The Role of Culture in Business Transformation

Executive Summary Rather than being a ‘soft’ topic, culture is the primary reason why any business transformation succeeds or fails .

No amount of strategic intent or investment can overcome cultural misalignment.

The cost of ignoring culture is measurable and severe: the Daimler–Chrysler merger wrote down nearly $30 bn, mainly because two different cultures failed to integrate.

Culture sets direction; technology sets the pace . Without directional clarity from the organisational culture, speed itself becomes counterproductive.

Firm-level positioning determines the speed of response to disruption.

AI is an amplifier of existing practices , not a corrective measure. Bad practices scale at bad pace; good practices unlock exponential value.

The CHRO's role is not advisory but foundational. Business transformation is inseparable from people transformation , and culture is the bridge that makes both real.

. Increasingly, organisational cultures must respond to technological disruption, particularly AI. It falls upon business leaders to build frameworks that help navigate the paradox between velocity and direction. Drawing on case studies spanning the automotive, banking, technology and retail sectors, Sanjay Menon, Managing Director of Publicis Sapient India, explored the mechanisms through which culture either accelerates transformation or silently constrains it, and the specific practices that can unlock innovation at scale in an age of generative AI.

Culture as Structural Risk, Not Soft Concern The Daimler–Chrysler merger of 1998 was pitched as a transformative union: a marriage of Daimler's European engineering discipline with Chrysler's North American market reach. Nine years later, Daimler divested Chrysler for $7.4 bn, writing down nearly $30 bn in value. The failure was not technological or market-driven. Rather, it arose from the fact that, while Daimler operated with hierarchical discipline and meticulous process, Chrysler was fast-moving, democratised and creatively freer. The incompatibility was thus not commercial, but cultural. Indeed, whilst formal due diligence processes remain silent on the topic, research on failed mergers consistently identifies culture as a key reason for failure. The term ‘culture tax’ captures the hidden costs that get paid for such oversights. The lesson for managers is clear: instead of studying culture after an integration fails, culture should determine whether the integration is possible at all.

AI as Amplifier, Culture as Director AI does not correct for or improve existing organisational practices; rather, it amplifies them. This asymmetry is both the promise and the peril of AI. Organisations with rigorous development practices, transparent data governance and sound decision-making frameworks experience exponential gains when generative AI is introduced. Those with embedded biases, poor practices or legacy shortcuts tend to rapidly scale those failures. The amplification is indiscriminate, operating on both excellence and mediocrity with equal force.

A simple test reveals the stakes: a company with inherent biases in its hiring practices will scale those biases dramatically when AI is introduced into candidate screening, unless the underlying practice is first examined and corrected. Conversely, organisations with deliberate, well-designed hiring processes unlock significant efficiency gains. The question to ask before deploying AI is not ‘What can AI do?’ but ‘What are we doing now, and is it aligned with our culture?’ AI is a directional tool, not a corrective one. Culture must set the direction; AI then sets the pace.

The Three Levers of Transformation: Mindset, Skill, Toolset Most investments in business transformation go in reverse order of priority. Toolsets are the first to receive investments, because they are the most tangible: MSAs are signed, licences purchased, implementation begins immediately. Training programs comes second, which is why they tend to proliferate. Mindset-related work, being the most critical and most difficult lever, is deferred to last, mainly because its shape remains unclear. The result is that mindsets becomes a poster-child, an aspiration unsupported by actual change in senior leadership behaviour. The ‘unlock’ occurs when senior leadership visibly models the mindset shift being demanded of others. When a CEO demonstrates the ability to create using AI rather than merely discussing AI adoption, the mindset shift becomes more credible. When CHROs celebrate AI-enabled work rather than treating it as evidence of displaced competence, the culture shifts from fear to enablement. Mindsets are thus not a communication problem; they are a leadership exemplification problem.

Creator Culture as Competitive Advantage Competitive advantage accrues not to organisations that centralise innovation, but to those that unlock it at scale. Post-it notes emerged not from corporate innovation labs but from spare time spent at an organisation that celebrated a ‘creator culture’. It came from the belief that any person, at any level, can innovate and will be celebrated for doing so. In an era of agentic AI, where systems operate and improve autonomously, the ability to unlock thinking across the entire organisation is a structural competitive advantage. The mechanism is straightforward: celebrate creation over process, celebrate value created over credentials earned, and create space for micro-cultures and experimentation. The outcome is that 100% of the population is innovating rather than relying on the ‘1%’. The scale of distributed innovation becomes impossible for competitors to match.

Speed Limits and Organisational Positioning Culture functions as a speed limit on how quickly an organisation can move in any particular direction. The distinction is observable in how organisations position themselves. Ford positions itself as an automotive company serving passenger and freight segments; Tesla as a company that makes ‘computers that have wheels.’ The positioning is not merely marketing; it is cultural. An organisation that thinks of itself as a technology platform will respond to market disruption differently than one that views itself as a hardware manufacturer. The implications extend across sectors. Some large banks report three-year communication lags between strategy announcement and ground-level understanding. Smaller institutions like Monzo and Revolut, with fewer than 1,000 employees each, shift strategy three times a year. The cultural difference is not capability but operating logic. One bank positions itself as a ‘bank’, the other as ‘a technology company in the business of banking.’ The latter has already given itself permission to expand into travel, food delivery and lifestyle services because the cultural frame is technology enablement, not financial intermediation. The frame determines the speed and scope of possible transformation.

The Role of Leadership Rotation and Next-Gen Mirrors A structural way to keep the firm’s culture directionally honest is the deliberate rotation of emerging leaders into close proximity with senior leadership. One particularly effective practice involves selecting 20 people from across career stages on a rotating 12-month basis to form a ‘next-gen leadership team’ that meets quarterly with the senior leadership team. The function is explicitly a mirror, to surface what is actually happening on the ground versus what leadership believes is happening . This introduces friction into the leadership narrative. When leaders declare that a major rollout is working, and the next-gen team reports that people on the ground feel disconnected and unsupported from it, the gap becomes more visible. The practice ensures that culture remains a lived observation rather than a narrative constructed by those with power to enforce silence. For CHROs, building these mechanisms is a way to institutionalise honesty about where culture actually is, rather than where leaders hope it to be.

The CHRO as Conscience Keeper Business transformation is inseparable from people transformation. Yet the CHRO role is frequently positioned as that of a policy-maker rather than a strategist. Such gaps are systemic. When CHROs are brought into strategy conversations late, they are asked to execute on decisions already made; when brought in early, they shape what is actually possible. The role itself requires a reframing: the CHRO is not the keeper of benefits or leave policies, but the keeper of culture – the invisible leash that will either lead the organisation in the direction it claims to want to go, or in a different direction entirely. This requires asking difficult questions in real time:

What is the stated culture?

What is the real culture?

Will what we are experiencing on the ground take us where we intend to go?

And crucially: What assumptions are we pretending not to see?

The answer to this last question often determines whether transformation fails silently or succeeds visibly.

The organisations that will thrive in the next decade are those that treat culture not as soft infrastructure but as the directional system that determines whether technology accelerates value creation or scales existing failures. Strategically, for CHROs, AI adoption is now inseparable from culture adoption. The question is not whether CHROs should have a seat at the table; it is whether they will use that seat to ensure that culture is examined not as a communication exercise but as a directional lever, one that determines whether the organisation moves faster in the right direction or faster toward the wrong destination.