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Why you are your own worst enemy when trying to launch a digital product.

February 2016 | Contributing Author: Jason Voiovich

Your organization’s digital product strategy is likely to fail if you
do not address culture.

Decades of product development experience have taught us that a full 75 percent of new product initiatives never reach the
market. Because a successful digital product strategy includes customer relationship management as well as operational
components, the increased complexity does not bode well for a successful launch.

While much has been made over the market’s acceptance of digital / smart / The most common root cause of
connected / Internet of Things products, much less energy has been devoted to digital product launch failure is an
understanding the most common root cause of failure: Our own organizational
cultures. organization’s culture.
In order to succeed with a digital product strategy, anyone involved in the
innovation process – from R&D to product management to IT to the C-suite – must
understand organizational culture, using its inherent strengths to our advantage and
mitigating its weaknesses. Building on Cameron and Quinn’s Organizational Culture
Assessment Index (OCAI) with “digital” success factors, we can attack the largest
cause of failure head-on and help improve our odds.

Digital Organizational Culture Assessment | February 2016

A Failure to Launch

For a restaurant equipment OEM, this was about as good as it gets. They had an idea: By connecting their food production
machines to the internet, they could deliver clear, tangible and immediate benefits to everyone involved.
Because the equipment already recorded its own diagnostic data, the OEM could run predictive analytics, maintaining an even
higher rate of machine uptime – approaching 100%. By monitoring their equipment in real time, the OEM could also deliver timely
food safety warnings to its restaurant chain customers (for example, when the machine’s temperature sensor indicated that hot
food was dropping below 145 degrees Fahrenheit), preventing a common source of food borne disease outbreaks before they
ever got started (not to mention providing trend data to state health inspectors).
There was even an aftermarket for the machine data for the food ingredient
supply chain: The OEM could monitor usage trends across thousands of
devices and provide just-in-time advice based on aggregated information.
And it was cheap to implement. Many of the newer versions of the equipment
in the field had cellular radios already built in (the engineering team snuck
them into the last revision and kept them turned off). For those that didn’t have
wireless communication built in, each machine manufactured after 2000 had a
functional USB port currently used to manually extract performance data. For
those devices manufactured before 2000, the retrofit paid for itself within 90
days.
Did the OEM do its homework on the market? Sometimes your customers say
they want something without being willing to pay for it. During small scale field-
testing, QSRs (Quick Serve Restaurants) not only said they wanted it, but were
willing to place pre-orders. Suffice to say, this one was in the bag.

Digital Organizational Culture Assessment | February 2016

So why did it fail to launch?

There was no issue with the business case (the most common refrain and challenge with “digital” or “IoT / Internet of Things”
product solutions). In a word: Culture. Internal politics, business systems and interpersonal relationships killed this idea before it
ever got off the ground. Specifically, four insurmountable problems emerged:
Problem 1: Data management and ownership inside the OEM

Strictly controlled by IT under the guise of “regulatory constraints”, the prototype cloud data solution implemented by the
innovation team didn’t even come close to meeting stringent security requirements. IT was already stretched thin in terms of
human and capital resources. Couple that with endless “Who owns the data?” arguments and you have a recipe for delay and
inaction.
(Does this sound familiar?)

Problem 2: In-fighting between R&D and Product Management
Innovation was incentivized to “think outside the box” without constraints. Product management incentives are different. They
are held accountable to long-term revenue and profitability. This core difference in objectives led to a strong difference in the
personality and temperaments of the two teams. To the innovators, product management couldn’t see past next quarter’s profit
report. To the product managers, the innovators were living in a fantasy playground with no accountability. Project meetings were
tense at best. When it came time to transfer the technology out of the innovation group, product management was not on board.
(Does this sound familiar?)

Digital Organizational Culture Assessment | February 2016

So why did it fail to launch? (cont.)

Problem 3: No clear executive sponsor
Problems 1 and 2 can often be addressed with a “champion” in the C-Suite. This person’s role is to be “mom and dad” – make
everybody play nice in the sandbox and get them enough toys (resources) to play with. Executives were MIA on this initiative,
more worried about maintaining their relationships with their peers and higher-ups in a multi-layered organization.
(Does this sound familiar?)

Problem 4: No buy-in from the sales group
For the VP of Sales, the solution was a non-starter: The OEM’s channel partners – the hundreds of dealers around the country
who sold and services the equipment – hated the idea of the OEM getting too close to who they perceived as their customers.
The OEM simply did not have the inside and outside sales force to replace their dealer network, at least not within 18 months. In
a competitive marketplace for equipment, the downside risk to market share was very real.
(Does this sound familiar?)

Bottom Line: The market didn’t kill this digital product solution. It was the OEM’s own corporate culture that chewed up this
innovated product idea and spit it out. We already know that three out of every four products never reach the market. Although we
don’t have a lot of hard data (yet) for digital product and service solutions, that 75% failure rate must be even higher. In the above
example, it’s easy to see that there is not one clear point of failure. Several factors contributed to the end result.
In order to address the root causes of failure, we need to take a systematic approach. Otherwise, this is simply another cautionary
case study.
The question of the day is: How? To begin, we need to understand corporate culture.

Digital Organizational Culture Assessment | February 2016

Building a successful organizational culture for
digital transformation.

Internal corporate culture is responsible for over 75% of all product failures. Why don’t we focus more time there?
If you read the literature on the subject of product development and innovation, only a small percentage of case studies and
academics focus their attention inside the organization. Most advice focuses on understanding buyers, mapping the value chain,
creating a compelling value proposition, attacking a significant problem and ensuring you have a viable and valuable market. If
we get advice on internal processes at all, it is to exhort ourselves to take an “agile” approach, to fail fast, to collaborate with our
customers in the development process. We rarely explore how different organizations will respond to those demands, how likely
they are to succeed and how to mitigate internal risks.
Yes, all of that advice is useful, but we can’t ignore the
elephant in the room. Internal culture is our own worst
enemy. On any Pareto chart, we are primary root cause of
failure. It is time we stopped glossing over the issue and
attack it head on.
For most of us however, assessing culture is easier said
than done. It’s squishy. It’s messy. It’s human. All true. While
organizational cultures defy easy categorization, we can
leverage decades of experience in organizational social
psychology to select a mental model that can help us
make decisions and take action to reduce our incidence of
product launch failure.
But first, it’s important to understand that not just any tool
will work. In fact, most approaches to understanding culture
won’t help you.

Digital Organizational Culture Assessment | February 2016

Mental models for organizational culture: Why most don’t work.

Theoretical models in social psychology are like tools in a mechanic’s toolbox: Some tools are better than others for a given task. You could
use a hand wrench instead of a socket driver to extract a deep bolt, but you wouldn’t want to. Cultural models follow the same rule. A quick
Wikipedia search will give you dozens of models to try, but only a select few will help you act on digital transformation initiatives. A few of
these tools bear a bit more than this passing mention, if only because they are common (albeit ultimately problematic) approaches to the

Levels and Functions of Organizational Culture Linking Organizational Structure and Organizational A Classic Approach: 11 Types of Organizational
MIT’s Ed Schein developed his groundbreaking model Culture Structures
of organizational culture over 30 years ago. At its core, In the 1970s, Charles Handy and Roger Harrison
the model identifies three levels of organizational popularized the link between organizational structure For the most direct approach, we can consider a
culture: Artifacts and Behaviors, Espoused Values and and organizational culture. In other words: The structure historical or evolutionary perspective. As the modern
Assumptions. Artifacts and behaviors are outward, of the organization had a great deal to do with the business environment has evolved through the industrial
obvious and tangible. Espoused values are defined by culture that emerged and developed. Their work and information revolutions, a number of different
how members of the organization represent themselves described four types of culture: Power culture, Role organizational structures have emerged to best fit the
to others. Assumptions are unspoken and often culture, Task culture and Person culture. needs of a specific organization at a specific point in
hidden – like the large area below the water line in an Before we dismiss their work as unsuited for a “new time. Those organizational types include:
iceberg, they tend to have disproportionate impact on millennium” of organizational types (How could they
the actual behavior of the organization. Schein goes possibly have envisioned Uber or Google or Tesla?), 1. Pre-bureaucratic 6. Matrix structure
on to articulate three functions of culture: Demarcation, the model is brilliant in its simplicity. It highlights the structures 7. Organizational circle
Identification and Control. tendency for the organization to emphasize traditional
This model is helpful in understanding culture, but less and non-traditional authority, the importance of 2. Bureaucratic (flat)
helpful to us as an actionable tool. Because many of processes and controls, the value of simply “getting it structures 8. Team
the basic assumptions of the culture lie “below the done”, or operating with cults of personality. They also 9. Network
water line”, it is difficult to leverage them into actionable go on to explain that organizations can express different 3. Post-bureaucratic 10. Virtual
prescriptions for a given situation. We need a more sub-cultures and can react to different challenges in 4. Functional structure 11. Community
directive model. different ways. It’s easy to see how each organization 5. Divisional structure
has elements of all four types – even innovators such as
Uber and AirBNB. While these organizational structures aren’t mutually
But this model’s flexibility is also its challenge. While exclusive, nor necessarily sequential, we can see a
it is more structural than Schein’s model, it is still a bit natural progression from earlier to later (more modern)
too situation-dependent to be actionable in day-to-day types. That’s also not to say that all of these types don’t
planning – especially for our purposes implementing remain in existence – and also not to say that an “older”
digital product solutions. structure may not remain ideal for a specific set of
circumstances – but it is true that newer structures better
align with more modern business value propositions
(e.g. Uber and others previously mentioned).

Yet this model fails us as well. Yes, it is as straightforward
as any we’ve discussed, but it lacks a clear link between
customer and market forces. No organization exists in a
vacuum, and this structure doesn’t help us account for
that critical point.

Digital Organizational Culture Assessment | February 2016

OCAI: Understanding Organizations through Internal and
External Tensions

The Kim Cameron and Robert Quinn model balances the challenges encountered with other models. Cameron and Quinn found
that competing values produce tensions inside an organization – like magnets pulling toward a North and South Pole. The most
predictive polarities in defining organization success are:

•• flexibility vs. stability Flexibility & Discretion
•• internal focus vs. external focus
The polarities construct a quadrant with four types of culture:

•• Clan culture (internal focus and flexible) - A friendly workplace where Internal Focus & Integration Clan Adhocracy External Focus & Differentiation
leaders act like parental figures.
Hierarchy Market
•• Adhocracy culture (external focus and flexible) - A dynamic workplace with
leaders that stimulate innovation. Stability & Control

•• Market culture (external focus and controlled) - A competitive workplace
with leaders like hard drivers

•• Hierarchy culture (internal focus and controlled) - A structured and
formalized workplace where leaders act like coordinators.

In order to assess cultural tendencies, Cameron and Quinn developed and
validated the Organizational Culture Assessment Instrument (OCAI). Think
of the OCAI as an “organizational” version of the popular Myers-Briggs
personality assessment tool – but with a twist. Instead of simply looking at
the “current state” of the organization, the assessment also identified the
“preferred state”, providing a roadmap for cultural change.

Digital Organizational Culture Assessment | February 2016

The Next Generation: OCAI + Digital Readiness &
Aspiration Assessment

As strong as Cameron and Quinn’s model is at simplifying the dynamics of organizational culture and yielding an actionable
assessment tool, it was never conceived to directly address the transformational impact of digital strategy on organizational
tensions. Specifically, any new model and assessment must provide guidance in three core areas of digital strategy:
•• Innovation and New Product Development
•• Marketing and Customer Relationship Management
•• Operations
Building on the foundational tenants of the OCAI tool (it’s two “polarities”), we can expand the assessment to include those three
areas specifically. Once we do, we can map digital readiness (now state) and digital aspiration (preferred state) onto the cultural
tendencies of an organization. That powerful combination not only creates a roadmap for organizational culture change, but also a
roadmap for digital strategy deployment.
Preliminary research indicates a correlation between cultural tendencies and digital readiness factors.
In short, there is no one cultural type that is more (or less) ready for digital transformation on the whole than any other. Each
organizational type has tendencies for digital strategy strengths as well as digital strategy weaknesses. Further research (currently
in field) will provide statistically relevant baseline data to deepen our understanding of these factors.
But we don’t need to wait.

Digital Organizational Culture Assessment | February 2016

Adapted OCAI Matrix + Digital Readiness Assessment

OCAI Matrix ©2006 Kim S. Cameron and Robert E. Quinn Digital Readiness Portions ©2015 Logic PD Inc.

External Focus

Adhocracy Culture Market Culture

Dynamic leaders stimulate Competitive leaders appreciate
innovation hard drivers

Digital Digital Digital Digital
Strengths Weaknesses Strengths Weaknesses

Innovation / Operations Marketing & Innovation /
Development New Customer Development

Marketing & Acquisition
New Customer Operations

Acquisition
Flexible
Structured
Clan Culture Hierarchy Culture

Friendly, fatherly/motherly Formalized leaders act like
leadership style coordinators

Digital Digital Digital Digital
Strengths Weaknesses Strengths Weaknesses

Marketing & Operations Operations Innovation /
New Customer Operations Development
Innovation /
Acquisition Development Marketing &
New Customer

Acquisition

Internal Focus

Digital Organizational Culture Assessment | February 2016

How to Guide: OCAI + Digital Readiness &
Aspiration Assessment

We have developed a three-step process designed to help organizations embarking on a digital product launch identify problem
areas and take steps to mitigate them in advance.
In other words, this process will help you get out of your own way.

•• Step 1: Map Your Digital Initiative
•• Step 2: Complete the OCAI + Digital Readiness Assessment
•• Step 3: Merge the Two Findings to Create a Digital Culture Action Plan

Map Your Digital Complete the OCAI
Initiative + Digital Readiness
Assessment

Merge the Two Findings
to Create a Digital Culture
Action Plan

Digital Organizational Culture Assessment | February 2016

How to Guide: OCAI + Digital Readiness & Aspiration Assessment

Step 1: Map Your Digital Initiative

As we saw in the introduction, the digital product solution envisioned by the restaurant equipment OEM was not simply an
“Innovation and New Product Development” initiative. It touched on all three aspects of digital strategy, including Marketing and
Customer Relationship Management as well as Operations.

The table below identifies the different parts of the digital product initiative from the example in the introduction, which of the three
parts of digital strategy they apply to and key internal stakeholders.

Solution Component Alignment to Digital Strategy Internal Stakeholders
Development of communications (new equipment or Innovation and New Product Development
retrofit) Operations Development Team
Data acquisition, analytics and management
Operations (primary) IT
Monetization of analytics offerings (predictive Marketing & CRM (secondary) Product Management
maintenance) Sales
IT
Monetization of analytics offerings (food safety alerts) Operations (primary) Field Service
Marketing & CRM (secondary) Product Management
Sales
Monetization of analytics offerings (ingredient trends) Marketing & CRM (primary) IT
Operations (secondary) Product Management
Sales
IT

Digital Organizational Culture Assessment | February 2016

How to Guide: OCAI + Digital Readiness & Aspiration Assessment

Step 2: Complete the OCA + Digital Readiness
Assessment

Now that the digital solution objectives and implications are clear, the next step involves a look inside the organization. That
assessment will help show you where you are culturally inclined to succeed and where you are likely to struggle.

To continue the example, analysis of the survey data from the OCAI+Digital Readiness Assessment tool for the restaurant
equipment OEM yielded the following results.

Current Tendencies (Now State) Digital Strategy: INN/NPD Digital Strategy: MKTG/CRM Digital Strategy: OPS
Adhocracy: 15% Readiness Score: 20%
Clan: 10% Readiness Score: 20% Readiness Score: 60%
Market: 10%
Hierarchy: 65%

As expected, the organization exhibits a strong hierarchy tendency leading to predictable digital readiness scores. It tends to
struggle with Innovation and New Product Development as well as Marketing and Customer Relationship Management. However,
like most other hierarchical organizations, it tends to be operationally strong.

Digital Organizational Culture Assessment | February 2016

How to Guide: OCAI + Digital Readiness & Aspiration Assessment

Step 3: Merge the Two Findings to Create a Digital
Culture Action Plan

Obviously, we can’t turn the clock backwards for our restaurant equipment OEM, but we can use the example as a case study
in how to diagnose the issues after the fact and predict how we might address those issues moving forward. This assessment
highlights the value of completing this task in advance of the initiative, ensuring the “most likely” mitigations are put in place up
front rather than relying on chance.

Solution Component Alignment to Digital Strategy Internal Stakeholders Readiness Assessment Prescribed Action Plan
Development of Typically a weakness
communications (new Innovation and New Product Development Team (addressed well in our Consider an outside partner or “walled-
equipment or retrofit) Development example) off” innovation team
Typically a strength
Data acquisition, analytics Operation IT (handled poorly in our Complete a risk assessment up front;
and management example) involve the IT team in the creation of
the plan
Monetization of analytics Operations (primary) Product Management Typically a strength
offerings (predictive Marketing & CRM Sales Can be a weakness, but Involve legal and compliance up front
maintenance) (secondary) IT secondary importance
Field Service Recognize the human disincentives
to automation as well as customer
Monetization of analytics Operations (primary) Product Management Typically a strength relationships
offerings (food safety Marketing & CRM Sales Can be a weakness, but Involve legal and compliance up front
alerts) (secondary) IT secondary importance Be prepared to address data privacy
Product Management Critical aspect of the issues
Monetization of analytics Marketing & CRM (primary) Sales solution as well as a Work with ALL internal and outside
offerings (ingredient Operations (secondary) IT typical weakness stakeholders on the business case
trends) (win-win-win)
Typically a strength Work with finance teams up front on
revenue / cost recognition issues for
this new service.

Digital Organizational Culture Assessment | February 2016

How to Guide: OCAI + Digital Readiness & Aspiration Assessment

Step 3: Merge the Two Findings to Create a Digital Culture
Action Plan (cont.)

Our model would have predicted potential trouble spots in two areas:
•• Developing the hardware/software solution; and
•• Monetizing new information as a new business offering
However, like all case studies, no two are the same. The most striking paradox is the relative ease in which this organization
developed the initial concept (typically a weakness for this type of organization) and how poorly it handled it operations
responsibilities (typically a strength).
In the actual case study, the walled-off innovation team at the OEM successfully navigated the first issue but was not able to
address the second. “Tiger teams” in innovation initiatives are a common (and often successful) tactic, but by design, they are not
operationally focused. They were not able to mitigate the business risk of successfully crafting a win-win marketing strategy for the
ingredient trend data that could satisfy the concerns of its dealer/distributor network.
The model highlighted (yellow/caution) the same core concern involving the field network in the other monetization areas as well:
Predictive maintenance and food safety alerts. In the example, these were of even more pressing concern to the dealer/distributor
network than the ingredient trend information (in other words, they were “red” in actuality, but only “yellow” in our prediction).
In the end, the model succeeds in creating the framework for a structured conversation focusing on critical areas of digital strategy
specific to the initiative planned. It is effective because it combines the assessment of all aspects of digital strategy with an
individualized assessment of the internal culture of the organization.
This approach cannot guarantee success in the marketplace, but it can help ensure you have the chance to find out.

Digital Organizational Culture Assessment | February 2016

Conclusion

OEMs embarking on digital product development initiatives must understand that their own organizational culture is their own
worst enemy. But only if they let it. By focusing on internal culture, innovation teams can more effectively partner with their
counterparts in marketing and operations in order to improve their odds of success. The three-step process using the OCAI+Digital
Readiness Assessment can shed light on organizational culture strengths and weaknesses, encouraging the right conversations
between important internal stakeholders.

Digital Organizational Culture Assessment | February 2016

Let us know if we can help you navigate this brave new digital world.

Contact Logic PD today to learn more.
[email protected]
www.logicpd.com
Tel: 855.461.3802

About Logic PD: Logic PD collaborates with clients to help them throughout the complete product lifecycle to accelerate their
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opportunities, reduce risk, and control costs to deliver innovative products to market faster. The company is headquartered in
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Digital Organizational Culture Assessment | February 2016