AI Adoption Needs Culture First: Why Technology Fails Without Behavior Change | Jamey Lutz | S1E12

Utsav: The companies that are going to win in the AI era are not the ones with the best tools. They are the ones that can change how work actually gets done. But here's the problem. Despite all the investment which is going into ⁓ artificial intelligence, most organizations are not seeing meaningful productivity gains, not to mention revenue growth.

And the reason is not technology, it's behavior. People, in my opinion, are not resisting AI. They are predicting how they have learned to succeed. And as a result, most companies are using new tools to improve existing workflows instead of reimagining how work should happen.

So the real challenge becomes how do you change behavior in an organization at scale? And that's exactly what we are going to explore today. Welcome to Alt consulting conversations. I'm Utsav Bhatt founder of StratOff we help companies drive AI adoption and innovation led growth.

I'm joined today by Jamey Lutz, who has spent more than three decades helping organizations build high performing cultures and deliver exceptional customer and employee experiences. His work spans organizations like Ritz Carlton, known for its gold standard in customer experience, Orlando Magic and GenMed, where he has played a key role in shaping service excellence and driving cultural transformation. Jamey, great to have you here. Jamey Lutz: Utsav it's great to be here.

I've been very excited about speaking with you for some time now. Utsav: So let me start with a fundamental question. When leaders say we need to change culture, it often stays quite abstract. In your experience, what actually drives behavior inside organizations?

Jamey Lutz: Yeah, I think from a cultural perspective, I think it's not the behaviors themselves, it's the underlying beliefs that drive those behaviors. So I believe that what you believe actually drives your emotions and your motivation, which ultimately drives your behaviors and the outcomes that you get. And so I think we make the mistake of moving directly to trying to change behaviors without necessarily changing the underlying beliefs that ourselves have and that our employees have.

Utsav: So if you have to break that down, almost looks like an iceberg, but there things which are underneath which need to be focused on first. So what are few levers that really shape how people behave? Jamey Lutz: Yeah, I think it's if you look at someone's life, right? ⁓ They've got an environment that has kind of molded and formed their beliefs about anything and everything ⁓ from how they view themselves to how they view the world.

⁓ And if we don't address those underlying beliefs, then chances are the behaviors that we're looking for them to display are not necessarily going to be displayed because they don't actually ⁓ share the same beliefs and values that you're looking for within an organization. So culture is so much about ⁓ the beliefs and behaviors of an organization. If you don't, again, get to those kind of underlying beliefs, you're going to have very limited success in driving change within an organization and therefore the culture.

Utsav: Ritz-Carlton is often seen as the gold standard when it comes to service culture. And ⁓ I remember their motto. ⁓ It was something on the lines of we are ladies and gentlemen, serving ladies and gentlemen. It's quite fascinating.

⁓ What I'm really interested is to understand the execution bit of it, because you can shape fantastic mottos and missions and values and the credo of the company, but to execute it a whole different thing. So what did they do differently to make that culture real consistent? on ground. Jamey Lutz: Yeah, and again, I think I'm being a little bit redundant here, but I think the again, ladies and gentlemen, we are ladies and gentlemen, serving ladies and gentlemen.

That's what we believe. And it one of the ways that they do that itself within the organization is from the moment that you are interviewed for a job, they are looking for alignment with their values. And part of their values are that motto, ladies and gentlemen, serving ladies and gentlemen, it's it's their employee and employee promise, ⁓ it's their ⁓ service values within the organization. All of those things are the underlying beliefs of the organization.

We're ladies and gentlemen serving ladies and gentlemen. That's what we believe. And that's the way that we behave. And within the Ritz-Carlton environment, they repeat that.

They repeat those gold standards over and over as part of a daily lineup process, as part of their reward and recognition systems, as part of their accountability and performance management process. I think one of the mistakes we make is we think we can talk about our core values and our gold standards in terms of the Rich Carleton and believe that that's, we can talk about it once or twice and think that it's it's ingrained in the DNA. I think one of the things that Rich Carleton has really gotten over the years is you've got to repeat incessantly what the organization believes in and therefore that drives the behaviors of the people that make up that organization.

Utsav: Right. if you had to sort of look at aspects beyond just training, repeating this as a ritual routine, you know, daily practice, what other elements were looked at? Like, was it something that you would also look at while hiring people, while, you know, sort of how leadership should role model, you know, these behaviors, because a lot of people come from different organizations have spent like decades in a different culture and now they're coming into an organization. So how, ⁓ how that, bit how is that handle?

Jamey Lutz: Yeah, and think, you know, just within the organization, not everyone is a good fit for the Ritz-Carlton. And if you don't have the heart of a servant and you don't have a desire to put others above you, then chances are you're not going to be successful. So like many organizations, Ritz-Carlton uses a number of different tools. They use a process called behavioral event interviews, and they will interview this you to say, hey, how have you reacted in the past in this type of scenario, let's say, where a customer was very frustrated or upset?

What steps did you take? What was the outcome of it? And so they conduct these behavioral event interviews to get a real sense at a practical level of how individuals would respond or have responded in the past. And they really, really focus on are their values aligned with the values of the company.

⁓ It's not a perfect science. They do have turnover just like every other organization. But what I found, Utsav, is they don't necessarily have to terminate individuals that are not a good fit. The individuals will deselect themselves ultimately because they see This is not what I expected it to be.

I, my individual beliefs don't necessarily align with what the company espouses and they'll leave on their own. ⁓ So I think, you know, the, the Ritz Carlton, ⁓ mystique is largely built by. We want people that are fully aligned with this concept of we're going to do whatever it takes to make the customer happy. As long as it's ethical, moral and legal, we're going to do that.

And it's not for everybody. And I think they've made that very clear during the hiring process. They've made it very clear once you are onboarded. And they miss it sometimes, but it's incumbent upon the company that they make sure that they're they've got those right type of people because to expect to get the results that you want without alignment is just wishful thinking.

Utsav: So the rituals, routines and daily practices would definitely play a big role as you just stated. What happens when someone is in a bad mood, turns into, comes to the organization and doesn't live up to that value for whatsoever reason? What are sort of corrective mechanisms beyond rituals, routines where you see someone in the company has not actually lived up to the expectation that we wanted to? ⁓ How does that sort of self correct in the organization?

Jamey Lutz: Yeah, and I think like a lot of organizations, you know, there's a performance improvement plan if you're not kind of living up to the standards or the expectations of the organization. One of the things that Ritz-Carlton does, which I think is pretty unique is, is they don't, if you're a frontline ⁓ person that's ⁓ having face-to-face interactions with customers as an example, could be ⁓ concierge, could be a check-in attendant. housekeeper, whatever, they will not set you loose on your own until you're quote certified, until you can prove that you've got the technical aspects of the job, ⁓ know, ⁓ master those, but also ⁓ the more customer facing ⁓ aspects of it as well.

And at Ritz-Carlton, not only when you're starting a position, do you have to demonstrate that. level of certification, but there's an annual recertification process where in order to continue in your job, you've got to again demonstrate those expected behaviors. ⁓ And again, going back to the beliefs, who I understand why I'm being asked to demonstrate these behaviors, ⁓ that annual certification process really makes it ⁓ clear to employees, ladies and gentlemen, that if They don't share those beliefs and therefore those behaviors that it's not a good fit.

And again, in many cases, from kind of indirect peer pressure from their fellow employees, they'll leave the organization on their own. Utsav: Now if you look at an organization ⁓ like Ritz-Carlton, this is very well ingrained into the DNA of the organization. Their routines, norms, HR policies, correction programs, everything has been set for the organization to continue promoting the behaviors which it wants its employees to showcase. But what if you enter an organization as a consultant and that organization wants to get into a path of driving culture change, say becoming more ⁓ AI friendly or becoming more customer friendly, whatever might be the goal.

Which are the places to start? Because it's such a big area to look into. You started systems first, you started culture first, you like org structure, incentives, HR policies, and their software aspects. So what are a couple of two or three big areas where you'll go and start the journey?

Jamey Lutz: Yeah, and I think you and I have to, it's off offline. I've talked about this concept of jobs to be done. And I think it really starts with what is the experience you're trying to create for your customers. And in the Ritz Carlton's case, it's for your guests.

And so what are they actually hiring the Ritz Carlton to do as a guest in order to provide value in their lives in order to improve their lives? And I think if you take it from the end in terms of the experience that you're trying to create, that then drives the necessary behaviors and processes and technology ⁓ and performance management and recognition that's necessary ⁓ for the organization in order to achieve those jobs to be done. And so, I think it's really, really important.

Every organization is serving someone. Some group of customers or guests, patients, whatever the case may be, is to start with the end in mind. And they don't exist without their customers. So what are customers hiring that organization to do?

And work your way backward from that in terms of how do we design those experiences, again, through all of those elements that we've talked about. in such a way that it's going to provide value for the end customer. So I think that's one of the big ways. And then your culture is really driven by that anticipated outcome.

And therefore, technology like AI, which ⁓ is not meant to replace those ⁓ kind of customer facing activities, but it's meant to further supplement what you're already trying to do and create greater efficiencies and greater knowledge of your customer. I don't know that exactly explains it, but I do think you have to start with the end in mind. And the end in mind in any organization is what are the customer requirements? What are they hiring you to do?

Utsav: Yeah. It reminds me of the experiential outcomes and behavior outcomes and business outcomes of how you think customer back literally on what you want your customers to think and feel and how would you want them to behave. And if you, if they behave in those manner, then you'll be able to achieve your business outcomes, which you set for your organization. ⁓ If I, and I'll jump to the AI question in a bit, but before that, when you sort of start a transformation journey in any organization, maybe, know, like GenMed or any other ⁓ clients that you have consulted.

Which are the top few blockers where it gets stuck? Is it like, just to name a few, like lack of clarity of where we are headed or misaligned incentives or leaders not ⁓ aligned on ⁓ we need to behave in unison and do certain things which might be initially very uncomfortable but for a larger purpose it's a journey that we are on. What are the top blockers that you have seen? Company space.

Jamey Lutz: Yeah, I think for me and in my book, I talk about the importance, the critical nature of the tone from the top. If it's not being, people often ask me, can you change an organizational culture without buy-in and modeling at the top? And I never want to say never. think you potentially can do that, especially at individual unit cultures, At a department or a team level.

But it is really, really hard. To drive transformational organizational culture change without a tone at the top. And the executive level from the CEO to the rest of the C-suite has to really drive and model the way. And they have to, you know, at the risk of being monotonous, they have to continuously talk about and share stories of what that looks like over and over and over within an organization.

you know, the executive level modeling is really, really critical. And I think the other thing that many times organizations are challenged with is they have really strong core values, mission, vision, values, but they don't demonstrate or they don't articulate what those underlying behaviors are ⁓ to bring those values to life. So if I'm someone in finance or someone in HR that may not necessarily be having a lot of customer interactions, what does that look like for me in terms of demonstrating and living out values every day?

And you've got to make sure you're making those connections within every area of the organization, or it's going to limit your effectiveness in terms of serving your customers and driving your culture. Utsav: And how do you arrive at those behaviors that you want to drive? So like for instance, an organization wants to become a customer centric organization. And right now they are not doing that well.

The NPS scores are a bit low. They're receiving a lot of customer complaints. So the goal that they set is I want to be a customer centric organization. Now when they go on that path, there are certain behaviors that you need to live by.

What's the process of arriving at those underlying behaviors? Jamey Lutz: Yeah, and I think that's a collaborative effort. as ⁓ a ⁓ organizational strategist and consultant, I would go into an organization and see what they have already. Most organizations have values.

It's the underlying behaviors that are really important. And so it's working within an organization in all areas, within all departments to make sure the behaviors for a concierge or you know, valet in terms of driving that value of customer centricity would be different than it would potentially for, you know, someone working in the pool area or, you know, working in food and beverage in one of the restaurants. And so it's really, really important whether it's an organizational consultant or someone within the organization that is meeting with all of those different areas.

to talk about what is good and even better, what does great look like when we talk about customer centricity for this particular team or this particular department. And you draw those, you kind of draw those lines so that everyone, again, understands and has a belief about the importance of it that then drives the behaviors which you're getting really specific about within those. individual departments or functions within an organization. Utsav: What question which I was once asked by a client was, hey, we have been on this three year journey of driving ⁓ customer centric transformation.

We have done pretty well. have met our targets. The business targets have been achieved. What's next for us?

And it's ⁓ often the answer might be, hey, you there is no end to it. You can keep on doing incremental improvement and be better at what you do and keep pushing the boundary of what it means in your industry to be customer centric. But how do you sort of inculcate a culture? Because there is one problem of how you help a client move from, say, a state A to state B, where there's a big jump in terms of what they want to achieve.

But when they feel like they are there, they have achieved their showing those new kind of behaviors, the numbers are showing it up, customers are loving it. How do you keep that fire lit up in the company of keeping on sort of moving on that path? Jamey Lutz: Yeah. And I think you're talking about a really big challenge within organizations is like, you know, moving from a transactional kind of point of view to a transformational one.

How do you do that? And, you know, again, I think it comes with, you know, we're instead of answering the phone in three rings, we're answering it in two. That's great. Right.

That's ⁓ an incremental type of improvement. But how do we create these leapfrog kind of experiences. And I think, again, evaluating the experience of your customers and from a jobs to be done perspective. And as you as you journey map the experience of customers or guests or patients, it may be something that's not even on the current journey map.

So what are what are things that could be done that are changes in in ⁓ not just changes in degree, but changes in kind of overall experience. ⁓ How do we create something that maybe the rest of the industry has not even considered? ⁓ And in creating, again, the processes and the tools and ⁓ the mindsets to create something like, you know, moving from a ⁓ you know, a Netflix that previously just sold ⁓ DVDs in the mail to a streaming service or, you know, something that ⁓ would completely differentiate you in the marketplace and would provide additional value that maybe has never even been thought about.

So I think you have to have a real mindset of innovation within the organization that were never done. You know, it is a journey. It's not just a sprint. And what's good enough today is not going to be good enough tomorrow.

as you know, it's obvious we talk about, you know, AI, I think AI is a is a incredibly powerful tool to allow us to know our customers better, to allow us to leverage data and processes in a way that can create something that's completely new and differentiated. So you're not just transactional, you become transformational in the way that you interact with your customer. Utsav: The way I see it is and I think you summarized it beautifully. It's essentially when you are starting from a place where there is a big gap between what you are doing right now to where you want to be.

You're basically solving something which is known. It's a known problem. You're basically making fixes, trying to improve your performance. But once you do that, then you actually go into the territory of solving the unknown.

Like you need to define what that future is and that's where some leaders might struggle because Till now they were focusing on, my competitor is doing this, so let me do this as well. Somebody in this particular market has done something interesting, let me copy that. Or let me contextualize that for my market. But sort of stepping back and setting the stage for what actually great looks like in my industry requires a different kind of mindset.

And that actually is an interesting bridge to the topic of AI. Because when I am working with clients, I often say, not that people are resisting AI, it's just that they are fiercely protecting how they know to succeed. Because if they use AI from from sort of improving their process to doing anything different, like challenging their current way of working, re-imagining their work, it's extremely ⁓ dangerous space for them to go into because first of all, you don't know what it'll lead to.

The second, third, fourth degree order effects which you have not computed in your head. It might impact your ⁓ team in terms of its size, your growth prospect in the organization. So it's a very scary place to be. So when you sort of look at and apply these practice of transformation in other setups like culture, service excellence, customer centricity and apply to the AI lens ⁓ of companies driving AI transformation, really adopting it.

What do you think might be some useful ways for employees to leave the old ways of working and get into that mindset of let me think about the possibilities which are there in the future. support they might need from the organization to behave in those ways. Jamey Lutz: Yeah, and I think it's you're exactly right Utsav. I think human nature is any type of change can feel very threatening because we we are very comfortable with with kind of status quote.

And, you know, I think we automatically when we think of AI, we think it's going to it's going to replace jobs. And, you know, AI is not meant to replace jobs. It's meant to free us up to do things, especially from an experiential. position or perspective that maybe we couldn't do.

We can get closer to our customers as a result of ⁓ the features and the benefits that AI is able to provide for us. And so I think, again, a little bit redundant here, but how do we change the underlying beliefs of our employees in terms of how they view AI? If we can change their mindset to be one of hey, it's going to allow you to be more effective and productive and get closer to your customers in a way that you would never have been able to do before because of related proficiencies and ⁓ efficiencies with AI.

⁓ If we can, and heck, the chief of kind of resisting change. At first, I was like, I don't know about this AI thing, but I found that allows me to get tasks done in a much more effective way and have more knowledge about my customers so that I can better serve them in ways that I would never have been able to do before. ⁓ You you think of the term mass customization, it almost allows you to customize things ⁓ for individuals in a way that you never have been able to do before.

⁓ So I've had to change my beliefs about the power and the possibilities around AI on a personal level for me to be able to realize the power of it in terms of, again, being more productive in serving my customers in ways that I never would have even thought was possible before. So again, I think it goes back to how are we positioning AI within our organizations in such a way that people don't see it as a deterrent or a threat. but they see it as, my goodness, this is something that can help me in serving my fellow employees, but also my customers in ways that maybe we never even dreamed of.

Utsav: Absolutely for employees to behave in those ways and think and sort of operate in that kind of a mindset. One thing which I think is non-negotiable is to have an organization that gives them a psychological safe place to work and try new things. At the same time, a very important aspect is what leaders are doing at that point of time. In fact, they are also learning AI.

They are also trying to improve their understanding of how it can change our organization's future. So what role modeling do you think leaders can play in all this when you are talking about a technology which has a power to fundamentally redesign, reimagine your business model and your employees, want to empower them to think differently, ⁓ create a conducive culture for them. So what do you think are ways in which they can be helpful? Jamey Lutz: Yeah, and I think, again, that tone from the top is really, really important.

And I think, you know, we often think of CEOs as individuals or in C-suite folks as people that are not even necessarily using a computer. They're kind of supervising and managing from, you know, kind of afar. And I think it's really important that, ⁓ you know, executives ⁓ at the very least are able to articulate how they are personally leveraging the power of AI ⁓ to help them and better serving their employees and their customers. And I'm such a big proponent, Utsav of storytelling.

And I just think there's a great opportunity for the ways in which AI is being used productively, not just within the organization at hand, but sharing stories about how other companies, even beyond their industry, are leveraging AI as a platform for enhancing service. Think ⁓ establishing ⁓ repositories of stories ⁓ that bring in the power of AI in ways that we can ⁓ better provide value to our customers. it needs to start from the top. I think, you know, CEOs, executive teams need to lead the way in demonstrating here's what good looks like.

Here's what exceptional looks like. And if they can find those examples internally, it just reinforces those behaviors all the more because people see the power in it and what the company espouses is in terms of the way they envision AI being leveraged. Utsav: One last question, which is it's a very different challenge to scale. this entire transformation across organization.

Many times you can start with a pilot team, you can start with a business unit within that, in a team, try to do something. But when you're talking about organizations which are 20,000, 50,000, 100,000 employees, it's a massive undertaking to drive change at scale. What are some two or three useful techniques that you have seen or mechanisms which you have deployed to scale it across an organization? Jamey Lutz: Yeah, I think part of that is creating a want to kind of mentality versus a have to mentality.

So I'm working with an organization now that has instituted an innovation lab, they call it within their organization and they look at customer experience. Kind of differentiating signature experiences. within the organization and they tested, they pilot within a couple of locations or a couple of departments and they begin to build momentum through, you know, small successes, low hanging fruit. And what happens is others in the organization hear about it and they hear about the successes financially or from a service perspective, an employee engagement perspective, and they want to be a part of it.

And so instead of kind of mandating certain behaviors. Again, you're changing the beliefs underneath it with some smaller groups of people and you begin to build momentum and others begin to line up and say, hey, we've heard about efficiencies or additional revenues or cost containment ⁓ initiatives that are coming from this innovation process. We want to be a part of that too. So I found that to be really successful as you start really small, get some small wins and others begin to kind of line up to participate in it.

And ultimately it kind of cascades and you figure out how to scale it across a whole organization. So that's one of the things that immediately comes to mind for me is, how do you start with a small group of folks that that have an innovative kind of mindset that are willing to experiment and fail a little bit, continue to iterate until you get it right. And then it becomes a success and you again become very adept at telling story and others within the organization want to participate versus feeling like they're being forced to participate.

Utsav: I can't help but find so many similarities between how do you drive a transformation within an organization in its existing business model and compare it with ⁓ how large companies create startups within. Principles are quite similar. Find a small group of people who are motivated, who behave in a particular manner, who are looking at possibilities. Then, you know, let them sort of try a few things out and it sort of gradually keeps momentum.

You sort of pivot because not all the ideas that you have in an organization would land. You would need to pivot some ideas, figure out alternative ways in which you could do that, but then gradually create a system and a culture which is resilient, which allows you to push the organization into new ways of working. So Jamey, fantastic conversation as usual. I think one of the takeaways, which is for everyone is culture is not something abstract.

I think it's designed, it's reinforced, leaders need to role model. And ultimately it shows up in how work actually gets done every single Jamey Lutz: you Utsav: day. It's not something which is on a poster, in a meeting, in a town hall. It is a lived experience of employees.

And once it happens, you will see it in the organization, ⁓ in the way conversations happen in a company, if they're living those or not. So, and this is mostly what organizations are struggling with when they're trying to drive AI adoption. So a lot of similarities and a lot of learnings of how a very well-established change management or a transformation process which companies have gone through decades is more applicable today than ever given the flux we are in. Thanks for joining Jamey, lovely talking to you.

Jamey Lutz: My pleasure, Utsav Thank you for having me.