Digital transformation fails without this culture shift

In companies where digital transformation (DX) isn’t progressing as expected, the common barrier is not technology but the organization.

You’ve introduced AI tools. You’ve organized your data. You’ve developed DX talent. Why aren’t you seeing results? Could the reason be that the organizational culture hasn’t been established where people feel safe to take on challenges and safe to fail?

The essence of DX is transformation — in other words, embracing change. The key players in adapting to that change are people, and DX will not move forward unless people take on the challenge.

Especially in today’s VUCA era, no one knows the right answer for how to manage a business or drive DX. There is no secret manual that guarantees success. It is commonplace for the goal to become obscured, change, or for the path to become interrupted while you’re in the midst of the process. That is

precisely why an agile approach is the best way to reach the true goal quickly:

Try it first → Fail more and faster than others → Learn from failures and pivot quickly → Turn that into growth

But what is the reality within your organization? Is it:

• The person who speaks up gets the short end of the stick
• Failure leads to a lower performance evaluation
• New plans and proposals get rejected because there’s no precedent or no other companies have done it?
• Elaborate plans are drawn up, but since no one wants to fail or take responsibility, the plans are never executed

If such a negative, stagnant atmosphere prevails, it is quietly and surely robbing the organization of its spirit of challenge.

As such, the greatest enemy of DX is not failure. It is stopping the pursuit of challenges.

What exactly is organizational culture in the first place?

What exactly is organizational culture in the first place? Since culture is something you can’t see, don’t you get the impression that it’s elusive and difficult to improve?

I, too, have seen and heard various definitions of the term organizational culture over the years, but I’d like to share the one that makes the most sense to me. It comes from Ryosuke Ishii, author of the book How to Create Psychological Safety, who states: Organizational culture is the “memory of trigger words → actions → feedback” within that organization over time.

In this context, triggering words refer to the words spoken by others before you take a certain action, while feedback words refer to the words spoken by others after you’ve taken that action.

Let me give you a concrete example to illustrate this. Imagine a scenario where you’re explaining a new project to your supervisor at work.

After explaining the details of the project to your supervisor, consider these “triggering words”:

• Person A was told by their supervisor, “Why don’t you give it a try?” and “I will take responsibility for it.”
• Person B was told by their boss, “I don’t think it’ll work out,” and “It’s impossible anyway.”

They both carried out the project (i.e., took action), but unfortunately, both Person A and Person B ended up failing.

After reporting the failure to their boss, consider this feedback:

• Person A’s boss said, “Nice try!” and “What can you take from this for next time?”
• Person B was told by their supervisor, “Why did you fail like that?! (angry)” and “It was impossible from the start.”

After this series of exchanges, what do you think Person A and Person B will do going forward?

• [Person A’s future actions] “I will learn from this failure and apply what I have learned next time,” and continued to take on new challenges.
• [Person B’s future actions] Thinking, “If I am just going to get yelled at for failing, I am never doing that again,” Person B stopped taking on new challenges.

What kind of organizational culture do you envision?

• An organization with many people like Person A?
• An organization with many people like Person B?

The answer is obvious.

So, what should you do if you want to build an organization full of people like A who are willing to take on challenges?

Let’s revisit the definition of the term organizational culture. There is one word in particular I would like you to focus on: the word memory in the definition that states, “Organizational culture is the memory of trigger words → actions → feedback that has occurred within that organization in the past.”

The true nature of organizational culture lies in the memories that exist in each person’s mind — the recollections of various things that were said to me before and after taking action within the organization in the past. These are memories, not records. This means that if you want to foster a positive organizational culture, you need to continuously overwrite each person’s memories within the organization with positive trigger words and feedback. Doing so will increase positive, proactive efforts, transform the organizational culture for the better, and open the door to a brighter future.

Without psychological safety, people won’t take on challenges

The first and foremost step in transforming an organization into one with a positive culture is ensuring psychological safety.

According to the Success Cycle proposed by Daniel H. Kim, an expert involved in organizational learning research and practice at MIT, if you first prioritize improving the quality of Relationships, then raise the quality of Thinking, and finally enhance the quality of Behavior, good Results will naturally follow. Conversely, it is said that if an organization first demands Results, it creates a failure cycle that leads to failure.

When working to improve relationships, ensuring psychological safety is crucial.

Psychological safety consists of four elements: Speak, Support, Challenge and Innovate.

• Speak: Being able to express one’s opinions with confidence and admit when one doesn’t understand.
• Help: Being able to ask others for help and support one another when in trouble.
• Challenge: Being able to take on challenges with confidence, failing without fear and learning and growing from failures.
• Innovation: A state where new ideas continuously emerge and are welcomed.

Kansai Electric Power also places a high priority on strategically fostering an organizational culture where employees can take on challenges and make mistakes with confidence, and is promoting company-wide organizational culture reform under the slogan “Notice, Speak Up, Take Action.” It is only when such a foundation of positive relationships exists that people can view DX as something that directly concerns them, take on challenges with a positive attitude and grow.

A learning organization transforms failure into an investment in the future

There is one point to keep in mind when aiming to ensure psychological safety: Simply having a high level of psychological safety is not enough. If we stop there, the workplace will become what is often called a complacent workplace. What is essential is a learning organization that strives to balance high psychological safety with high standards and goals for work.

The defining characteristics of the AI era are that change is happening far too quickly and that change never ends.

In the Pre-Generative AI era, before the advent of generative AI,

• Once you acquired a skill, it remained useful for a long time
• Once a system was implemented, it could be used stably for several years to over a decade

However, in the Post-Generative AI era,

• AI technology evolves on a monthly basis
• The skills required of people are changing by the minute, and the way we learn is changing dramatically
• And people’s roles, work styles and lifestyles themselves are undergoing major changes

In other words, what will be important in the coming Post-Generative AI era is not learning something once, but the ability to continue learning continuously. That is precisely why what we need going forward is not an organization that teaches and learns, but a learning organization.

• Organizations must accumulate and share knowledge, including tacit knowledge
• Sharing not only success stories but also lessons learned from failures
• People and AI learn from and inspire each other
• Building networks both inside and outside the company to support one another

This kind of organizational culture enables both individual and organizational growth to coexist, which in turn drives the company’s overall growth.

Companies that are advancing in DX do not simply experience a lot of failures. They turn failures into assets.

Why did we fail? What did we learn from it? What should we do next? There is a culture of reflecting on and sharing these questions.

When this happens, a single person’s failure becomes wisdom for the entire organization. It becomes an asset for the company as a whole, rather than a liability. It becomes an investment in the future, rather than a cost.

Strategically building an organizational culture that embraces challenges

John P. Kotter, a leading authority on leadership, proposes the Eight Accelerators of Change in his book “The Execution-Oriented Organization”:

1. Heightening a sense of urgency while seizing major opportunities
2. Form a core group
3. Articulate a vision and define the initiative
4. Increase the number of volunteers
5. Removing obstacles
6. Achieve early results and celebrate
7. Maintain Momentum
8. Embed change into the organization’s culture

Kansai Electric Power Company also follows this framework to plan and implement its various initiatives.

Of the eight transformation accelerators, it is most effective to implement 1–3 using a top-down approach.

In particular, #1 is crucial as the starting point for transformation. This sense of urgency is not meant to instill fear or anxiety, but rather a healthy awareness that staying as we are will only lead to regression and without change, there is no bright future. At the same time, it is important to recognize the significant opportunities, hope and bright future that lie ahead after the transformation.

For 4–6, it is effective to proceed with a bottom-up approach while incorporating top-down elements. It is essential to advance each initiative with a strong focus on making DX a personal priority—ensuring that DX is not seen as something done reluctantly or out of obligation because a superior told you to, but rather as the overlapping area of the Venn diagram representing Will (want to do), Can (able to do) and Must (required by customers or society).

Regarding points 7–8, based on my experience observing various companies, I’ve noticed that the organizations achieving the best results with DX seem to be having the most fun.

There is constructive discussion, mutual support, a spirit of continuous challenge, excitement and joyful smiles. My ultimate goal in reforming our organizational culture is not simply to make the organization a more comfortable place to work. It is to create an organizational culture where people enjoy taking on challenges. I believe that once we reach this level, we can say we have succeeded in #8, making change a part of our DNA. Therefore, the Kansai Electric Power Group aims to create an organizational culture where people enjoy taking on challenges and will accelerate various initiatives toward that end.

In conclusion

The essence of DX is not technology. It is people.

And the key to changing people, changing the company and changing the future lies in the organizational culture that serves as the foundation.

That is precisely why I believe the final challenge a CIO must address is not AI or data, but organizational culture:

• Feeling secure enough to take on challenges. Feeling secure enough to fail.
• Learning from failure, taking on new challenges and continuing to grow.

When that cycle begins to turn, DX ceases to be a fleeting project and becomes a capability deeply ingrained in the organizational culture, evolving into a sustainable competitive advantage for the company.

That is why I believe it is essential for CIOs to strategically cultivate organizational culture rather than leaving it to chance.