Digital technology is transforming our world whether we like it or not. 5G, AI, VR, IoT, and all sorts of technologies are converging and creating an exponential pace of change that has never been so fast, yet it will never be so slow in the future. To me, it is very clear – and history tells us – that there will be two kinds of companies in the future: those that have embraced technology, and those which are out of business.
Digital transformation is inherently a culture change program, and HR leaders are well positioned to be the seat at the table which is advising and leading on the adoption of digital technology by implementing a robust culture of innovation across their organization. HR leaders must explain and teach an organization that technology is business, and business is technology. It is not a bolt-on to existing structures. Rather, it needs to be ingrained deeply within a company for it to work well.
Typically, companies and their leadership teams face a few cultural difficulties when it comes to embracing technology, and they fall into three pitfalls – which can lead to failed digital transformation and innovation efforts. These are:
- A fear of technology
- Having an ego
- The sunk cost fallacy
A fear of technology
Xerox Holdings Corporation is best known for their photocopiers. In the 1970s and 1980s they dominated the market, with revenues in the hundreds of millions of dollars. Their photocopier business was so strong that when their engineers developed the Xerox Alto – the first personal computer (packed with Ethernet networking, a graphical user interface, bit mapping, a mouse and connectivity with laser printers) – the executives at the company passed up the opportunity to partner with the personal computer technology and failed to launch the product to the market. There was a psychological block within the leadership team who cited numerous reasons for not launching the new technology, including because they didn’t want to risk their existing business – which was performing wonderfully.
Fear of the new technology literally paralyzed them, and Apple, Microsoft, and IBM swept in to take market share.
Having an ego
But, as well as having a fear of new things, ego also plays a massive role in stopping partnerships with technology. Biases can often come down to the belief that things don’t need to change because they work ‘just fine as they are’, and that introducing new technologies would be too complicated or costly. Yet in the changing digital world where the pressure to compete and meet new customer expectations is continuing to ramp up, being comfortable now doesn’t mean that your business will be fine going forward.
In fact, failing to change because of complacency and ego could mean your organization is left trailing behind others that moved faster and sooner with their digital transformation plans.
The sunk cost fallacy
When it comes to technology, many companies literally throw good money after bad as they have already invested so much into technologies that they become unwilling to let go of their investment – despite that being the wise action. The Concorde plane is a great example of this. With an original budget of £311 million (in current monetary value), the real cost came in at £3.4 billion. The British and French Governments bankrolled the project to create the world’s fastest passenger jet – but neither could say “stop” during the development process, despite costs spiraling out of control.
They felt they “had come too far” and “spent too much money” to stop, despite the business case being in ruins.
Overcoming these challenges requires businesses to innovate, adapt and evolve – all of which requires an organizational culture that empowers their people and embraces transformation. HR leaders can address these three challenges by implementing a culture that drives digital innovation and transformation by encouraging business leaders, their teams, and the wider organization to reflect upon their values and outlooks. For example, through strong coaching and business partnering, Human Resources can help people identify the biases each of us faces (for example our egos), or, by creating a space where it is safe to try new technologies – and fail if needs be.
So to finish, I’ll leave you with a task to get you thinking about how your company is empowering its people to embrace change and thrive in the digital age? Ask these questions within your company, hold the mirror up to leaders and see what next cultural tweaks may be needed:
- What investments in technology have you been putting off or deferring to a later date because of the fear of the unknown, or fear of taking a risk?
- Which technology providers could you partner with right now to enhance part of your operations? and,
- Are there any existing technology projects in which the sunk cost fallacy is playing a part in their continuance?
I wish you the best of luck in these fast-paced times.