The Psychological Factors Affecting Digital Transformation

by Chris Horn

People just don’t buy like they used to. We’ve all seen the statistics: more than three-quarters of B2B buying decisions begin on Googlei; two-thirds of the buyer’s journey is done digitallyii; a B2B customer will typically use six different interaction channels throughout the decision journeyiii; and more-than half of the buyer’s journey is completed before the buyer even talks to salesiv .

Despite a common consensus that moving to a digital marketing and sales model is increasingly imperative, many companies are still lagging in their efforts. A common refrain we hear is: “We know it’s important, but where do we start? There are so many different issues and opinions and stakeholders that it’s almost impossible to get going.”

The statement highlights two important, interrelated problems that deeply affect business decision-making: Firstly, there is knowing what needs to be done, and secondly there’s a question of how to get moving.

Many times, the biggest hindrances to progress come in the form of individual and collective psychological factors at play which prevent sound decision-making.

Making The Right Call: What Doesn’t Happen

An organisation at the beginning of their digital journey will find themselves faced with some very hard calls. These could include (amongst many things) creating new digital channels to connect with customers, investing in a new digital marketing solution or making far-reaching, expensive changes to the operating model. Whatever decisions the business makes, the consequences will be far-reaching. But what are the chances the business makes the right call?

Unfortunately, research into organisational change show the chances are quite low. Academic studies show a 60-70% failure rate for organisational change projects — a statistic that has stayed constant since the 1970s. It’s clear the majority of businesses don’t make or can’t execute critical decisions well. Some just dither. Others reach a decision, but go through the damaging and costly churn of multiple reports and committees because consensus breaks down. Still others make poor choices or never translate their decisions into action.

Whether you are preparing your company for the transition to a digital marketing and sales model, or are facing other significant decisions that will affect your operations, it’s important to meet the decision-making process with some understanding of how to avoid the psychological pitfalls that could hinder your progress.

The Inherent Biases of Decision-Making by Committee

The 18th Century French mathematician Marquis de Condorcet gave an early insightv into the value of having as many people as possible involved in decision-making. He noted that if people in a group have a better-than-even chance of choosing the right option, the larger the group of people, the higher the probability they will make the right call. The bigger and more diverse the group the better as more people bring more information to the table which, if properly harnessed, leads to improved decisions.

This implies the business should consult as widely as possible before making a decision. One risk here is the amount of time spent in meetings – a key problem in time-poor sales. To reduce the impact, work out who are the best people to have in the room and ensure no time is wasted by implementing a non-negotiable standard for meeting operations.

Another issue with so many stakeholders in the room is the inherent flaws in how people make decisions. The more people you add to the mix, the more likely these problems will surface, rendering the process even more complex and less-likely to succeed.

While committee decision making can be effective, it’s important to carefully manage input sessions to avoid these potential pitfalls. Here are some key risks to consider when making decisions in a group:

  • How things are presented can affect how they are perceived

Experiments have shown decision-making in committees is highly susceptible to the ‘Halo Effect’. When one aspect of an idea or argument seems appealing, people tend to judge its other features favourably, too. Polished slides will make a presentation seem more compelling. Good-looking speakers win audiences over too easily. Graphs and numerical data – even if trivial – are given too much weight.

The order of presentation can also affect decision-making. A seminal studyvi by Amos Tversky and Daniel Kahneman showed how information presented first – even if it’s ridiculous – sways committees. In a business context, the classic example of this ‘Anchor Effect’ is when a dominant, authoritarian boss opens the discussion in a meeting. When they speak people tend to shut up, listen and agree – even if they are wrong.

An effective way to counter the ‘halo’ and ‘anchor’ biases is to have every person write down and circulate their views prior to the meeting. This limits the first-mover advantage and the threat of slick presentations having too much sway.

Secondly, don’t have the same person leading the meeting every time. Random assignment reduces the anchoring effect and it limits the chances of a single person taking over and dominating a meeting.

  • Too much consensus can change minds

There is natural inclination to agree with the group even when an individual knows the decision is wrong. In a famous experimentvii , psychologist Solomon Asch showed how palpable group-think conformity can be. Even when the material is relatively straightforward, the group can push an individual into making the wrong call.

To stimulate discussion and to prevent personal interests taking over, the leader of the meeting has to encourage and reward disagreement. Simple ways to achieve this are by verbalising the minority view to balance the discussion or offering a ‘devil’s advocate’. Be sure to keep back channels open as well. People who disagree with an action but are afraid to say it in a meeting need to know they can communicate their concerns to the forum leader to ensure all viewpoints are ultimately considered.

  • Reputational risk is a killer and creates risk aversion

Research has shown people in committees are often more worried about the cost to their reputation than making the right call. There is a natural inclination of people to avoid disagreement instead of upsetting another decision-maker. Similarly, no one wants to be seen as a fool and so will sit on an idea or an interjection if there’s risk of being seen as foolish. A clever experiment viii by Gilat Levy shows the incentive to vote against a controversial measure rises in correlation with the likelihood a participant will be blamed for its passage – the classic problem of risk aversion and decision-maker passivity.

A business should never assume its interests are perfectly aligned with its decision-makers; you have to create the incentives and accountability for people to make the call in the interests of the business, not their career.

Remove Barriers and Evolve Your Business

While there are many hurdles to enacting any type of overarching organisational change, the growing pains can be mitigated by a measured, thoughtful approach. Understanding how decisions are made – or not made, for that matter – can help prepare you to open the lines of communication, prevent bias and enact change.

Getting your leadership team to agree on the plan and commit to action may take time, but creating a space where the challenges of bias, fear and procrastination have been reduced will go a long way towards getting the ball rolling on your evolution to a digital marketing and sales model.

ivLadha, Krishna K. “The Condorcet Jury Theorem, Free Speech, and Correlated Votes”. American Journal of Political Science 36.3 (1992): 617–634.
vMarquis de Condorcet. "Essai sur l'application de l'analyse à la probabilité des décisions rendues à la pluralité des voix" (PNG) (in French). Retrieved 2016-03-10.
viKahneman, Daniel; Tversky, Amos. "Prospect Theory: An Analysis of Decision under Risk". Econometrica 47 (2) (1979).
viiAsch, S.E. “Effects of Group Pressure on the Modification and Distortion of Judgments. In H. Guetzkow (Ed.), Groups, Leadership and Men (1951): 177–190.
viiiLevy, Gilat. “Decision Making in Committees: Transparency, Reputation and Voting Rules”. American Economic Review 97 (1) (2007): 150-168.