Managing the Human Element of Digital Transformation: Overcoming Cultural Barriers
Digital transformation is by no means a new concept. It is well known that restructuring the business model of an organization to integrate digital technology in all areas improves efficiency and agility at all levels. However, despite its longevity as a goal for businesses, many find it difficult to fully understand the concept and implement it successfully, in a sustainable manner. While Gartner reported that 69% of boards of directors accelerated digital business initiatives in 2020 due to the disruption of Covid-19, the 2018 McKinsey study found that only 16% of digital transformations resulted in ” improve performance successfully.
As Gartner statistics suggest, the urgency of digital transformation has accelerated due to the pandemic. Not only does remote and hybrid work demand it, but the uncertainty of the past year has proven that businesses would be wise to use data-driven tools to effectively plan for the future wherever possible.
Often times, business leaders try to make key decisions and solve problems through intuition and instinct. Taking action based on intuition means that instead of being guided by objective data and precise information, businesses are run by an “intuition bias”. This is a particularly prevalent problem in the sales industry: Xactly’s recent Global Business Sales report found that doing things the ‘they’ve always been done’ is the most influential factor in decision making in the UK regarding sales planning today among sales managers (31 percent).
However, the past 18 months have been a far cry from the status quo, so doing things the way they always were no longer works. Forecasting and planning faced an unprecedented challenge due to economic uncertainty: 50% of sales decision-makers in the United States, Canada, United Kingdom, France and Germany said that ‘it’s more difficult to predict bookings because of the pandemic. In this context, business leaders can no longer afford to make decisions as in the past, as the goals of the game have changed dramatically.
The forgotten obstacle: behavioral resistance
Any business attempting large-scale digital transformation projects will be aware of the obvious hurdles it may face, cost constraints and inflexible legacy systems to executive stakeholders’ lack of alignment with the plan of action. However, organizations often overlook what is perhaps everyone’s biggest challenge: cultural and behavioral resistance.
Digital transformation is, by its very nature, a radical restructuring of a company’s operations. Drastic change of any form is often met with reluctance and reluctance by the entire workforce, even though the anticipated benefits of such a change are far-reaching. Much of this resistance can be attributed to the natural human fear of unknown and uncertain territory.
This knee-jerk reaction has only been exacerbated by the pandemic. After 18 months of turmoil and anxiety, employees crave comfort and safety rather than radical change, even if that’s when they need it most.
Proof makes perfect
How can leaders overcome these barriers within the workforce to implement digital transformation in a sustainable and effective way? First, business leaders need to demonstrate to employees and other leaders how digital transformation will deliver tangible benefits in helping businesses grow, succeed and increase revenue. Often, leaders take it for granted that employees understand the positive outcomes of digital transformation.
Take the example of the digitization of compensation and incentive plans. The traditional way of compensation was to pay sales reps after the sale had already closed. However, if they don’t know how much they are getting paid for weeks after the sale is closed, it will not effectively boost behavior because they will not know how much they stand to gain from making a deal.
Giving sales reps instant visibility into their compensation right before the point of sale, based on real-time analytics, is much more effective in driving successful sales. If each salesperson only completes five more deals per year through a flexible and dynamic digital incentive program, the cumulative effects for the business are enormous.
Take advantage of the Covid
While Covid has exacerbated resistance to change after 18 months of turbulence and uncertainty, it has also proven the need to invest in digital transformation in order to be agile and responsive to change. The past year has demonstrated the costs to businesses that weren’t robust and prepared for future disruptions as organizations scrambled to move resources and workplaces online. According to the same Xactly report, only 26% of UK sales organizations were fully prepared for remote work with a full suite of digital tools when the pandemic struck, showing that there is still a long way to go before the digital transformation is widespread.
Digital transformation is not only crucial for sustainability against potential disruption, but it is also essential for ensuring the success of the new workplace. Hybrid work between home and office is here to stay: A recent report found that a third of UK employees would seek new positions if their company did not offer flexible working. Business leaders should leverage this point with executives to prove that an organization needs to be digitalized in order to remain attractive to talent.
Failure to effectively digitize operations in a hybrid workplace risks reducing efficiency and productivity, especially in planning. For example, sales managers have always been able to walk around the office and check on sales reps. Remote working, however, means sales managers have lost sight of their reps, making it much more difficult to forecast sales numbers reliably, jeopardizing revenue plans and forecasts. Leveraging data analytics (real-time and historical) to accurately forecast sales numbers is a key example of the need for digital transformation due to Covid.
It would be remiss to suggest that behavioral barriers are a problem only among the lower levels of the workforce. Junior employees are often the strongest advocates of digital transformation and face resistance at the management level.
Those who wish to implement digital transformation but do not have the powers at the board level to lead it, can start by assigning “change agents” at all levels of the company. These agents can champion digital transformation within their teams and colleagues, building on the arguments above and demonstrating bottom-up support that leaders will notice.
When digital transformation is successfully implemented and tangible benefits are felt, these change agents can emphasize their role in this process and leverage it as an innovative and forward-thinking career step.
Take the smart path
Data is the most valuable and unique resource available to every business. Without the digital tools to effectively use the available data, decisions have to be made on a number of assumptions; sometimes more than 30. For example, when undertaking sales planning without using data, executives must make assumptions about how long it will take salespeople to close a deal; attrition rate; the time required to hire replacements. As the inaccuracy of each assumption is high, the cumulative margin of error is enormous.
Why should business leaders guess, when instead they can make efficient, swift, and accurate decisions that are more likely to achieve desired results? Digital transformation is the smart move for companies to accelerate their revenue, and explaining the reasons will encourage employees to engage.
Chris Cabrera, Founder and CEO, Xactment