By Jonathan H. Westover, PhD
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Abstract: This article discusses how organizational leaders can strategically transform their company culture to gain a sustainable competitive advantage. The article argues that culture is a key determinant of change success and financial performance, but is also difficult to recognize and influence. The article outlines several foundational principles for cultural transformation, including developing a clear vision and values, building urgency through strategy, fostering open communication, modeling desired behaviors, and aligning structures and systems. It then provides a multi-phase framework for evolving culture specifically towards high performance and innovation. The framework involves assessing culture, aligning around priorities, piloting changes, and institutionalizing shifts through HR, recruiting, and operations. The article also stresses the importance of leading the emotional transition with empathy to drive individual-level buy-in for transformation efforts.
As a business leader and organizational consultant with over 15 years of experience working with companies across various industries, I have seen first-hand the powerful impact that transforming an organizational culture can have. While change is difficult, shaping a culture that enables high performance, innovation, and adaptability is crucial in today’s complex and volatile world.
Today we will explore how leaders can successfully lead cultural transformation initiatives to gain a long-lasting competitive edge.
The Challenge and Opportunity of Culture
Culture is the invisible yet defining framework of how work gets done within an organization. It is comprised of shared assumptions, values, norms, beliefs, and behaviors that underpin every interaction and decision (Schein, 2017). Like an iceberg, culture runs deep below the surface and is notoriously difficult to see clearly, let alone influence directly. Yet culture fundamentally determines the success or failure of any change initiative. When the culture is not aligned with strategic priorities, it creates drag and acts as a barrier (Kotter, 2012).
This presents both a challenge and opportunity for leaders. The challenge is recognizing how culture operates below the surface and shapes how people think and act each day. The opportunity lies in consciously evolving culture to better support business needs. As markets become more complex, technological change accelerates, and customer demands shift rapidly, culture has never been more important. Organizations with adaptive, innovative cultures will outperform those stuck in outdated mindsets and ways of working. The ability to transform culture strategically is thus a critical leadership capability and source of sustainable competitive advantage.
Foundational Principles for Cultural Transformation
Based on my research and experience, successful cultural transformation follows several foundational principles:
1. Start with Clarity of Vision and Values
Before embarking on cultural change, take time to clearly define your organization's purpose, vision, and values going forward (Kotter, 2012). What do you want your culture to emphasize? Where do you want to strengthen existing practices or introduce new ways of working? Communicating a compelling vision and shared set of values to guide decision-making lays the groundwork for cultural alignment.
2. Build Urgency and Drive Change through Strategy
People are more willing to change behaviors when they understand why the status quo is no longer viable (Kotter, 2012). Leaders must communicate a compelling case for change by connecting cultural priorities to strategic imperatives like market disruption, innovation objectives, or financial targets. This builds urgency and gives cultural transformation meaning and direction.
3. Foster Open Communication and Engagement
Two-way dialogue is critical for changing hearts and minds (Bridges, 2003). Leaders should proactively gather employee feedback to understand existing cultural strengths and pain points. Involve key stakeholders throughout to create shared understanding and ownership of needed changes (Kotter, 2012). Communication should be ongoing as culture evolves continuously.
4. Model and Reinforce Desired Behaviors
As the prime influencers of culture, leaders must sincerely embody the behaviors they want to encourage (Schein, 2017). Actions always speak louder than words, so model risk-taking, collaboration, customer-focus, and other priorities daily in interactions, decisions, and priorities. Likewise, reward and recognize instances when others demonstrate new cultural norms.
5. Embed Cultural Change through Structure and Systems
For cultural shifts to take root, they must be reinforced by formal systems like performance management, talent processes, and operational practices (Kotter, 2012). Take time to thoughtfully align systems and structures to incent desired cultural attributes rather than outdated instincts. This institutionalizes changes and embeds new cultural DNA into day-to-day operations.
Developing a High-Performance, Innovation Culture
With foundational principles in place, let's now explore how to specifically evolve an organizational culture toward high performance and innovation - two attributes critical for remaining competitive in today's world. The following multi-phase approach has been effective in my experience leading transformational initiatives across technology, manufacturing, and professional services firms:
Phase 1: Assess Current Culture
The first step is to take an honest look at your existing culture through tools like 360-degree feedback, focus groups, and surveys. Look for strengths to build upon as well as aspects hindering agility and performance, like siloed structures, risk aversion, or bureaucratic processes. Identifying blind spots is crucial for change.
Phase 2: Align Around Core Attributes
With assessment insights in hand, refine your vision of a high-performance, innovative culture emphasizing traits like accountability, collaboration, customer-focus, and speed. Engage leaders to define supporting behaviors and check cultural alignment with strategy. Make choices around what's preserved versus overhauled.
Phase 3: Lead Pilots to Build Momentum
Launch targeted pilots in receptive business units to prototype new cultural ways of working in safe spaces. Examples include agile product development methods, cross-functional ideation sessions, customer immersion programs, or accelerated decision rights. Early success builds confidence and spreads desire for change.
Phase 4: Scale and Sustain Through Systems
To scale cultural shifts, formally embed changes through performance reviews emphasizing new behaviors, recruiters seeking cultural fit, and operational processes prioritizing speed, risk-taking, and continuous learning. Additionally, standardize cultural training, leadership development, and recognition programs to cement changes.
For example, when transforming to a customer-centric culture at a B2B software firm, we:
Piloted customer visitations and Voice of Customer programs
Integrated customer metrics into reviews
Hired for passion, empathy, and outside perspectives
Standardized design thinking across product development
These practices incorporated customer-focus holistically at both an individual and system level to sustain transformation.
Leading Through Transition with Empathy and Support
Of course, successfully changing culture is not just a strategic exercise - it is ultimately about leading people through an emotional transition. Moving to a new way of working requires letting go of old habits deeply engrained from past successes. Change creates uncertainty that provokes natural human resistance. As a leader, showing empathy, addressing concerns openly and building confidence in the future vision is thus crucial for guiding employees through this journey.
During periods of shifting culture, I have found it helpful to:
Acknowledge the difficulty of change and natural human instinct to cling to the known
Share vulnerability by talking candidly about your own adaptive challenges
Actively solicit feedback to understand fears and clear up misperceptions
Offer emotional and practical support through coaching, resources and celebration of wins
Reiterate why the status quo cannot sustain results and make the case for a better future together
Maintain optimistic determination while giving time and grace for learning curves
For example, during a culture change at a 100-year old manufacturing company, I supported leaders by:
Hosting lunch discussions to hear candid insights on transition struggles
Creating online forums to crowdsource solutions to implementation blockers
Recognizing top performers monthly who exemplified the cultural vision
Sending personal notes to employees facing layoffs with empathy, resources and thanks
Showing human care and compassion through challenges of change instills hope, smooths fear, and rallies energy toward a shared goal of cultural revival. Addressing both rationale and emotion is key to driving successful transformation at the individual level.
Measuring and Sustaining Cultural Progress
To ensure cultural transformation achieves intended business results over the long-run, its ongoing progress and impact must be actively measured and managed. Some effective methods include:
Repeating cultural assessments annually to benchmark evolution against launch understanding
Tracking qualitative and quantitative KPIs aligned to your cultural priorities, such as:
Team collaboration rates
Innovation ideas generated
Customer satisfaction and retention
Employee engagement scores
Time to market for new products
Surveying employee perceptions of whether day-to-day practices truly reflect desired norms
Auditing recruitment patterns and performance reviews to check hiring and incentives sustain changes
Formally reviewing cultural “ staying power” as part of leadership succession planning
Continuously improving and adapting transformation approach based on learnings
Given the dynamic nature of competitive landscapes today, culture change should never fully “end” so much as continuously evolve. Leaders must institutionalize vigilance, learning and adaptation to ensure hard-won cultural strengths retain relevance with each new challenge.
Conclusion: Building a Sustainable Advantage
Strategically transforming organizational culture to support high performance and innovation in ever-changing markets can provide sustainable competitive differentiation. However, cultural improvement demands thoughtful leadership, clear strategic direction, open communication, modeling of behaviors, alignment of systems, empathy for transitions and ongoing vigilance toward progress. Leaders who apply a holistic, long-term program for cultural change with these foundational elements in mind will successfully guide employees to new heights of achievement while overcoming resistance to transformation. While challenging, the payoff of a culture primed to out-learn, out-create and out-deliver competitors makes the journey well worth embarking on. With dedicated focus and care, any company can build a true advantage through cultural reinvention.
References
Bridges, W. (2003). Managing transitions: Making the most of change (2nd ed.). Da Capo Press.https://www.amazon.com/Managing-Transitions-Making-Change-2nd/dp/0738205257
Kotter, J. P. (2012). Leading change. Harvard Business Review Press.https://hbr.org/2012/05/leading-change-why-transformation-efforts-fail-2
Schein, E. H. (2017). Organizational culture and leadership (5th ed.). John Wiley & Sons.https://www.wiley.com/en-us/Organizational+Culture+and+Leadership%2C+5th+Edition-p-9781119087573
Jonathan H. Westover, PhD is Chief Academic & Learning Officer (HCI Academy); Chair/Professor, Organizational Leadership (UVU); OD Consultant (Human Capital Innovations). Read Jonathan Westover's executive profile here.
Suggested Citation: Westover, J. H. (2024). Leading Cultural Transformation: Your Key to Sustainable Competitive Advantage. Human Capital Leadership Review, 12(4). doi.org/10.70175/hclreview.2020.12.3.4
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