The People Business: Why successful Digital Transformations rely on the Human Factor

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Britta Stutzmann
Britta Stutzmann
April 19, 2021
8 minutes
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Digital transformation is becoming an ever more urgent business imperative, with executives keen to capitalize on the significant benefits it offers. According to research from Gartner, 87% of business leaders report that digitalization is their company’s top priority. Yet we regularly see executives who don’t know how to prepare their organizations to enable and embrace it. All too often, excessive focus on the technology itself means many leaders simply overlook the importance of planning and preparation with people in mind. And it’s one of the most common causes of failed digital transformations.

Of course, digitalization must have a business case, but ultimately its aim is to benefit people and society as a whole. Successful digitalization projects demonstrate an elegant, harmonious and interdependent interaction between technology and people for the wider benefit of everybody in mind. One element alone can’t succeed without the other. That’s why the human aspect is crucial. Leaders must strive for twin goals: early employee buy-in through effective change management. Let me break down how this works in practical terms.

 

Goal one: Early employee buy-in – bring employees along from conceptualization

What many fail to appreciate is that digital transformation is a people business in which human factors and culture are the predominant influencers. And the cost of ignoring the human factor is eye-watering; the failure rate for digital transformations stands between 60% and 85% (HBR Pulse Check Survey, 2019). As a leader, once you understand that it’s as much a cultural transformation as it is a technological one, you’ll find it easier to develop an overarching strategy that has your personnel at its heart from the beginning. 

As our CEO, Aymeric, reports, he visited a customer factory in Asia that had implemented a digital transformation. Its production machinery automation was successful. But management hadn’t adequately considered the workforce from conceptualization; employees remained oblivious to how digitalization could improve the processes for them. Because they hadn’t been involved from the start, floor managers were disengaged and resisted change, reverting to experience over automation to assign incoming jobs. New systems designed to track jobs through the production cycle were by-passed and the technology wasn’t able to learn.

Initiating cultural transformation

How, then, could this situation have been better managed so that employees recognized the benefits? If you put your workforce at the heart of any transformation, employees become agents of transformation rather than casualties. So, establish clear two-way communication up-front so everyone’s aware of the direct benefits, impacts and improvements you expect.

Part of this approach is to ensure new technology and user interfaces are instinctive for all generations represented in your company. They must be intuitive for generation Z (born post-1997) as well as baby boomers (1946-1964). Workshop your digital processes, encourage feedback and be prepared to redesign them if employees find new processes harder than legacy ones. Human-centered design has a helpful analogy in today’s music-streaming apps; most of them offer pretty much the same access to music but are all slightly different in UX design. People choose to use Spotify, Apple Music or Deezer, for example, based on how they interact with them. What digital leaders need to address is: what kind of technology and processes will a wide variety of employee groups and generations need and use, and still all find intuitive, attractive and engaging?

Goal two: Effective Change Management at the heart of digitalization

Successful change management boils down to understanding the diversity of our workforce; our job is to make sure we know exactly who our employees are, how they learn and what makes them tick. Efforts to align your corporate culture will dictate the success of any cultural transformation and change management. There are three aspects of cultural alignment on which the success of your change management depends:

  • Information & functional silos
  • Corporate immune system
  • Generation diversity

Information & functional silos – how to mitigate isolation

Certain functions, like legal or finance, demand specific skills and qualifications, and employees within those groups consequently pursue vertical career paths. These individual function groups tend to value qualifications and skills over agility, and the privilege they tend to enjoy as a result of their expertise, influence and resources can create a functional silo.

These groups in turn can create information silos. Function-specific business imperatives within vertical groups that are, by their very nature, functionally oriented can ignore the broader company-wide advantages of collaboration. As a result, the organization can find itself in a situation where functional silos – in which many employees already feel isolated and disincentivized to collaborate – actively resist the sort of collaboration and data-sharing essential for digital transformations.

Look for opportunities for collaboration across different functions where isolated employees can break out of their silos to form new groups. Essentially, you’re looking to instill a shared culture across a diverse group of silos to develop common values and expectations. Once you achieve that, cross-functional teams can form and disperse quickly in response to commercial demands. The result? A more agile, coordinated operation.

 

The corporate immune system – how to use it

Let’s be clear; an immune system, like that of the human body itself, exists to protect the functioning status quo. Like the human body, that’s great if you don’t want to change anything. But disruption and innovation in an organization can be seen as a threat in the same way that a human immune system will see a viral infection, for example; individuals within your corporate structure may act to resist and neutralize anything that threatens to change any part of your company’s past and present.

Your corporate immune system – a key element of the human factor – can halt your entire digital transformation in its tracks. And it uses three key traits of human nature – resistance to change, skepticism and suspicion – to decrease innovations like digitalization. It’s important to recognize each of these three traits, so let’s have a closer look at the detail.

Resistance to change is partly rooted in a natural fear of the unknown, as recent experience with one of our clients shows. Engineers at a major energy equipment supplier feared losing their jobs to an AI design algorithm. The engineers were skeptical of an automated process. As a result, despite the benefits in time-to-market and reduced costs, the company experienced widespread resistance to proposed changes in design processes.

The solution was to pick out a handful of coaches from among the engineers, selected on their willingness to adopt change and their ability to act as role models to colleagues. These coaches were given access to the organization’s entire digital strategy, allowing them to see how important the transformation was to the company’s continued success. This gave the coaches the opportunity not only to identify new emerging roles as a result of the transformation – roles that would give engineers valuable extra skills – but to plot their development within the organization. Once satisfied that change was desirable, the coaches acted as intermediaries to explain the potential to their colleagues. As a result, engineering teams that had previously feared the unknown and were therefore resistant to change sensed the urgency and benefit of the change; in the end, those teams actively pursued change to bring about a successful launch of the algorithm.

4 Key Elements

Successful change management boils down to understanding the diversity of our workforce

Britta Stutzmann

Skepticism is insidious, so it’s important to keep an eye on it. Skeptics may have experienced failed transformations with previous employers, and this can strengthen a pervasive narrative that digital leaders may be untrustworthy. One way to overcome this is to identify prevailing skepticism in the team. It’s important to get a feeling for employees that might not possess core competencies that are critical to the success of any transformation: collaboration, disposition to change and agility. Conversations, support and internal or external training can be useful to upskill employees and address any gaps in core competencies that are identified.

Finally, the immune system deploys suspicion. Few employees simply tend to dislike the need for change. If they feel being left behind, they’ll look at the evolving target state and take that as justifiable grounds for suspicion. In reality, due to inevitable ongoing developments, the target state of digital transformations can continuously evolve – and change can happen quickly. If a small number of skeptics latch onto this, this tiny minority might already think the transformation will fail. If left ignored, the attitudes of that small minority could gain wider traction across the organization.

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If you put your workforce at the heart of any transformation, employees become agents of transformation rather than casualties.

Britta Stutzmann

Generation diversity – how to identify & harness behaviors

It’s common for many organizations to play host for three to four generations of employees. Broadly speaking, your workforce will fit into one of four categories: baby boomers (1946-1964); generation X (1965 – 1976); millennials, or generation Y (1977 -1997); and generation Z (post-1997). Successful leaders know that they all think and feel differently.

That’s not to say these generations don’t share common ground, and we should beware of stereotypes. But leaders need to know unique attributes of distinct generations in order to take everyone of the transformation journey. Include the baby boomers, for example, and leaders are getting valuable knowledge, expertise and experience.

To make your transformation effective, the use of training to embed cross-generational mentoring is worth considering. The thinking behind this suggests that pairing different generations creates complementary strengths. One possible approach is to pair millennials with baby boomers, helping employees in their 50s and 60s understand exactly where their accumulated wealth of experience fits into your digital transformation. Another possible way is to follow the example of Italian fashion brand Gucci and establish a shadow board, made up of non-executive millennials to expose older executives to broader perspectives. Since it was established in 2015, its internet and digital strategies have been largely responsible for a 136% growth in sales.

Digital transformation is nothing if not a people business

Those two clear goals - early employee buy-in and effective change management – are at the heart of a successful transformation. Aligning your corporate culture to lay the ground for effective change management involves planning with people in mind and communicating those plans clearly; understanding their digital preparedness and anticipating employee reluctance will help ensure nobody is left behind.

So, before anything else: put people at the very heart of your transformation now. If you enable them as agents and advocates of change, together they will help you unlock the power and full potential of digitalization for your business.

 

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Britta Stutzmann
Britta Stutzmann
Britta Stutzmann
Partner. Transformation & Performance
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