IoT, AI, cloud computing, and Industry 4.0 are changing business environments at unprecedented speeds. Established corporations either need to keep up and embrace these changes through digitization and evolve, or face losing markets to new entrants with the latest technological advantages. These new entrants are usually small startups or ventures able to adapt more quickly than the current players.
Large corporations, such as the American company GE, Germany’s Siemens, and Hitachi in Japan, are creating digital platforms as a way forward for their businesses, markets, customers, and, ultimately, society. These organizations are rich in history, with extensive product and service offerings based on longstanding corporate strategies and deep corporate cultures that took decades to develop. Yet as new strategies emerge, can their entrenched corporate cultures handle the speed of change, or will they miss the boat?
As Peter Drucker famously said, “Culture eats strategy for lunch.” Until new digital technologies reach a point where human involvement is not required, corporate culture will continue to be essential in IoT adoption. Smart organizations focused on introducing IoT know that adapting is not just about the right hardware and software. More than anything, it’s about the right “wetware”—people. The right wetware can accelerate implementation of IoT and digital capabilities, or it can severely impede it, having drastic negative effects on a company’s performance.
The perfect culture for emerging technologies
As every organization has its own unique needs, it is generally agreed that digital transformations begin with leadership embracing technology, sending a clear message about every change. After all, digital transformation affects the whole organization, from the top to the front lines.
Business smartization at Hitachi is one example of how large, successful companies are achieving digitization and cultural change.
In 2008, Hitachi posted its worst loss in history, creating the catalyst for change and realignment. The company had well over 300,000 employees, making everything from televisions to nuclear power plants. Hitachi employees were then, and are still now, united by their corporate mission, vision, and values of harmony, sincerity, and pioneering spirit. However, they were siloed in more than 900 vertically integrated companies with a culture built over 100 years.
To change this and create a more agile enterprise, Hitachi leadership redefined its direction with growth through social innovation, restructuring the entire organization. In 2010, Hitachi launched its Smart Transformation Project to knock down the silo walls and implement horizontal integration of systems, capabilities, and resources. As of today, we see a different Hitachi, which no longer sells televisions, but rather products and digital solutions for social innovation, with drastically improved financial results.
Levent Arabaci, Hitachi executive vice president of human resources, has said that Hitachi’s pioneering spirit was one reason that its 900 companies developed their own environments and ways of managing people: “There was no sharing of talent, systems, or anything; so literally, it was like running one thousand companies separately.”
The Smart Transformation Project aligned and connected systems and resources, but Hitachi needed to connect its talent. Arabaci said Japan’s population decline, combined with Hitachi’s realization that its model of seniority-based employee promotions worked against innovation, were the primary reasons Hitachi HR is undertaking this project now.
Resistance to change
Resistance to the Hitachi transformation comes from a deeply entrenched mindset and culture based on 100 years of success. For this very reason, Hiroaki Nakanishi, then Hitachi chairman and CEO, made himself publicly accountable for delivering on the changes in the HR revamping plans.
Beginning in 2012, Hitachi took its first step to overhaul HR, creating its Global HR Database, allowing Hitachi to collect fundamental information for implementing personnel measures. The second step, implemented in 2013, was a global grading of all its 50,000 managers around the world. The third step, global performance management, was introduced in 2014 — a framework to evaluate and coach employees while managing goals. These steps are helping to change the mindset in Hitachi management from seniority to talent based.
Hitachi introduced in 2013 its first annual group-wide employee survey, Hitachi Insights, to measure employee engagement. The the goal is to help Hitachi perform PDCA (plan, do, check, act) on the changes implemented each year. The survey measures 13 categories aligned with management goals, evaluating progress and satisfaction while engaging employees across the organization.
These steps led to the completion in 2018 of the Hitachi HR Management Integrated Platform, enabling talent management on a global scale. Powered by Workday cloud services, the platform transcends old boundaries, facilitating visibility and identifying talent across the whole organization. In another first for Hitachi, the platform assists employees in sharing information around the world, accelerating collaboration, and creating new value and solutions to resolve issues faced by Hitachi, its customers, and society.
In six years, Hitachi has moved to connect its entire organization, highlighting talent, connecting and engaging employees through digital platforms, and ultimately leading to an increasingly open and transparent organization. Hitachi’s approach has taken steps toward ensuring diverse employees can demonstrate their potential to achieve the optimum implementation of wetware in a more collaborative culture that embraces digital technologies and IoT.