Want to reinvent your business? Start with culture

Last week, McKinsey and Fortune brought together more than 150 senior executives for the inaugural Brainstorm Reinvent conference, held in Chicago. The participants—representing organizations young and old, digitally native and digitally transitioning—were there to exchange ideas and lessons they’ve learned as their organizations undergo massive shifts created by technology and innovation. The most-discussed learning: the key to successful reinvention is culture.

McKinsey global managing partner Kevin Sneader kicked off the event by reminding executives of the need to continually reinvent their companies. He cautioned against becoming complacent when powerful trends like digitization take longer to bear fruit than anticipated. Kevin used the analogy of the transition from sailing ships to steam ships. Steam power took decades to completely overtake sailing, he explained. Meanwhile, rather than innovate, some ship builders continued to simply try to build a better sailing vessel, often by adding more sails. They became obsolete and missed the chance to become part of the new era of steam.

Brainstorm Reinvent conference reveals that culture is key to any transformation
Elizabeth Comstock, co-chair of Brainstorm Reinvent and former vice chair of General Electric; Frances Frei, Harvard Business School technology and operations management professor; Siemens CEO Barbara Humpton; and Minsok Pak, EVP and Chief Strategy and Innovation Officer of Target
Brainstorm Reinvent conference reveals that culture is key to any transformation

McKinsey helped Fortune innovate its own conference format, presenting four new “master classes” which interwove our expertise with stories shared by executives leading digital initiatives.

The discussions revealed that the oft-held notion of competition between digital natives vs incumbents is simply not true, as executives demonstrated again and again their dependence on each other to thrive.

In one segment, Mark Johnson, cofounder of a small New Mexico–based data-science shop called Descartes Labs, appeared alongside James Weed, head of global analytics at 153-year-old Cargill, to talk about how their firms are working together to use geospatial analytics to optimize agricultural supply-chain activities. Mark later noted “McKinsey’s master class offered tech start-ups like mine a rare opportunity to see the frameworks larger companies use to think about how to deploy AI; it can help smaller tech firms hone their research and offerings.”

Brainstorm Reinvent conference reveals that culture is key to any transformation
McKinsey Senior Partner Anand Swaminathan who co-led the innovation master class
Brainstorm Reinvent conference reveals that culture is key to any transformation

While the conference highlighted tech and innovation, culture change dominated the conversation, as attendees universally acknowledged that it is the most difficult nut to crack as organizations digitize. Edith Cooper, former global head of human capital management at Goldman Sachs, said the financial-services giant couldn’t have executed on its strategy to move into new markets if it weren’t for its “culture of exploration, innovation, and risk taking.”

Siemens CEO Barbara Humpton spoke about how her company sought to create an “ownership culture” to empower employees to find innovative ways to use digital technologies. The list of references to culture’s paramount importance could go on.

Tech firms recognize that they aren’t immune to culture challenges just because they cut their teeth on innovation. As noted by Frances Frei, the Harvard Business School technology and operations management professor who helped Uber address its cultural woes: “If you’re born for innovation but neglect the people, bad things will happen.”

Brainstorm Reinvent conference reveals that culture is key to any transformation
McKinsey’s Virginia Simmons, senior partner and leader of our Midwest region, gave a preview of the master classes
Brainstorm Reinvent conference reveals that culture is key to any transformation

Several executives shared the ways they rallied their employees to embrace digital cultures: organizing town halls, realigning incentives, and creating a fail-fast culture, which Sam Yagan, former CEO of dating-site titan The Match Group and current CEO of ShopRunner, said he achieved by making business leaders at Match quantify their failures—and celebrate them.

In McKinsey’s master class on culture change, senior partner Chris Gagnon shared additional innovation accelerants such as flattening organizational hierarchies, aggressively reallocating budget to growth areas, and personalizing talent strategies.

Yet, as Chris and others noted, little will work in the absence of a strong company vision in which technology, innovation, and employees are all in sync. WW (formerly Weight Watchers) CEO Mindy Grossman urged executives to “relentlessly use your purpose filter.” ESPN’s executive vice president of content, Connor Schell, noted that the sports entertainment company grounds innovation and everything it does in the company’s original purpose of telling great stories and connecting with fans.

As the conference closed, executives noted that the quality of the takeaways made the event stand out from others they’ve attended—and likely to spur even more reinvention.

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