Digital business transformation

“You have to keep up with the times, or in time you’ll be gone” — transformation expert Katja Nettesheim believes that Friedrich Schiller’s views about progress more than 200 years ago are still relevant today, in the context of digital transformation. While Silicon Valley is home to many digital natives who drive digitalization, businesses worldwide are still lagging behind.

Holding on to outdated structures and fear of change are the factors clearly distinguishing the losers from the winners on the march forward into the digital age. Dr. Nettesheim believes that a flawed understanding of digital transformation is often the reason why the process is more fraught for some than for others. After all, it’s about more than just IT solutions: “Digital transformation is a holistic process that revolves around the entire company.”

Another factor is that the approaches taken by startups and other innovation leaders are often not analyzed in detail — even though they should be. New market participants, who play by entirely different rules, have been popping up in every industry. They deal with customers differently, redraw lines of competition, and act very distinctively in the marketplace. While this can be confusing, Nettesheim holds that “established companies need to understand those rules and learn how to play by them, because new market entrants are very successful.”

According to the recent study “State of Digital Transformation”, more than one in four companies regards the refusal of cultural change to digitize with entrenched viewpoints as one of the greatest difficulties in moving towards the digital future. Cultural issues pose notable difficulty: One in five companies regards corporate culture as a problem.

What does it take to make progress? A continuous customer focus, efficient data usage, and an ability to utilize the latest technologies are the decisive factors that make up what the professor calls the “triangle of digital transformation. But it’s not about the technologies as such, it’s more about the human’s connection to technology. This means that all three things are based on knowledge and culture,” she explains.

Nettesheim claims that the culture at many companies gets in the way of change. She sees this as the key to transformation. The consultant cites the Internet of Things (IoT) to illustrate her point: “If we take a look at what IoT was in the beginning, it was the ability of things to communicate independently of human interference. This is something that a lot of people need to get in the first place.” And now, because it’s going a step further, she notes, one has to understand interactions between things in the context of the digital transformation — and understand that there will be a digital Economy of Things (EoT) with its own transactions.

“Culture change means behavioral change, and we all know how difficult behavioral changes are,” says Nettesheim. She looks to neuroscience for bringing about a change in mindset. It isn’t algorithms that explain why enterprises establish a certain culture that informs their actions and decision-making, but rather very human behaviors, such as clinging to conventional work approaches, calcified hierarchies, non-critical attitudes toward the management’s identity, and avoiding dealing with the signs of falling behind. For Nettesheim, addressing these is crucial for change and progress, which is why the manifestation of corporate culture in day-to-day operations has to be pro-actively reshaped.