experimentation
  • rethinks the way people work and how people work together
  • revolves around a shared sense of purpose (with distributed decision-making that not only provides a shared sense of responsibility, but a sense of empowerment around change)
  • and one that is just as focused on, alert and responsive to outside influences (even those outside of their industry) as it is to internal ones.

In a recent interview, Constellation Research founder and principal analyst Ray Wang notes that while many CEOs plan to put digital transformation at the center of their corporate strategy, the hard part is actually supporting and leading a change in the way things have always been done, especially if the status quo is still operating fairly successfully.

“The reason digital transformation isn’t working for a lot of organizations,” says Wang, “is because it has to start from the board level. It has to start from the top. And it’s hard, because what you’re asking yourself to do is to develop a business model that will disrupt yourself. That’s not in human nature to do.

“In order to be successful in digital transformation, the cultural dimension is really about finding those people who know how to color outside the lines (and color inside the lines when they have to).

“But executives have to set up an environment for people to be successful – where people are able to submit ideas and know that they can innovate and co-innovate inside organizations.”

Transformational Culture Demands a Dual Operating System

In a recent CXO Talk, business model innovator Alex Osterwalder and culture strategist Dave Gray suggested organizations should look at their culture like the operating system of a computer. It’s functioning all the time in the background, and while it enables you to do many things, it also limits, controls or blocks the way you do others.

Osterwalder notes that most organizations are really good with a single operating system – a culture of execution. “We’re really good at running our existing business models and making them better, and cutting out the fat, and getting better at it all the time.” But what organizations looking to succeed in digital transformation really need is a dual operating system that supports innovation at the same time it’s supporting execution.

Gray notes that it’s not enough anymore for organizations to hold a party with pizza and balloons and say, “we’re going to be a different organization from now on; now go execute.” Because once the pizza is gone and the balloons have been popped, everyone will go back to their desks, and the operating system and processes that have always been in place will only allow them to keep doing the same things that have always been done – the way they have always been done.

To execute in digital transformation, the entire organization will need transformational tools and an innovative and collaborative culture that addresses its operating system’s enablers and blockers and changes as needed to discover and develop new business models, move forward, and keep doing so again and again.

Organizations with a dual operating system – an execution culture and an innovation culture – are what Osterwalder refers to as invincible companies. They execute on currently successful business models while experimenting and developing new ones, and the culture supports change when and as it needs to happen.

“Digital transformation isn’t this project that you put up once. You’re changing the business models. You’re delivering brand new products and services, insights, experiences and outcomes, notes Wang. “That’s why it requires the commitment of the board and the executives to build that into their culture. Digital transformation is way of life.”

Is your company creating a culture conducive to digital transformation?


Learn More About Digital Transformation

In a new interview, Constellation Research analyst and best-selling author Ray Wang covers top trends that are impacting digital transformation, the technologies needed to be successful, who should lead digital transformation initiatives, the impact on sales, customer service, IT, finance, marketing and much more.

Need to get start or want to move farther along?

Click here to access the entire interview.


R “Ray” Wang is the Principal Analyst, Founder, and Chairman of Silicon Valley based Constellation Research, Inc. He’s also the author of the new best-selling book Disrupting Digital Business, published by Harvard Business Review Press, as well as the business strategy and technology blog “A Software Insider’s Point of View” which provides insight into how disruptive technologies and new business models such as digital transformation impact brands, enterprises, and organizations.  His Silicon Valley research firm, Constellation Research, Inc., advises Global 2000 companies on the future, business strategy, and disruptive technology adoption.

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