May 30th, 2017

Testing and Learning: Cultural Transformation in the Digital Age

by Bernardo Crespo

That technology is more necessary now than ever is beyond all doubt. What is often overlooked
is the importance of having a clear strategy for addressing digital transformation and a leader
with the necessary skills and abilities to guide the organization toward a new culture that will
allow it to navigate in today’s environment of constant uncertainty.

Digital transformation is a strategic challenge in which culture plays a decisive role and trust is
the key ingredient. The goal is to maximize the value of technology, data, and people. But how
are organizations integrating this change?

Four Stages of Digital Competence

In my view, the integration of new competences at the organizational level can be divided into
four stages, similar to the four stages of learning a new skill or ability or the stages of digital
evolution at organizations (source: Bernardo Crespo, “Four Stages of Competence in Digital
Strategy”):
1. Channel vision: unconscious incompetence. Companies try to manage a single distribution
model through different channels. The channels become an alternative to distribution efficiency.
In this initial stage, each channel wages its own war, often giving rise to a certain degree of
competition between the traditional channel and the digital one. From a user perspective, such
internal dysfunction makes no sense, as it is taking place within the same brand experience.
These organizations have interpreted digital transformation as an exercise in efficiency affecting
the thickest part of their income statement.

2. Cross-channel vision: conscious incompetence. Companies begin to accept that digital is more
than just a multi-channel user experience and that technology can facilitate and enhance
multiple parts of the distribution model or value chain. They begin to discover that you really
can combine optimization of digital at the traditional business model level with other more
radical or disruptive innovation possibilities. They begin to exploit and explore: exploit the
current business model by boosting profits while at the same time exploring new business
models with a view to injecting future profitability.

3. User-centric vision: conscious competence. Those companies that already view each and every
interaction with users as something that can be measured have come to understand that
technology is a facilitator, but that the true lever of digital transformation is people. As a result
of their maturity with regard to the use of technology and the optimization of data-traceability
possibilities, they know that certain skills and abilities will generate differentiation in the future.
They have discovered that the company’s culture is one of the most powerful levers of change.

4. Interconnected vision: unconscious competence. In this final stage, companies have

successfully evolved their business model; technology and data are strategy facilitators. They
have developed the best way to accelerate the transformation of culture into processes and new
forms of relationships between professionals. Traditional skills and new ones are no longer a
source of friction. In this last stage, companies know which technology to incorporate based on
their specific needs as opposed to the latest hype. Each company is able to translate technology
to needs based on a roadmap. Among other things, this is because they have already determined
where they wish to go with their digital transformation, rather than simply reacting to the
transformation or to digital itself.
A Possible Solution: Technology, Data, and People

Is there a way to break down the challenge of digital transformation?

Digital transformation simply means maximizing the value of technology, data, and people. The
key ingredient in that maximization is trust.

Trust at various levels

Trust between people who share a strategic space and unique vision – at a company of silos,
there is no room for trust. Trust by people in technology, both in general and as a facilitator of
vision and strategy. Trust in the traceability of all information (data) in this new context. All of
this trust depends on striking the right balance between the use of data to build value and the
risk that using it poses to security. We live in an environment in which technology has facilitated
the offshoring of data and in which software, platforms, and infrastructures as services (SaaS,
PaaS, and IaaS) allow us to take a longer path to efficiency and effectiveness. However, the
security of the data we keep in the cloud leaves us more and more vulnerable. Everything is a
delicate balancing act in an increasingly less local environment.
In this context and with regard to trust from the perspective of data, does it make sense to
legislate based on a regional vision in a world of offshore technology and data management?
The European Union is determined to pass laws that promote consumer protection and has just
laid the foundations for data use in the Digital Media Age in Europe, to take effect in May 2018
(Johnny Ryan, “Europe’s new privacy regime will disrupt the adtech Lumascape”). No one knows
what will happen in the coming years, but for now Europe will be competing in unequal
conditions with other parts of the world, such as the United States or Asia. The new legislation
on the protection and movement of data in the EU (General Data Protection Regulation or
GDPR), which replaces Directive 95/46/EC on data protection, positions Europe as the region of
the world in which users will be most strongly protected, and digital development by companies
most limited, due to restrictions on the use of third-party data.

Given that, in the digital age, the use of the information and data provided by technology is a
catalyst for change, why would European regulators seek to weaken an entire industry
compared to other regions of the world for the sole purpose of satisfying the demands of users
and the most bullheaded lawyers? Is it at all logical to require the company that owns a digital
asset such as a webpage to have to show users, midway through their browsing experience and
in real time, that it has each and every one of the necessary authorizations to use their data?
Should we round out the 768 pixels with a legal disclaimer? Who benefits from this regulatory
exercise? Data is one of the levers with the greatest multiplier effects in digital transformation.
It allows us to learn, optimize, and even create new business models and generate value for an
economy. In my view, it is more logical to design a legal framework that encourages
harmonization and allows competition to drive the capacity to innovate as a lever of
differentiation. We are once again witnessing a scenario like that of the transposition of the so-
called Cookies Directive, under the guise of guaranteeing trust. Or are we not perhaps talking
about regulating mistrust?

Leadership of the digital change is a question of people and skills;

technology may be more necessary than ever, but alone it is not enough.
Strategy is even more important, and it is the CEO who must lead the
transition.

Technology Is Evolving at a Spectacular Pace

We are all familiar with concepts like “big data” or “augmented reality,” concepts that are
quickly being left behind and giving way to new, unpronounceable technologies. This very year,
in 2017, we may witness the consolidation of the use of data and technologies, of chat bots and
technologies such as 3D printing. And although every year Gartner publishes its “Hype Cycle for
Emerging Technologies” and new technologies burst on scene, all professionals must decide,
based on their knowledge of their specific vertical, on their specific strategic capabilities and
creative and executive skills with regard to innovation, which technologies will actually help
them achieve their strategic goals.
In Addition to Data and Technology, There Are People

Although today it is possible to generate intelligent systems (artificial intelligence) with an

amazing capacity to learn and evolve, we have not yet managed to build a system able to
replicate human intuition. Our creative capacity, our intuition, and our passion will continue to
be what greases the wheels of any transformation process. And it is impossible for an
organization to change strategy when its culture is dragging it toward a space of non-
collaboration. Again, trust can block and/or catalyze the “people” axis of the digital
transformation equation.

The future transition requires a new culture in which testing and learning needs to be part of
each and every employee’s DNA. Leadership of the digital change is a question of people and
skills; technology may be more necessary than ever, but alone it is not enough. Strategy is even
more important, and it is the CEO who must lead the transition. Who else to lay down a vision
and surround him or herself with the necessary talent to achieve the desired future situation?
Companies that have accepted the possibility of making mistakes are the best prepared to
manage change. Those corporations that have not yet spent time determining a course, a
purpose – no matter how threatening it may be to try to chart that course in today’s VUCA
environment – are unlikely to succeed in a process of digital transformation.

The future transition requires a new culture in which testing and learning
needs to be part of each and every employee’s DNA.

Above all, digital transformation is a strategic challenge in which culture plays a decisive role.
And, although, as Peter Drucker said, organizational culture eats strategy for breakfast, the
reason digital transformation is on the agenda of CEOs and governments alike is due to the
economic and social value the challenge harbors. The World Economic Forum’s Digital
Transformation Initiative (“Introducing value at stake: a new analytical tool for understanding
digitalization”) has estimated the value of digital transformation for four industries at more than
23 trillion dollars for the next ten years. There are more than enough reasons when value
creation is at stake. And this value creation lies as much in the growing business for industries
as in the value generated for consumers and society at large.

According to the 2017 Divisadero-IE Barometer, which studies the digital maturity of Spanish
companies, 74% of Spanish corporations have begun a process of digital transformation, and
 57% have incorporated senior digital executives. This is not a trend. It is a fact. Knowing how to
determine which levers drive the digital challenge and transform how we compete is the key
issue facing most major corporations in all the world’s verticals. In the Divisadero-IE report on
digital maturity, the vectors leading to digital transformation were as follows:

 Organizational and business model.

 Innovation management and data-driven maturity.
 Cultural transformation and digital capabilities.

The challenge of how to generate value combining the best of technology, data, and people is
the equation to solve to achieve the desired differentiation in any industry right now. Tomorrow,
digital will be a mere footnote, and the transformation will already have taken place.

About the Author:

Bernardo Crespo

Academic Director of the Digital Transformation Executive Program at IE Business School

For more articles like this, click here.