Getting culture right is the key to success in a digital world and resolving culture issues is “no longer optional.”

That’s according to a new report from according from McKinsey & Company.

“Leaders won’t achieve the speed and agility they need unless they build organisational cultures that perform well across functions and business units, embrace risk, and focus obsessively on customers,” the authors wrote.

Poor digital culture is also costing organisations money.

“Our research, shows that cultural obstacles correlate clearly with negative economic performance,” the authors said.

The report, Culture for a Digital Age, is authored by McKinsey partners, Julie Goran and Ramesh Srinivasan, and senior practice manager, Digital McKinsey, Laura LaBerge. It found culture is the most significant self-reported barrier to digital effectiveness and three cultural impediments stand out in particular.

“Functional and departmental silos, a fear of taking risks, and difficulty forming and acting on a single view of the customer” are the three digital culture deficiencies, the report said.

“Each obstacle is a long-standing difficulty that has become more costly in the digital age,” according to the authors.

However the big three digital culture inhibitors also present a roadmap to drive cultural change, provided leaders are proactive, the authors said.

“In our experience, executives who wait for organisational cultures to change organically will move too slowly as digital penetration grows, blurs the boundaries between sectors and boosts competitive intensity.”

“Executives must be proactive in shaping and measuring culture, approaching it with the same rigour and discipline with which they tackle operational transformations,” the report said.

The report outlined how to tackle the three roadblocks — risk aversion, poor customer focus and siloed mindsets.

Calculated Risks

In a digital world, two critical priorities emerge for leaders looking to strike a balance between experimentation and failure, the report said.

“One is to embed a mind-set of risk taking and innovation through all ranks of the enterprise. The second is for executives themselves to act boldly once they have decided on a specific digital play.”

Empowering others builds a culture where employees, “feel comfortable trying things that might fail.” Front line employees will be more comfortable making small calculated risks if they have the required skills, information and trust of their leaders, according to the report.

“The critical question for executives concerned with their organisation’s risk appetite is whether they are trusting their employees, at all levels, to make big enough bets without subjecting them to red tape.”

Senior leaders must also look to act boldly, the authors said. A prospect that involves “aggressive goal setting and nimble resource reallocation”.

Customers, Customers, Customers

“Although companies have long declared their intention to get close to their customers, the digital age is forcing them to actually do it, as well as providing them with better means to do so,” the authors said.

As customer expectations are driven up and applied to all experiences, a customer centric organisational culture “is more than merely a good thing—it’s becoming a matter of survival”.

Digital is providing the tools for organisations to get closer to and better understand their customers. Organisations can then craft better customer journeys and experiences, the report said.

A customer focus also becomes a “unifying force” of culture change, the authors said.

“At its best, customer-centricity extends far beyond marketing and product design to become a unifying cultural element that drives all core decisions across all areas of the business.”

Busting Silos

The integration of silos is more than a structural or technological problem, it’s also a cultural one, the consultants argue.

“The narrow, parochial mentality of workers who hesitate to share information or collaborate across functions and departments can be corrosive to organisational culture.”

In fact, executives surveyed in the report ranked siloed thinking and behaviour as “number one among obstacles to a healthy digital culture.”

The two key challenges to unlocking siloed culture are inadequate information and insufficient accountability or coordination, the authors said.

“Every part of the organisation reaches different conclusions about their digital priorities, based on incomplete or simply different information. This contributes to breaks in strategic and operating consistency that consumers are fast to spot,” the authors said.

Correcting this lack of information requires providing employees a clear direction and purpose of the organisation, according to he report. Data and transparency across the organisation as well as management rotation instills a consistent direction and digital culture, the report said.

Accountability helps solve the siloed culture problem of regarding an issue as “someone else’s responsibility, not their own,” the authors said. A common sense of success and team wide accountability and outcome ownership helps overcome the ‘not my problem’ attitude and culture, according to the report.

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