In the corporate world, decision making tends to be viewed as a considered, binary process that is led by data and best practice – but businesses are ultimately run by humans. This means that the idiosyncrasies of the human brain influence a range of business choices.
These become obvious when processing the outcomes of technology-oriented decisions, which bring out every facet of our psyche. This is because, for lots of companies, new tech still represents an unknown quantity.
The Covid-19 pandemic acted as a catalyst for many businesses, who took the leap and embraced new digital tools to survive. A significant proportion, however, were less willing to take the plunge.
I recently collaborated with Xero on a behavioural science study that explored the psychological barriers to digital change. It found that, despite clear benefits, there remains a resistance to change and scepticism around technology adoption. While six out of ten companies claimed to be confident when embracing new technology, there was evident apathy towards technology, as only three out of ten would consider themselves worse off if digital investment is postponed.
Of course, factors such as cost can stall the pursuit of digital strategy, but I’ve often found that inertia around technology can be explained by psychological factors impacting business leaders.
Why are businesses still averse to technology change?
You might think businesses would be accustomed to constant change, making it easier for them to embrace new ways of thinking and tools to keep pace with an expanding digital economy. Instead, many still opt to maintain the status quo.
It’s true that change is the only constant in our lives, but we are often afraid of it. Theoretical models suggest that change causes stress because it is associated with a lack of control that stems from the unpredictability of the outcomes.
We lose control when our status quo is threatened – perhaps a new digital application is introduced to better support the finance team, but employees are nervous about the associated risk. It’s not a lack of experience of change holding them back, but an unknown result.
Avoiding psychology flaws in technology decision making
There are a number of psychological factors influencing digital decision makers. These can vary depending on the size of the organisation.
For larger businesses, ‘groupthink’ can be dangerous, taking hold when a leadership team does not seek insight from elsewhere in the company. This leads to faulty decision-making processes that occur in highly cohesive teams such as those of senior leaders, often bound together by hierarchical status. Since everything seems fine on the surface, they are likely to make more extreme decisions, which lean towards either being safe or being very risky. In stressful situations requiring significant change, such teams get so used to the status quo and the feeling of safety that comes with predictability, that they aren’t willing to consider any other paths.
For larger businesses, ‘groupthink’ can be dangerous, taking hold when a leadership team does not seek insight from elsewhere in the company.
Employees in larger firms are also more likely to lack psychological safety due to perceptions of disposability, especially at times of rapid change. They are less confident to speak up, something that often becomes entrenched during a crisis because people tend to agree with ideas imposed on them due to fear or the need to feel stability. In this context, key stakeholders in digital strategy may not voice their opinions.
Conversely, the decision-making burden may fall on just one person in a smaller business. This makes it easy to fall victim to cognitive errors. For example, ‘all-or-nothing thinking’ means small business owners may think something is either completely good or bad, meaning any change from the original choice may be perceived as a negative.
This is related to our brain’s response to change, when mental filtering means we only pay attention to evidence that supports our assumptions. The size of small businesses leave decision-makers with little social support from colleagues and makes it very hard for them to know if they are falling into these mind traps.
‘Nudging’ businesses into technology adoption
Given the psychological traps lying in wait, it’s difficult to persuade business decision makers that technology adoption is the right course. Usually, rational explanations and encouragement aren’t enough. It’s about shifting people’s mindsets – but humans change slowly.
Using nudge theory, we can apply different techniques to influence them. Many of these evoke our fear of missing out, an innate part of human programming. For example, being forced to compare ourselves with competitors can help to highlight the ‘what if’ and drive rapid change.
Otherwise, we can ‘prime’ business owners by sending them reminders or asking them to imagine a future in which they do or don’t adopt technology. Perhaps they are prompted to consider the impact of a decision on a loved one or colleague. Appealing to the imagination in this way can be very effective.
A moral imperative should of course govern any attempt to influence digital adoption in businesses. Regardless of the stakeholder – government, technology vendors or industry bodies – any attempt to affect change in business should be carried out without manipulation.
On the surface, it seems many businesses don’t want to take risks. But how risk is perceived can often be more telling. In the example of technology adoption, the perceived risk is adding digital tools or infrastructure. As Xero’s recent study showed, shying away from digital decisions is a far riskier path.
The pandemic has made it far more challenging to break free from inertia, but a better understanding of the individual behind the investment can help businesses make the right decisions.