While many companies invest millions in the latest technologies, they often overlook the heart of any organization: its culture. In the digital era of the 21st century, technology is often brought to the forefront while corporate culture is neglected. Research has shown, however, that cultural aspects like employee engagement, collaboration, and open communication significantly contribute to the success of digitalization projects. Companies need to invest not just in technology but also in the cultural aspect to meet the challenges of digitalization.
What is Corporate Culture?
Corporate culture is often defined by Schein’s model, which comprises three levels: artifacts, espoused values (officially shared values), and basic assumptions. This model emphasizes that it’s not just about observable behavior but also about deep-seated beliefs and values that guide employee actions (Source: Edgar H. Schein, “Corporate Culture,” 1985).
Edgar H. Schein’s Model of Corporate Culture (1985)
Edgar H. Schein, a prominent researcher in organizational psychology and corporate culture, developed a model to describe and analyze the various levels of corporate culture. His model divides culture into three levels:
- Artifacts:
- This is the most visible level of culture.
- It includes all the physical and tangible things that you can see in an organization, such as how people dress, office decor, or how people interact with each other.
- Artifacts are difficult to interpret because they are only visible on the surface.
- Espoused Values (officially shared values):
- This level includes the values, norms, and goals shared within the organization.
- These are conscious strategies, goals, and philosophies.
- These values can be expressed in company missions, visions, or guiding principles.
- Basic Assumptions:
- This is the deepest and least visible level of culture.
- These are unconscious, self-evident assumptions, beliefs, and thoughts that have developed over time within the organization.
- They are often so deeply embedded in the culture that they are taken for granted and are not questioned.
- Basic assumptions determine how members of an organization perceive and interpret the world, and they influence their behavior at a fundamental level.
Criticisms of Schein’s Model:
- Complexity of Reality: Some critics argue that while Schein’s model provides a useful framework, it does not fully capture the complexity of real corporate cultures. Culture is dynamic and constantly changing, which may not be adequately represented by a three-level model.
- One-Dimensional View: The model tends to portray culture as monolithic and homogeneous. In reality, multiple subcultures may exist within an organization.
- Lack of Consideration for External Influences: External factors like market changes, technology trends, and social movements can influence corporate culture. Schein’s model focuses more on internal aspects.
Modern Approaches in Agile Environments for Product Organizations:
- Agile Culture Models: These models emphasize the importance of flexibility, adaptability, and customer-centricity. Values like transparency, feedback, and continuous learning are at the forefront. The Spotify model is an example that uses Squads, Tribes, Chapters, and Guilds to describe a dynamic and agile organizational structure.
- Lean Corporate Culture: This focuses on the elimination of waste and continuous improvement. Lean thinking emphasizes the value stream and the reduction of waste across all areas of the business.
- Growth Mindset: Based on the work of Carol Dweck, this approach emphasizes the importance of learning, adaptability, and the recognition that abilities are developed, not fixed.
- DevOps Culture: In product organizations, particularly in software development, DevOps culture emphasizes the collaboration between development and IT operations teams to bring products to market faster while ensuring quality and security.
An Attempt to Define Corporate Culture
“Corporate culture refers to the deeply-rooted system of values, beliefs, norms, and behaviors that are shared within an organization. It manifests itself in the everyday actions, decisions, and interactions of employees and is shaped by shared experiences, stories, and rituals. This culture serves as a guide for members’ behavior and influences how they perceive, interpret, and respond to problems. It reflects the collective ‘programming’ of thinking in an organization and distinguishes it from other organizations. Corporate culture is both a product and a driver of internal dynamics, leadership, and the adaptability of an organization to its external environment.”
Digitalization: An Overview
Digitalization has revolutionized the business world. Studies by Forrester Research have shown that companies that effectively utilize digital technologies typically achieve higher revenues and profits than their competitors who lag behind (Source: Forrester, 2018).
Interplay of Corporate Culture and Digitalization
Kotter’s 8-Step Model for Change emphasizes the need to create a culture of change before initiating profound organizational changes. This is especially relevant for digitalization, where technological changes often require deep organizational adjustments (Source: John P. Kotter, “Leading Change,” 1996).
Kotter’s 8-Step Model:
Kotter argues that there are eight critical steps organizations must go through to implement successful changes. These steps are:
- Increase Urgency: Communicate the need for change.
- Build a Guiding Coalition: Form a group with enough power to lead the change.
- Develop Vision and Strategy: Create a clear and understandable vision and strategy for the change.
- Communicate the Vision: Share the vision throughout the organization.
- Remove Obstacles: Eliminate barriers for the change and create systems or structures that promote the vision.
- Create Short-term Wins: Achieve early visible improvements to maintain momentum.
- Consolidate Gains and Implement More Changes: Build on the momentum and introduce further changes.
- Anchor the New Approaches: Root the new approaches in the corporate culture.
Resistance to Change:
Kotter emphasizes that resistance to change is natural, and that leaders must be able to recognize and respond to it.
The Role of Leadership:
Kotter distinguishes between management and leadership, arguing that true leadership—not just management—is required for successful changes.
Common Criticisms of “Leading Change”:
- Too Linear: Some critics argue that Kotter’s 8-step model is too prescriptive and linear. They contend that change is often chaotic and non-linear.
- Not Always Applicable: Some organizations find that the model is not suitable for every type of change or for every corporate culture.
- Too Leadership-Centric: While leadership is crucial, some critics argue that Kotter’s model does not sufficiently focus on the role of employees and their participation in the change process.
- Not Adequately Addressing Cultural Aspects: Some critics feel that Kotter does not sufficiently emphasize the influence of existing corporate culture on the change process.
- Overemphasis on Urgency: The constant stress on urgency can lead to “change fatigue,” especially when there are continuously new “urgent” changes.
The Advantages of Positive Corporate Culture in Digital Transformation
Deloitte and other studies have shown that companies with “digital maturity” often have an open, experimental, and collaborative culture. Such cultures foster innovation and accelerate digital transformation.
Digital Maturity
Digital maturity refers to a company’s ability to utilize digital technologies to achieve better business outcomes. Companies that are mature in this regard often have an integrated technology and business strategy supported by leadership.
Open Culture
An open corporate culture encourages the free exchange of ideas, feedback, and criticism. It also favors flat hierarchies and an inclusive leadership strategy.
Experimental Culture
An experimental approach means that companies are willing to try out new ideas and learn from them, even if it leads to mistakes. It emphasizes the concept of “fail fast”—if an idea or project does not work, it is quickly identified, corrected, or discarded.
Collaborative Culture
Collaboration refers to the ability of teams and departments to work effectively together, share information, and jointly work on projects. It stresses teamwork and cross-border cooperation.
Fostering Innovation
Companies that maintain an open, experimental, and collaborative culture are often better positioned to foster innovation, as employees are encouraged to think creatively, take risks, and collaborate.
Accelerating Digital Transformation
Such a culture can support digital change by facilitating the adoption of new technologies, accelerating the implementation of changes, and ensuring that employees are behind the digital vision of the company.
Challenges in Merging Culture and Digitalization
The biggest challenge in digitalization is often human resistance to change. The ADKAR model by Prosci emphasizes the stages of change (Awareness, Desire, Knowledge, Ability, Reinforcement) and can serve as a guide for companies aiming for cultural change in the course of digitalization.
The ADKAR Model by Prosci
The ADKAR model is a change management framework that puts people and their journey through the change process at the center. The acronym “ADKAR” stands for the five sequential building blocks that individuals go through when experiencing a change:
- Awareness: Understanding the need for change. Before people are willing to change, they must understand the reasons for change. This involves awareness of why the change is necessary and what risks exist if no change takes place.
- Desire: The personal decision to support and participate in the change. This is about an individual’s motivation—the personal “why” behind the change. Factors that can influence desire include personal experiences, organizational factors, or external influences.
- Knowledge: Knowledge of how to change. This involves the information, skills, and training needed to successfully implement the change. This is about how to change, which may include new skills or behaviors.
- Ability: The ability to implement the required skills and behaviors in daily actions. It’s not enough to just have knowledge of the change; individuals must also be able to translate this learned knowledge into practical skills. These skills often need to be developed further through practice, coaching, or feedback.
- Reinforcement: Ensuring that the change is maintained. Reinforcement mechanisms can help ensure that the change sticks and that people do not revert to old habits. This can be achieved through rewards, feedback, and ongoing support.
Prosci’s ADKAR model is both linear and sequential, meaning each step builds on the previous one. The approach is individually centered and emphasizes the human side of change management, helping organizations better understand how to lead their teams through the change process. It often serves as a diagnostic tool to identify resistances to changes and plan specific interventions that help individuals navigate through the change process.