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Managing the human element of digital transformation: overcoming cultural obstacles

digital transformation
(Image credit: Image Credit: Chombosan / Shutterstock)

Digital transformation is by no means a new concept. Restructuring an organization’s business model to integrate digital technology into all areas is well recorded as improving efficiency and agility at every level. However, despite its longevity as a goal for businesses, many struggle to understand the concept thoroughly and implement it successfully, in a sustainable way. Whilst Gartner reported that 69 percent of boards of directors accelerated digital business initiatives in 2020 due to Covid-19 disruption, McKinsey’s study from 2018 found that only 16 percent of digital transformations resulted in successfully improved performance.

As Gartner’s statistic suggests, the urgency of digital transformation has accelerated due to the pandemic. Not only does remote and hybrid working require 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 as far as possible.

Often business leaders attempt to make key decisions and solve challenges through intuition and gut instinct. Taking actions based on gut feeling means that rather than being guided by objective data and accurate insights, businesses are being led by ‘intuition bias’. This is a problem that is especially prevalent in the sales industry: Xactly’s recent Global Enterprise Sales Report found that doing things the way ‘they have always been done’ is the most influential factor in UK decision-making around sales planning today amongst sales leaders (31 percent).

However, the past 18 months have been far from business as usual, and thus doing things the way they’ve always been done is no longer working. Forecasting and planning has been met with an unprecedented challenge due to economic uncertainty: 50 percent of sales decision-makers, across the U.S., Canada, UK, France, and Germany, reported that it is more difficult to forecast bookings because of the pandemic. In this context business leaders can no longer afford to make decisions as they have in the past, because the goal posts of the game have dramatically shifted.

The forgotten obstacle: behavioral resistance 

Any business attempting digital transformation projects at scale will be aware of the obvious obstacles that they may face, from cost constraints and inflexible legacy systems to a lack of alignment amongst executive stakeholders on the plan of action. However, organizations often overlook what is perhaps the biggest challenge of all: cultural and behavioral resistance.

Digital transformation is, by its very nature, a radical restructuring of a business’ operations. Dramatic change of any form is often met by the wider workforce with reluctance and pushback, even if the predicted benefits of such change are far-reaching. Much of this resistance can be traced back to the natural human fear of unknown and uncertain territory.

This instinctual reaction has only been exacerbated further by the pandemic. After 18 months of turbulence and anxiety, employees are craving comfort and security rather than radical change, even though this is when it is needed the most.

Proof makes perfect 

How can executives overcome these hurdles amongst the workforce to implement digital transformation sustainably and efficiently? Firstly, business leaders must demonstrate to the workforce and other executives how digital transformation will bring tangible benefits in helping enterprises grow, succeed, and increase revenue. Often leaders mistakenly take it for granted that employees understand the positive results of digital transformation.

Take the example of digitizing compensation and incentive plans. The traditional way of compensation has been paying sales reps after the sale has already been made. However, if they do not know how much they are getting paid until weeks after the sale has been made, this will not effectively drive behavior, as they won’t know how much they stand to gain from closing a deal.

Giving sales reps instant visibility over their compensation just before the point of sale, based on real-time analytics, is far more effective in encouraging successful sales. If each sales rep makes only five more deals a year due to a flexible and dynamic digital incentive scheme, the cumulative effects for the business are huge.

Take advantage of Covid 

Whilst Covid has exacerbated the resistance to change following 18 months of turbulence and uncertainty, it has also proved the necessity of investing 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 disruption, with organizations scrambling to move resources and workplaces online. According to the same report from Xactly, only 26 percent of UK sales organizations were fully prepared for remote working with a full suite of digital tools when the pandemic hit, showing that there’s a long way to go until digital transformation is widespread.

Not only is digital transformation crucial for future-proofing against potential disruption, it’s also key in ensuring the success of the new workplace. Hybrid working between home and the office is here to stay: a recent report found that 1/3 of UK employees would search for new roles if their companies didn’t offer flexible working. Business leaders should leverage this point to executives to prove that an organization must be digitized in order to stay attractive to talent.

Failing to effectively digitize operations in a hybrid workplace risks a fall in efficiency and productivity, especially when it comes to planning. For example, sales leaders have always been able to walk around the office and check in on sales reps. Remote working, however, means that sales leaders have lost sight of their reps, making it much more difficult to reliably forecast sales figures, therefore compromising revenue plans and predictions. Leveraging data analytics (both real-time and historical) to accurately forecast sales figures is one key example of how digital transformation is a necessity due to Covid.

Agents of change 

It would be remiss to suggest that behavioral obstacles only pose a problem amongst the junior levels of the workforce. Often junior employees are the most fervent advocates of digital transformation and are met with resistance at the executive level.

Those who are keen to implement digital transformation but don’t have the board-level powers to lead on this, can start by assigning ‘agents of change’ at all company levels. These agents can champion digital transformation amongst their teams and colleagues, drawing 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 agents of change can point to their role in this, and leverage this as an innovative and forward-thinking career step.

Take the smart path 

Data is the most valuable and unique resource available to each business. Without the digital tools to effectively utilize the data available, decisions must be made on a number of assumptions; sometimes upwards of 30.  For example, when undertaking sales planning without using data, leaders must make assumptions about how long it will take for reps to close a deal; attrition rates; the time needed to hire replacements. With the inaccuracy of each assumption being high, the cumulative room for error is enormous.

Why should business leaders guess, when instead they can make effective, fast, and accurate decisions that are more likely to achieve the desired results? Digital transformation is the smart decision for companies aiming to accelerate their revenue, and unpacking the reasons behind this will encourage employees to get on board.

Chris Cabrera, Founder and CEO, Xactly (opens in new tab)

Chris Cabrera, Founder and CEO, Xactly.