How digital transformation is shaped by 'organization culture'

When large organizations launch so-called digital transformation initiatives, it is often believed that integrating new technology with existing systems poses the biggest challenge. But that is not necessarily the case. Often, grappling with organizational culture presents a bigger problem. While some firms have a DNA that accepts change relatively easily, others are far more resistant. Navigating the balance between the culture and technology together is one of the toughest challenges of digital transformation.

Consider the digital journey at FedEx, whose culture reflects the company’s long-held belief that profits follow after ensuring employee and customer satisfaction. The Memphis-based company has used digital tools to upgrade its offerings, speed delivery and improve the quality of tracking information, notes Nik Puri, senior vice president of international IT at FedEx.

Wharton has also been dealing with these issues. Organizations need to create a culture that introduces technological change with empathy toward people and processes, according to Dan Alig, chief information officer at Wharton Computing and Information Technology. Alig and his team are using digital tools to help students gain more value from their courses, and also to help faculty and administrators improve their performance.

Puri and Alig spoke with Knowledge@Wharton about how FedEx and Wharton went about navigating the complex relationship between digital transformation and culture in their organizations.

An edited transcript of the conversation follows.

Knowledge@Wharton: Nik, could you tell us a little about yourself and how you came to be doing what you’re doing at FedEx?

Nik Puri: I am based out of the Netherlands, and I’m responsible for almost all aspects of IT activities [of FedEx] outside of the U.S., in close to 220 countries where we operate. I have been with FedEx for about 20 years, and have lived on three different continents. For the past two years, as market forces have changed, I have been driving digital consumer initiatives across the entire international arena.

Knowledge@Wharton: Dan, tell us a little bit about yourself and how you came to be doing what you’re doing at Wharton.

Dan Alig: I’ve been at Wharton for about 20 years in different roles. I’ve driven a lot of digital transformation here. But for the past six years, as chief information officer, I’ve been helping lead those in education.

Knowledge@Wharton: Nik, everybody speaks these days about digital transformation. But not everyone defines it in quite the same way. What’s your definition?

Puri: The phrase “digital transformation” is a widely used one. And depending on whom you ask, you will get different answers. It’s one of those phrases that does require clarity. Some of my peers would argue that it’s nothing new. They would say it’s basically automation that IT has been doing for many years, and now we are using big data, cloud and artificial intelligence.

I don’t view it as simple as that. I call digital transformation a business change-management journey. It’s about adopting new technologies, but it’s also about adopting new ways of working and new mindsets to deliver new business value. It’s this new business value creation that differentiates the concept of digital transformation from what others may call digital optimization.

Knowledge@Wharton: Dan, do you agree?

Alig: Nik made a lot of great points. We’re looking at that shift in how technology is empowering what we do. I’ve found myself reverting to stories from 20 years ago when we were rolling out e-mail at the Wharton School. I remember getting a lot of questions about, “Why are we doing this? This is crazy. I can send memos. I don’t need this.” I was sticking with, “No, this facilitates it. It makes it a little easier. It makes the information travel faster. And it will help make what you do more efficient.”

Fast-forward 20 years and now we take e-mail for granted as such a fundamental part of what we do. When we look at the new technologies, it’s just a different way of thinking about how we empower everything around us and change the way we operate.

Knowledge@Wharton: Nik, you talked about both digital optimization and digital transformation. What has this meant in FedEx’s context, especially since you have such a broad view of looking at this play out in many different countries?

Puri: FedEx has been on this journey for a while, even before the word “digital” was commonplace or a buzzword used in almost every topic. Our digital transformation journey is called Renewal, and it has both digital optimization and digital transformation flavors to it. It offers a modern framework that powers our key strategic initiatives. I’ll give you a couple of examples over here; this has been very effective within FedEx.

For digital optimization, we have used technologies to improve our customer experience and employee productivity. Technologies like robotics process automation, or RPA, allow us to automate internal processes and reduce waste. They also allow us to reduce decision-making times for our customer service reps. We have leveraged tools and technologies that come with artificial intelligence to improve clearance processes, which obviously provides a better experience for our customers. We also have used it to improve IT system reliabilities and have seen good results.

Our teams use this concept of digital optimization regularly. I think it’s in our DNA. I’ll give you a couple of examples on digital transformation. This is where business and IT members have worked in an agile fashion, and have provided new and modern intelligence to e-commerce shippers.

We launched products where shippers, shipping companies and receivers get notifications through a unified platform on the status of the shipment anywhere in the world; and it’s not just tracking information, but a lot richer content that comes with the movement of shipments nowadays.

FedeEx recently launched SameDay Bot, which is changing the way we interact with our customers. (SameDay Bot is an autonomous delivery robot that enables retailers to accept customer orders for same-day delivery, and will be tested in select U.S. markets this summer.) We have quite a few patents in IOT technologies, which provide near real-time tracking data.

Knowledge@Wharton: Dan, how does digital transformation play out in a business school?

Alig: Wharton’s dean, Geoffrey Garrett, looks back to how the school was founded as an institution to teach finance. We’re no longer just finance, and that leads forward into analytics. From an IT perspective, we pull that back internally and think about data.

I wouldn’t necessarily call our students our customers. But we do focus on how they come into the school, and how they manage that experience through time. There are so many different challenges and opportunities vying for their attention as they look to learn, grow, collaborate with each other and the institution, go through the programs, look for jobs and become alumni.

Many tools are available to manage the experience of how that data flows through those systems, and how it empowers them to get better experiences — how we’re able to deliver a better experience based on what we know about them and what they know about us.

That data journey is in our DNA. The newer tools, like machine learning and AI, enable us to help students connect with the right experience at the right time, to get more value. If the learning is on a deeper level with them, and we can change that experience, it’s a more powerful return on their investment.
Knowledge@Wharton: It is clear that both of you see the digital transformation that’s taking place not simply as a technological exercise. But more broadly, it’s an exercise in managing change. Nik, how do you view the digital transformation and optimization process that you just described as being part of a broader change management exercise at FedEx?

Puri: Digital transformation is about delivering new business value. Marshalling the core enterprise data, or school data in the case of Dan, enables a level of connectivity, experience, and engagement that is hard to break and for others to create.

These all have to work together, whether it be data access, or new ways of working, new organizational models or design thinking. The analogy I always use is that of layer cakes. All three cakes have to be consistent, and they have to have a harmonization around them, for the user to have a delightful experience.

A modern mindset is important. How leaders are able to drive this digital transformation is also important. We use events like hackathons, where we bring our teams together and they spend two or three days developing new ways of doing things.

We as a team of leaders have to ask ourselves: Are we empowering our teams to think about these ideas in ways where, if they fail, they stand up, find a new way of doing things and move forward? Is there a mindset for rapid prototyping? All these have to come together like layer cakes for us to be able to drive a new way of working and a new mindset, leveraging new technologies.

Knowledge@Wharton: What does the layer cake look like in a business school? How have you seen the technological change at the school fit in a broader change management initiative?

Alig: A lot of that rolls back into the culture of the organization. When we look at Wharton IT and where we were five or 10 years ago, there was a lot of data center management and a lot of server management. We had teams that were lifting heavy hardware, and their job descriptions required them to manage that physical infrastructure. When we started the conversation of adopting modern tools [and began] moving towards the cloud, the fear within the IT organization was, “If these aren’t the things that I’m doing, what do I do?” We had to manage the change perspective internally as we looked to help expand that conversation outward.

We have seen the effects of some of that change, and the opportunity that it provides. We’ve internally moved from fear of, “What am I doing if I’m not doing these things,” to, “If I’m not doing these things, that frees up my time to learn more about the business.”

We are trying to understand how our faculty are trying to create knowledge, how they’re using technology in more powerful ways, and partner with them to get past some of the roadblocks that were limiting their ability to research. We then look at how they translate that into learning, how students are more engaged in what they’re doing, and are able to digest the information and retain it in ways that weren’t possible without technology.

We’ve seen this shift in the organizational culture of Wharton IT from a bunch of solid doers to business partners. We started with a strategic partnership initiative, and it was a small team trying to figure out what everyone was trying to do. That team has grown significantly.

Knowledge@Wharton: You talked about culture, and that goes to the heart of our conversation today. Nik, as you think about the broader change management of the human processes around technology, how have you thought about the role of culture in enabling your efforts?

Puri: Years ago FedEx created this philosophy called People-Service-Profit that balanced the needs of employees, customers and shareholders. All across the world, we have had a common approach on PSP, as it’s called. While our business strategies continue to change and evolve every few years, our philosophy has allowed us to enable change in an organized manner.

Several years ago, we started looking beyond PSP as a philosophy, but as a way to start investing in a very deliberate culture — a culture that is embracing change and driving change. Within this cultural framework, we started to have a focused value discussion on a couple of items — learning and caring. By emphasizing the value of learning and caring, we are emphasizing our PSP philosophy, our culture, and using these to help employees embrace any form of transformation. Digital transformation is benefitting the most from it.

FedEx, being a transformation company and known for reliability, has a very strong culture on quality. We have a program called QDM, which stands for Quality Driven Management. It is all about continuous improvement, customer-centric thinking, teamwork and elimination of waste. By bringing together PSP and QDM – an employee-centric culture based on learning and caring and quality – we have seen a nonlinear or an exponential ability of our teams to embrace change, including digital change.

Knowledge@Wharton: You used two words that are dear to the heart of any educator: learning and caring. Dan, how do those values play out as you think about the culture of a business school, and how technology enables these kinds of changes within the culture here?

Alig: Learning is right there in our DNA, and so that’s fundamental. If somebody’s not open to learning, they’re not going to be successful in any IT organization. When we interview new candidates, one of the most important questions I find myself asking is, “What was the last thing that you learned?” You get some real insight into how they connect or could connect to our mission, in terms of how they’re able to adapt. We all learn so much every day. How conscious we are, and how connected we are to that process is sometimes important.

There are so many aspects of culture that are important to how we continue that growth. Diversity and inclusion are really important to that process as well. We do a lot of work in recruiting a more diverse work force, because in those interviews if we’re looking for people who are just like us, you then fall into these groupthink mentalities, and you’re not as open to change.

So, we’ve developed new rubrics in how we think about the interview process, and how we bring people into the organization, so that we can get that perspective and open ourselves to more change. And then once they’re here, how do we make sure that we have an inclusive environment?

The final aspect of the culture that is mission-critical in IT is tolerance for risk. As we continue to grow and as we continue to have an impact on the organization – technology doesn’t always work. You can’t just open the box and install it and it works the way you expected it to. You call your support team as often as anybody. We all need to think differently, and evolve and grow. And if things can’t go wrong, then that growth doesn’t happen. And so, preserving that tolerance is incredibly important. We also have to make sure that individuals feel protected to take risks and try new things, and to think differently about what they do, and how the work happens.

Knowledge@Wharton: What is the most recent thing that you have learned about the role of culture in digital transformation? And what could other companies learn from FedEx?

Puri: As goes the culture, so goes your ability to drive change in a sustainable manner. You can drive change if you invest in your people, in your team’s ability to adopt change, address their need to constantly learn. This goes for management, too. As you adopt new technologies, there is anxiety. The top management could say, “We care about you. We are going to support you with tools, mechanism, as well as programs, so that you are embracing change that delivers new value to the customers.”

It’s all about enabling team members to drive the change at the front line. It is always about people. And culture is how people engage with an organization as well as their employees.

Knowledge@Wharton: What is the biggest challenge you have faced at Wharton in navigating some of the people issues and cultural issues?

Alig: It is related to how connected everything is, especially with data. When we look to roll out new systems and empower all of our users with more information and more access, we push our teams on the empathy front. Nik phrased it as caring in some respects; making sure they connect with why and how people are doing their jobs. If we’re looking to help them change that, but don’t have a basic understanding for why they’re doing what they’re doing, and how they’re receiving the tools that we’re giving them, then we’re not going to be able to connect all of that.

Oftentimes when we get that deeper connection to certain parts of the organization, we’ll see the parallels between what’s going on in other parts of the organization and how sometimes there’s disconnect – not just the data disconnect but an organizational disconnect. So, it’s always meaningful to us to be able to work in the middle of that and help connect not just the data across the organization, but connect the process too. That shift and change happening with all of our workflows is significant. Being able to work closely side by side with all of our partners in the staff at the school and the faculty, to think through workflows, to understand it and to help empower it, is something that we continually work to grow, and to have the impact that technology has the ability to bring.

Knowledge@Wharton: Any concluding comments?

Puri: We sometimes underestimate the risk associated with not doing something and we overestimate the risk of change. Because the market forces are changing so fast, technology is changing so fast, I would ask our listeners and business leaders around the world to think about what would happen if you didn’t do anything. What would happen if your team members were not on this journey? Will you be able to sustain your revenue growth? Will you be able to sustain your team morale? Will you be able to continue to hire talented people in your organization?

So, the risk of not doing something in this era [of digital transformation] is higher than risk of change. Second, look at some of the metrics that are coming out in the marketplace of companies that do adopt the digital mindset, digital optimization, and digital transformation. You’ll be surprised from an economics point of view how successful those businesses are becoming. Will you be able to compete with them if you do not have these capabilities and way of doing things, all driven by culture?

We have seen tremendous improvement in IT system reliability, security, speed to market – all driven by this new mindset. We have also seen good acceptance of it by our frontline team members who now talk about it with others in the market, and are attracting talent. So, it is a positive reinforcement cycle.

Alig: When you think about digital transformation, it’s not about IT work. It’s not about the business. It’s about all of it coming together. It is about building that culture, and creating an environment where there’s continued partnership, the ability to grow together, and understand what the other is trying to achieve. That’s where the magic is going to happen. When we look at all the disruption that happens with the ability to be more mobile, the ability to connect to data, the ability to communicate faster, and especially as we look at the effects of that on education, there’s just so much opportunity.

Our digital journey is also about improving the value proposition of everything we do — the more we’re connected as a school — not just Wharton Computing changing its culture, but thinking about the culture of the school.

Opening that conversation and thinking deeper about what that opportunity looks like, is something that every business needs to be doing, as Nik said. It’s not enough to just keep doing what we’ve been doing. We all need to understand the opportunity and we all need to shoot for the stars. We need to find new ways of doing things that will make life different. That’s why Nik and I do what we do. It’s an exciting time.