Company Culture May be Your Biggest Digital Transformation Stumbling Block

Manufacturers understand in today’s digital-first world that embracing digital transformation is no longer an option but a necessity but implementing the right enterprise resource planning (ERP) software may leave them feeling like the guy in the “Life Comes at Your Fast” commercials.

The breakneck pace of digital change is tough to keep up with from artificial intelligence (AI) to machine learning (ML) to blockchain to cloud deployment to hyper-automation to the Internet of Things (IoT) and more.

New Technologies Have a Major Impact on ERP

“It's human intelligence and artificial intelligence coming together,” says SAP S/4HANA and Chief Evangelist for Cloud ERP Paul Saunders. “Users will interact with ERP in entirely new ways, using “intelligent connectivity” to dynamically mold the system to their needs. New technologies – like quantum computing – will also have a major impact on ERP and the way business and work get done. As they say, the only constant is change, and we all must adapt.”

Getting a grasp on how these technologies are revolutionizing the industry and the way we do business is certainly a big stumbling block to digital transformation, but the biggest hurdle is often company culture itself.

A seminal study by MIT Sloan Management Review and Deloitte in 2016 found that transitioning to a digital company cannot be accomplished if you don’t first develop a digital culture.

“There is a tendency to see digital technology as an opportunity or choice,” John Hagel, co-chairman of the Center for the Edge at Deloitte. “However, the mounting pressures of a rapidly shifting business landscape are turning digital from a choice into an imperative. The longer a business waits, the more marginalized it will become.”

Company Culture: Strip Away the Tech and It Comes Down to the People

One of the secrets of company culture is that when you strip away the business processes and technology … What really makes a company run is its people.

“A great company culture is built and reinforced by its people – meaning you, your peers, and your teammates,” says the Harvard Business Review.

What sort of company culture characteristics are most important to helping your business embrace digital transformation? MIT Sloan Management Review and Deloitte identified five key traits:

  • Appetite (or Lack of!) for Risk: Manufacturers often have a low appetite for risk due to the nature of their industry, where precision, reliability, and safety is paramount. However, this risk aversion can become a stumbling block in the face of digital transformation. Company cultures that resist risk-taking may miss out on opportunities to adopt cutting-edge technologies that could give them a competitive edge. The solution is to encourage a culture that values calculated risk-taking. Create an environment where employees feel safe experimenting with new technologies and approaches, knowing that failures can be valuable learning experiences.
  • Leadership Style: Leadership plays a pivotal role in shaping a company's culture and, consequently, its ability to navigate digital transformation. In manufacturing, leadership styles can often be hierarchical and top-down, which can pose challenges in the context of digital change. The solution is a transition towards a more participative and inclusive leadership style. Encourage leaders to solicit input and feedback from employees at all levels, empowering them to contribute to decision-making. This approach fosters a sense of ownership and collective responsibility for digital initiatives.

Leaders can create the right environment for digital transformation by:

o   Emphasizing communication.

o   Leading by example.

o   Encouraging experimentation.

o   Providing guidance.

  • Work Style: Manufacturing often relies on established processes and workflows, which can be resistant to change. A rigid work style can hinder the adoption of ERP software and other digital technologies, as employees may resist altering their well-established routines. To foster a culture of adaptability and flexibility, employees should be encouraged to embrace change as an opportunity for growth. The key is to provide training and support to help employees transition smoothly into new work styles and technologies.
  • Agility: Agility is crucial in the digital age, where responsiveness to market changes and the ability to pivot quickly are highly valued. Manufacturers with a rigid, slow-moving culture may struggle to adapt to evolving customer demands or incorporate new technologies efficiently. A culture of agility can be created by empowering employees to make quick decisions, encouraging cross-functional collaboration, and fostering an environment where experimentation is encouraged, even if it leads to occasional failures.
  • Decision-Making Style: Decision-making in traditional manufacturing often follows a hierarchical approach, where top leadership makes most decisions. In a rapidly evolving digital landscape, this approach can lead to bottlenecks and delays. Encourage the company culture to shift toward a more decentralized decision-making style, where decision-making authority is distributed throughout the organization. Encourage employees at all levels to contribute their insights and make decisions within their areas of expertise.

The Key is Developing the Right Digital Leaders

As noted earlier, leadership is paramount, and manufacturers need to develop the right digital leaders that can guide their companies to digital transformation.

Deloitte says it is simply not good enough to “have leaders” but you need to “have the right leadership”.

“The most digitally mature organizations are more than four times more likely to be developing needed digital leaders than the least digitally mature ones,” noted Deloitte.

When it comes to ERP transformations, chances of success will be increased if your digital leaders:

  • Provide Vision and Purpose: Digital leaders inspire others by articulating a clear vision of the future and how digital transformation fits into that vision. They provide purpose and direction to guide their teams.

  • Create Conditions to Experiment: Effective digital leaders create a safe environment for experimentation. They encourage employees to explore new technologies and methods, even if it means taking calculated risks.

  • Empower People to Think Differently: Digital leaders foster a culture of innovation by empowering employees to challenge the status quo and think creatively. They value diverse perspectives and encourage employees to voice their ideas.

  • Encourage People to Collaborate Across Boundaries: Collaboration is key to digital success. Digital leaders facilitate cross-functional collaboration, breaking down silos and promoting the exchange of ideas and information.

Perfect Mix: Right Digital Leadership + Company Culture

Digitally maturing companies are more likely to experiment and iterate on their strategies, processes, and technologies. To build this into their culture, manufacturers can:

  • Encourage Innovation Labs: Establish dedicated spaces or teams for innovation and experimentation. These labs can explore emerging technologies and test their potential impact on the business.

  • Reward Learning and Adaptation: Recognize and reward employees who contribute innovative ideas and adapt to changes effectively. Encourage a mindset of continuous learning.

  • Foster Cross-Functional Collaboration: Break down departmental barriers and encourage collaboration between different teams and functions. Cross-pollination of ideas often leads to innovative solutions.

While company culture can be a formidable hurdle to digital transformation for manufacturers, it's also a powerful lever for change.

By addressing issues related to risk appetite, leadership style, work style, agility, and decision-making, and by nurturing digital leaders with the right traits, manufacturers can create a culture that embraces digital transformation.