Former Microsoft CIO Jim DuBois sat down with Emerge to talk about his new book and how companies need to embrace risk and more inclusive corporate cultures if digital transformation is to succeed.

 

Allen: Hi Jim. Thanks for taking the time to speak with us today. In the very first lesson of your book, Six-Word Lessons to Think Like a Modern-Day CIO, you say that for companies working to take advantage of change, culture is "the foundation for everything else." For most companies, today embracing change means also embracing digital transformation. So, I'd like to start by having you define digital transformation and then get into the type of culture a company needs to be successful.

It's a good question because just about every company that you talk to says they're doing it. But what they're doing is very different. And it ranges from just trying to radically fix a mess that they've got, to actually transforming how they work, to what I'd really call digital transformation, where they're really doing business transformation for their company and how the company does business.


 Do you have an example of either an industry or a company that is doing it well?

The ones I think that are really doing it, they're actually using what they're doing to really transform their business, and how they do business, and how they interact with their customers. And even what they offer.

An example I often use is if you look at the hospitality industry -- the largest hotel chain in the world now, by number of rooms for rent, is Airbnb. They became the largest way faster than anybody else by completely changing the whole business model.

And when I was talking to a board member of one of the biggest legacy hotel chains in the world, I asked him what they were doing related to Airbnb disrupting their industry. I thought their answer was also a bit transformative. They were looking at using Airbnb as a way to sell their unused inventory, their unsold rooms.


So instead of reinventing the wheel, they are partnering with those who already have?

Right. And, in a way, it's transforming how they do business.


How so? It seems like just an extension of working with an aggregator site like Expedia or Orbitz. 

The Airbnb model is creating a marketplace for capacity that isn’t otherwise available to be “rented”, rather than as an aggregator like Expedia or Orbitz who buy capacity in advance but are another place where you can buy the same thing that you can get elsewhere (maybe cheaper especially if you are combining it with flight or car…) .  Also, if I talked to my daughter and son-in-law who are in their mid-20s, when they travel they never look at hotels. They only go to Airbnb. So as a mechanism to capture the millennial audience, the hotel chain, that I was talking to was looking at leveraging Airbnb as a distribution channel as a way of going after that millennial audience.


So, as your customers shift the way they consume then you have to support what your customers want, and that means going digital?

Yes.


How does culture fit into this picture? Why is a company's culture so important to achieving digital transformation?

Companies have cultures, just like countries have cultures, just like regions within countries have cultures. And getting the culture to change is hard. The natural tendency of humans is to resist change and to be a little bit risk-averse, to protect what you know. This is especially true in people that have expertise in something. They tie their identity to that. And that becomes a culture.

As we [at Microsoft] were trying to push to go faster … it was actually that exact culture that was holding us back. So, we had to address the culture first. Because no matter what strategy we had, no matter what great idea or innovation we had, the culture was holding it back. It was going to continue to slow us down.


Can you define culture?

Culture is the acceptable way of doing things. When you're trying to do something different, it's counter-cultural. It creates anxiety.


Okay. So, no different than societal change, right?

Very much aligned. I mean, you're pushing against what the accepted norms are. The first step in getting the culture to change is being purposeful about defining what's good about your current culture that you want to keep and what you need to change in order to have a culture that you want.

And there were a whole bunch of elements that we looked at [at Microsoft].

Like, if we want people to work at a new pace, the ability to learn was more important than the stacks of knowledge that people had, the expertise that people had. Because, at the pace of change that we were going, the half-life of expertise was getting shorter and shorter, and we had to start valuing learning more than knowing.


So how does this work in practice? How do you change a culture?

There are three parts to it. The first one is defining the culture purposefully. For example, expertise, or the smartest person in the room, was valued more in the old Microsoft culture as opposed to the people that could learn faster or were more innovative. We wanted to embrace the learning mindset over the fixed-, what-you-already-know mindset.

We also looked at how to deal with risk. Because it was, historically, a risk-averse culture. We didn't want to break anything. We needed to manage risk better so that we could take on more risk and move faster. By having the culture focus on resiliency …you're building something to recover quickly and to minimize failure. If you're trying to build something that never breaks, you have a very different type of culture.

And we wanted to be a more data-driven culture …verses relying on political power or organizational structure to make decisions.

Getting leaders to model the new culture is number two. You can talk all you want about what you want it to be, but if the leaders aren't living it, it's going to be really hard to get bottom-up change. And the leaders don't have to be just the CEO. They can be anybody that can take a leadership role within the company and be influential.

And the third thing is about how you communicate. You have to look at all the recognition systems and communication systems across the company, and you have to start changing them so that you no longer are recognizing the old traits. You can no longer just recognize somebody for the expertise that they've got because that reinforces that what you value is the experts, not the learners.

You have to start recognizing the learning that's happening. You have to start recognizing the use of data to make decisions as opposed to relying on positions of power or politics. You have to show that this decision turned out well because we used data to make the decision. Not because somebody was the smartest person in the room.

And you have to make sure that you're emphasizing the culture that you want to have, not the culture that you used to have. Your people have to believe that how they're going to be rewarded and compensated is going to be tied to the right behavior. If they see the culture that management wants, but they don't believe that that's actually how they're going to be rewarded, it's not going to be effective.


So defining the culture, getting leaders to model the culture, and then communicating and rewarding based on the behavior you want are the essential elements of successful culture change. Is that right?

Correct. Another culture trait that we looked for was the inclusiveness of thought. We would listen to all the different perspectives in order to come up with the best solution. If you're only taking ideas from a subset of your employees, you don't have the best opportunity to take advantage of all the learning that's happening.


How do you figure out and define what you want to change?

It depends on the culture that you think that you need in order to drive whatever transformation you're doing. I would advocate that a lot of the things that I've been talking about the learner verses knower, the data-driven, the resilient verses risk-averse, inclusiveness of thought -- those are things that are pretty generic to what any company should be doing. But there's going to be some specific things that, depending on what companies are trying to do, they will want to make sure is part of their culture.


Can you give me an example?

If a big retailer is trying to differentiate themselves by relying on customer service, they're going to have to have some pretty powerful parts of their culture that are all about customer service or the notion that customer's always right.


As opposed to Dollar General, right? Neither's wrong or bad, it's just a different approach to a different audience and different marketplace, right?

Exactly.


What is the ultimate goal of culture change?

I think it's to allow the team to go fast towards the goals that you want to set. You're taking friction out of the system so that behavior facilitates the goals that you have for the company, rather than holding you back or slowing you down.


And those would be the big hairy audacious goals, right?

Yes. Whatever your vision is. Whatever the big goals for your company are, you want the culture to support getting there fast. If the culture is one where you're slow to make decisions, then you're going to be slower to get to your goals.

You have to be able to quickly get to a decision. And then people have to commit and go, even if they didn't agree. But you need a process for everyone to feel like they were heard first, and then get the decision made, and then execute.

The first chapter I have in my book is on culture, but the second chapter is about getting clarity of vision for where you're going. It's much easier to empower everybody if everybody knows where you're going. If they're all running around, going in different directions, it's really not useful to have a great culture.

 

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