In the rapidly evolving age of AI, financial brands face significant challenges as research indicates that 60-85% of all digital transformation initiatives have either failed or not met expectations. The biggest roadblock? Surprisingly, it isn't technology; it's people. These individuals, who are responsible for deploying and utilizing new technologies, can either be barriers or catalysts for growth. Many financial brands fail to recognize the importance of human transformation alongside digital transformation.

In a recent episode of the Banking on Digital Growth Podcast, James Robert Lay welcomed Pia Wendelbo, the founder and CEO of Scandinavian Change Agents. With over 15 years of experience in guiding change for major financial institutions in Europe, Pia offers invaluable insights into managing exponential change in the age of AI.

The top 3 insights from this article:

  • The Importance of Human Transformation in Digital Transformation
  • Understanding Neuroscience and Behavioral Modification
  • The Role of Cognitive Frameworks and Continuous Learning

The Human Side of Digital Transformation

In the Age of AI, the human element remains crucial. As financial brands navigate the challenges of digital transformation, it's essential to prioritize human transformation and understand the interconnectedness of customer, digital, and employee experiences. As Pia aptly put it, understanding "how we as humans actually take on change" is paramount. "If you want to have a successful digital transformation, you definitely need to look at the human side of it."

Pia believes that leaders often overestimate how quickly people can adapt to new habits and ways of working. She emphasized the importance of considering the entire value chain, from business strategy to staff engagement, to ensure an optimal customer experience.

James Robert introduced the concept of "DX + HX = Growth," explaining that a positive digital experience combined with a positive human experience leads to growth. However, he acknowledged overlooking the employee experience (EX) in this equation. He believes that a brand's customer and human experiences are only as positive as the internal employee experience.

Pia agreed, noting that there's still a long way to go in understanding and improving the employee experience. She emphasized the need for managers to understand neuroscience and behavioral design to better grasp how people handle change.

Neuroscience and Behavioral Modification: Navigating System One and System Two Thinking

While digital transformation revolves around data, James Robert argues that behind every data point is human DNA. He emphasizes the importance of understanding the human experience in the context of digital transformation.

Pia, an expert in change management, discuss the role of neuroscience and behavior modification in digital transformation. Pia introduces the dual process theory, which explains how humans make decisions. System one is intuitive and unconscious, like brushing your teeth or riding a bike. On the contrast, system two is slow, reflective, future thinking and rational. System two requires a significant more amount of energy, Pia believes that understanding this theory can significantly improve the success rate of digital transformations.

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Humans inherently seek efficiency, often preferring not to expend more energy than necessary. This means we naturally lean towards using our intuitive thought processes, referred to as system one. However, when faced with changes like digital transformation, which might require us to adapt our work methods or change our approach to customers, we are forced to engage our more deliberate and analytical thought processes, known as system two. Many managers overlook this shift, expecting employees to easily adapt, but in reality, it's a more complex transition.

James Robert references the book "Thinking Fast and Slow," which elaborates on this dual system thinking. He underscores the energy required for system two thinking and how it can be exhausting for individuals. This energy drain is why setting up a conducive environment for change is crucial.

Pia sees numerous opportunities in understanding and working with the dual process theory. She suggests chunking transformations into smaller, manageable pieces to ensure long-term success. Pia believes that by approaching transformations differently, the failure rate can be significantly reduced.

James Robert emphasizes the importance of continuous learning and progress. He believes that adopting a curious mindset, akin to that of a child, can be beneficial. However, he also acknowledges the challenges in fostering continuous learning, especially in the financial services sector.

The Importance of Continuous Learning and the Role of Cognitive Frameworks

Pia attributes the struggle for continuous learning in financial services to a focus on short-term goals and the lack of a conducive framework for experimentation and innovation. She believes that creating space for long-term perspectives and fostering a culture of experimentation can lead to significant advancements.

James Robert highlights the risks associated with the lack of continuous learning in financial services. He believes that in a sector centered around managing risk, not investing in ongoing learning and development poses a significant threat.

They also discuss the significance of frameworks in guiding action and decision-making. James Robert introduces the Kolbe methodology, which evaluates how individuals naturally take action or solve problems. The Kolbe A Index, developed by Kathy Kolbe, categorizes individuals based on four areas: Fact-Finding, Follow-Thru, Quickstart, and Implementer. These categories provide insights into an individual's natural tendencies and problem-solving approaches.

James Robert highlights the phenomenon of conitive cloning, where leaders tend to hire individuals who think and act similarly to them. This lack of cognitive diversity can lead to repetitive problem-solving approaches and hinder innovation. Pia emphasizes the importance of understanding team dynamics and individual biases to ensure diverse perspectives and approaches.

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Pia suggests taking an operational approach to understanding team dynamics. By mapping out how team members view problems and situations, leaders can identify potential biases and gaps in the team's cognitive diversity. She recommends initiating discussions about success and failure scenarios, as these conversations can reveal diverse perspectives and potential biases.

Open communication about individual preferences, reactions to stress, and communication styles can help teams navigate cognitive biases. By laying these biases on the table, teams can address them head-on, fostering a more inclusive and effective problem-solving environment.

Navigating Change in the Digital Age

James Robert emphasizes the importance of understanding the human experience to increase adaptability in collaboration. Pia suggests open discussions about fears and concerns, emphasizing the importance of psychological trust within teams.

Both James Robert and Pia highlight the significance of reframing failure. James Robert introduces the concept of "winners and learners" instead of viewing situations as successes or failures. Pia stresses the importance of open discussions about potential pitfalls and challenges, allowing teams to address them proactively.

James Robert introduces the concept of the "future self," a relatively new perspective in psychology. It focuses on how envisioning our future selves can influence our present decisions. This concept can be applied at both individual and organizational levels, prompting teams and organizations to consider what they might sacrifice in the present to achieve their long-term goals.

Characteristics of Successful Change Managers

Pia outlines the key traits of successful change managers in today's digital age:

  • Curiosity: An open and inquisitive mindset.
  • Vision: A clear direction and purpose.
  • Communication Skills: The ability to convey ideas effectively.
  • Empathy and Emotional Intelligence: Understanding and connecting with others.
  • Resilience and Adaptability: The capacity to navigate challenges and change.
  • Stakeholder Engagement: Building relationships and creating space for change.

Pia recommends creating "slack" or space within organizations to facilitate change. James Robert echoes this sentiment, urging individuals to consider what they might need to let go of to continue growing.

Navigating the complexities of change in the digital age requires a blend of emotional intelligence, adaptability, and open communication. By reframing failure, envisioning our future selves, and creating space for change, individuals and organizations can effectively navigate the challenges and opportunities of digital transformation.

Take Action Today:

  • Prioritize Human Transformation: Organize workshops or training sessions that focus on the human side of digital transformation. Engage experts like Pia to provide insights and guidance on managing change effectively.
  • Invest in Understanding Neuroscience and Behavioral Modification: Introduce reading materials or training sessions on the dual process theory, such as the book "Thinking Fast and Slow." Consider implementing strategies like "chunking" transformations into smaller, more manageable pieces, as suggested by Pia.
  • Promote Cognitive Diversity and Continuous Learning: Use tools like the Kolbe A Index to assess team dynamics and identify potential biases. Organize brainstorming sessions where team members discuss success and failure scenarios to reveal diverse perspectives. Create a conducive framework for experimentation and innovation, allowing space for long-term perspectives.

For more about financial transformation, reach out to James Robert Lay at the Digital Growth Institute.