The Invisible Pillar of Any Organizational Transformation: Cultural Transformation

The term “Bankenstein Monster” describes a bank that has been growing, but whose central technological systems have never been replaced, as described in an article from the renowned London magazine “The Banker.” According to this article, such a system is “dead,” seemingly kept “alive” by layers of integrations and technological interfaces that disguise its age.

At first glance, it may be assumed that the main challenge this bank faces is technological modernization. Still, associated with this is a much greater challenge: that of a true organizational transformation.

Organizational transformation is increasingly considered a priority, especially in light of global events in recent years that have involved an extraordinary level of changes, from geopolitical instability and macroeconomic shocks to disruptions in supply chains, new ways of working, and changes in consumer behavior, among others.

According to a survey by the consulting firm Ernest & Young, 40% of executives involved in organizational transformation programs did not achieve the targeted key performance indicators (KPIs), and 20% participated in “failed” transformation programs in the last 5 years.

How to (re)define organizational transformation and achieve success, then?

In more developed economies, where the number of established companies operating on outdated technologies is higher and exposure to innovations and technological advances is more pronounced, there has been an effort to (re)define the concept of organizational transformation and its success factors, especially in the face of reported failures.

Today, it is more common to hear and read about “digital” transformation, so I chose two scenarios related to this sub-type of transformation to illustrate the meaning and scope of organizational transformation.

Scenario 1: Application of digital technology to existing business processes, automating them and making them more efficient.

Scenario 2: Reimagination of existing business processes and reinvention of new business models leveraging digital technology.

In the essence of these scenarios, it is worth noting that, when analyzed, a large part of digital transformation efforts is limited to what is described in the first scenario – pure processes of automation and digitization.

However, it is increasingly unanimous that real transformations involve reimagining products and services, reinventing business models, redefining the experiences of people, customers, partners, suppliers, and creating new and better solutions.

To transform is to change radically, to break with inefficiencies of the past, and to continue changing to maintain relevance and create value in the present and for the future.

How, in practice, does one transform beyond the digital?

A well-known example for all of us that can serve as an example is Netflix. Netflix started as a DVD rental service and became a global streaming giant that changed the paradigm of entertainment consumption.

Netflix’s transformation was not limited to technology and the digital realm but, above all, consisted of adopting an innovative mindset that considered all aspects of its business model and empowered people, enabling the continuous launch of innovations and global expansion.

Another good example of a holistic approach is DBS Bank, based in Singapore. Piyush Gupta was appointed CEO in 2009 and challenged the organization to “think like a startup, not like a bank.” Under his leadership, the bank drew inspiration from technology giants like Google, Amazon, Netflix, Apple, LinkedIn, and Facebook (GANDALF).

In an interview with Global Finance, Nimish Panchmatia, head of data and transformation at DBS, mentioned that the bank reinvented itself to adopt the speed, agility, and mindset of startup culture. DBS established experimental learning platforms, introduced new ways of working, redesigned office spaces, and fostered ecosystem partnerships to encourage experimentation and innovation. Today, the bank serves new customers in new markets with new products through new channels.

The failure of transformation programs results from the absence of a holistic approach, centered on people and focused on a purpose higher than the leaders’ mandates’ duration. Leaders who do not consider these factors ignore the fact that a good strategy, without true organizational transformation, translates into performance improvements whose gains can be nullified by market dynamics and trends.

In his book “Rewired,” Eric Lamarre of McKinsey & Company claims that the transformation process is continuous and endless and can create unparalleled competitive advantages if conducted in a structured manner.

More than efficiency, growth, or diversification, real transformations involve touching hearts, inspiring minds, changing behaviors. The decision to transform lies with leadership, but success depends on the repetition of countless actions performed daily by people.

Successful organizations will increasingly depend on people’s ability to master the art of change and serve as catalysts for successive transformations. Metrics and KPIs can quantify aspects of transformation, but the emotional core resides in culture. This human element is even more crucial in developing countries like Mozambique.

Data shows that organizations that invest in innovative, continuously learning, agile, and resilient cultures create an environment where transformation can thrive and are five times more likely to create value and be sustainable. The well-known Google policy of “20% time,” allowing people to dedicate part of the workweek to innovative projects of their interest, illustrates how organizational culture norms can drive transformational results.

Additionally, articles and studies, such as Harvard Business Review’s (2020) “The Business Case for Diversity,” McKinsey & Company’s (2021) “Women in the Workplace 2021,” or Forbes’ (2019) “How Women Leaders Change Company Dynamics,” demonstrate that organizations with more women in leadership positions and greater gender diversity have more inclusive, innovative cultures, better performance, and talent retention.

In Mozambique, facing unique challenges and opportunities such as LNG, incorporating continuous transformation into the organizational DNA can be a good approach for success and sustainability. In this context, female leadership is an even more determining factor to accelerate advancements in inclusion and innovation.

The future will belong to organizations with cultures of reinvention and innovation.