A while back one of our online learning community members posted a link to a case study article on the HBR Blog site. The article summarised the experience of Aetna as it transformed itself after a number of failed attempts. The major theme, not surprisingly, is about how to (and how not to) embrace the culture challenge.
Here’s a short exert.
“All too often, leaders see cultural initiatives, like the one at Aetna, as a last resort, except for top-down exhortations to change. By the time they get around to culture, they’re convinced that a comprehensive overhaul of the culture is the only way to overcome the company’s resistance to major change. Culture thus becomes an excuse and a diversion, rather than an accelerator and an energizer.”
There is no doubt that the relationship between ‘change and culture’ has become an increasingly hot topic. For example, take a look at many of the articles in the Harvard Business Review and you’ll see there is some great stuff all around innovation, R&D and transformation. And woven through those articles – all compiled by different experts - is the consistently common theme that culture matters! If you're still not convinced have a read of McKinsey's piece Culture: 4 keys to why it matters. In it they reinforce that the 'right' culture is the one (and only) thing that will give an organisation the performance, unique point of difference and adaptability they constantly seek.
And at ON-Brand Partners we know this to be true, as we see it everyday in our clients as they work to create organisation's that can tackle a fast and unrelenting future. And the one thing that will support or hinder that change is whether their culture is right for the task.
Here’s our perspective on the key themes becoming undeniable when tackling organisational change:
1. ROI correlates first and foremost with ‘strategic alignment and culture’ and only then is there a clear causal relationship with the level of investment in innovation or change. Strategy&’s “The Global Innovation 1000” study is always strong on this point.
In effect, the pathway to maximise ROI should look like the chart here. Unless you get the alignment and culture right, you’ll waste a lot of time and money on change efforts.
In reality, many organisations are still not grasping this. We are often presented with ‘transformation journey’ diagrams that are completely the other way around. That is: Stage 1 - Systems and technology; Stage 2 - Operational processes, and finally; Stage 3 - Culture and people. With that sequencing, culture is much more likely to become ‘an excuse and a diversion’ (as described in the Aetna case study). Culture is only likely to be an 'accelerator and energizer' if you lead with hearts and minds, and build commitment to the future vision and the change agenda required to achieve it.
2. Transformation is being seen less and less as one-off ‘step change’ (i.e. it’s a project or a programme) and more as incremental change and ‘continuous improvement’. That’s not to say that programme management disciplines aren’t useful, but our view is one of the key limitations in the way organisations have approached this (particularly ‘culture change’), is that the activities run in parallel to BAU, rather than being embedded within it.
In essence (and this seems self evident), to sustain success over the long term, the prevailing mindset needs to be that we are constantly looking to improve, change and innovate. There’s an old management adage the ‘best time to change is before you need to’ (i.e. when you are doing well), because it is then that you have the resources and momentum to accommodate the change.
3. The culture required to maximise innovation is becoming increasingly clear, but paradoxically, it’s not one uniform culture. If we liken culture to company DNA, then the (ideal) ‘genome’ for innovation-focused companies may actually vary across different parts of the organisation, depending upon the emphasis of change or innovation required.
By combining all these insights, ON-Brand Partners have constructed this chart which we thinks represents a good ‘wireframe’ for the culture that innovation and change focused organisations need.
The key points from this are:
No matter what sort of change or innovation you are aiming for, the mandatory cultural attributes are:
Where the focus is on ‘continuous improvement’ in order to ‘optimise’ the core business, then:
Interestingly, when leaders of companies are talking with us about weaknesses in their culture, the ‘silo’ mentality is almost always near the top of the list of concerns. This cultural attribute goes beyond just people and departments being helpful to each other (although that’s critical). It’s also about a mindset of being ‘joined up’: understanding the entire value chain and where you sit within it.
Where the focus is also on ‘expanding’ into adjacent products or markets (i.e. a higher level of innovation), then:
This is about the openness to new ideas and the commitment to support them. ‘Agile’ (a methodology increasingly applied in the technology space), is an appropriately descriptive word. It suggests a nimbleness and ability to move at pace – step by step.
Finally, where the focus is on the highest level, or true ‘breakthrough’ innovations, then:
“Well, of course!” you’re thinking. "Obviously we need to respect the value brought by people with deep specialist knowledge such as scientists". Yet, it’s often not the case as evident by the language used to describe these specialists - the ‘white-coats’, ‘tech-boffins’ and ‘cone heads’!
A key perspective from seminal analysis done by Nagji and Tuff on innovation is that breakthrough innovation should be clearly separated from the core business so that the activity is not encumbered, or pulled back by business as usual. This goes beyond physical location of the team, but includes different requirements for funding, performance metrics, and types of talent.
4. Dialogue based communication is the foundation for not only shaping the culture but also driving transformational change.
A global study by McKinsey done back in 2010, but still highly relevant today, that examined the common success drivers for large transformations identified three key factors that are directly pertinent to this point. And these are closely correlated with our core on-brand principles.
So back to the question we posed at the start. What should come first? Culture transformation or Transformation culture? In essence we believe organisations need to transform their culture into the 'right' culture first, such that it is then capable of transforming the overall business. The transformation process must start with culture, not end with it, as culture regulates the success of everything else. Culture transformation therefore leads to a Transformation culture.
Finally, to paraphrase a senior executive of a highly successful transformation process we have been involved in...
“Culture is the key to creating momentum in the change journey. The culture must align with what’s required from your transformation strategy. And the most important thing we did to shift the culture at was to ‘change the conversations’ happening across the business. That didn’t happen through emails or PowerPoint presentations, but through leader-led, dialogue-based communication at all levels, underpinned by on-brand stories and examples of the success we were seeking in action. And not just once or twice, but ensuring these conversations were happening week in, week out.”