Introduction
The aim of this essay is to present an exploration about the impact of using digital technology in a financial SME, and more extensively what are the conflicts, contradictions and dissonance in the management culture that impact on this digital progression? It is divided up into four sections. The first sets out an overview of the impact of organisational culture in a financial SME and the wider financial sector business climate. The next section reviews the impact of a digital transition with an exploration of the Technology Acceptance Model (Davis et al., 1989), the Theory of Planned Behaviour (Ajzen, 1985) and the required paradigm shift that is necessary to drive forward the digital marketing. The final section looks at the exact transition to digital technology, specifically in the finance sector. ‘Digital’ is a ‘disruptor’ this aims to understand why this is, and the perceived value of risk explored (Bauer, 1967). The conclusion will follow and from this the development three hypotheses for future exploration.
Current Situation:
In Asset Finance Solutions (AFS), there is much talk about wanting to progress the digital offering for both franchisees and the clients, but there is little evidence of this progression happening.
Anecdotally, the Operations Director feels that the digital arm of the business will grow organically through social media over time that there is no need for future proofing and heavy investment in digital. The first of the conflicts arise through the self-named MD feel that this is where the marketing focus should be, but this is only because the competition is already benefitting from using this medium, that he feels financial investment may not be the answer, also wanting to see results before apportioning investment to it. The Compliance Director is the only senior executive to have researched digital in the financial marketplace and fully understand the implications of becoming more digitally focused, but his personality is not strong enough to stand up to either of the other Directors individually and never collectively. Resulting in, one for digital technology, one against and one still to decide.
In AFS environment, an small medium enterprise (SME) where the management struggle to relinquish power, causing conflict because they want the business to move forward whilst retaining the same level of control. This is a contradiction – how do you move forward without releasing any control in the flat organisational structure of the heroic mindset (Gosling and Mintzberg 2003), is it possible to convince the Director’s to release some control whilst still feel they are in overall control? Currently there is dissonance within the business with both the management team, unable to run the business how they feel it needs to go? Also with the Owner/Directors who each feel they know what is best to take the business forward.
Organisational Culture
An organisations culture plays an important part in the future growth of a business, therefore it is necessary to understand what role culture plays on an organisation, and its development and how management teams can future-proof the business using digital technology. Corporate culture is represented by, “the aggregate of qualities, temperance’s, acknowledged practices (both great and not all that great), and the political environment of an association” (Bliss, 1999, cited in Gunasegaram, 1999). In AFS the culture has been created by the Owner/Directors, but that culture is changing as the dynamics change with the implementation of new technology, the digital technology is likely to reshape the culture. This will create conflict with the self-named MD, he wants to introduce digital technology to move the business forward, whilst at the same time without relinquishing any of the control. Using the Five Stages of Small Business Growth, (Churchill and Lewis, 2007) applying the values from the author’s framework, of the five different stages to small business growth: Existence; Survival; Success; Take-Off; Resource Maturity, it can be established where it sits on the growth charts. This aids the business understanding of the current challenges it faces and can help predict key requirements at various points including if there is a need for delegation and changes in their managerial roles when the business becomes larger. Applying this knowledge enables better understanding of the Director\’s motivations. The chart helps understand how SME’s change and although these changes are small to large business it has a profound effect on a small business like AFS. In translating the model and applying it to the organisation it is useful as an indicator of where the business is at both operationally and strategically and helps understand some of the Director\’s response to changing with digital technology and the reluctant motivations of the MD to use new digital technology. Using this framework, AFS is aiming to transition out of the survival stage towards the success stage they have sufficient cash flow – just, to see them through the short to medium term and have expanded the structure to include more staff but are reluctant to release any control (deliberate or not) still relying on their reputation to keep new franchisee\’s joining.
The question of management culture and how it is impacted by digital progression, was raised as part of the Price Waterhouse Cooper (PWC) 19th Annual Global CEO Survey article (Grimwood and Kendrick, 2016) conducting a survey of CEO\’s and their view of changes including technological. This view is from the top of business structure and how they see the future. The CEO’s were from diverse sectors in different countries but the results had recurrent themes, these findings suggest they are an accurate representation of CEO\’s around the world. Customer behaviour is felt to have the biggest impact for the present time on business strategy from the survey results. This has become increasingly more difficult as increased buying preferences evolve. The three biggest trends CEOs see as most influencing the results are, technological advances, demographic changes and global economic shifts.
When (Chen et al., 2012), investigated the relationship between transformational leadership and technological innovation at the strategic business unit level of management, it was found that what style of leader you are affects the implementation of digital technology. By examining the effect of modern culture on transformational leadership it provides a better understanding of the role of transformational leadership and the role of innovative culture. It has become far more important today to better understand about the impact technology has on organisations good or bad, Gunasegaram (1999) wrote in her paper for the Social Aspects of an Information Oriented Society, some technology changes are not for the best and create negativity. The premise with the introduction of technology is to increase worker productivity and improve decision making in the workplace. The premise by the end user is going to be different as they are using it to facilitate their life. A comparative study by Noack, (1999) states “90.3 percent of employees report surfing non-work-related sites at some point during the workday”. It is important that the Directors authorise the introduction of digital technology without undermining the current corporate culture. To do this, fundamentally they must have support from the management team. Deal, (1999), cited in Gunasegaram, (1999), stated, that it is the atmosphere of a workplace that both attracts and retains employees, especially skilled employees. Everyone wants to be in a nice place to work. Although the Director/Owners created the business and the culture formed from them, as it has grown the culture is changed by the people working in the business, they want a friendly atmosphere where they are appreciated and not derided (Deal, 1999, cited in Gunasegaram, 1999). Deal and many other business consultants feel that today’s employees are what make a businesses have competitive advantage and a business should provide and maintain the type of culture that look for. This plays a more pivotal role today than previously because it is likely that the employees currently at the bottom of the corporate structure are going to be the ones using the digital technology, they are the generation which has grown up with the technology, there is no need to adapt as they have always known about how to use it, they are much quicker than Generation X, those born between the years 1965 and 1980 (Ernst & Young, 2011). This research also found that although those born between the years 1981 and 2000 (Millennials) are good with technology, they are not good team players nor are they the hardest working demographic. The Directors of AFS need a strategy implementation which involves aligning employees’ goals and incentives with that of the organisation’s strategy. (Hitt et al., 2010) enabling the business to be in in the best shape to adjust to cultural changes and likely future changes in technology.
To have a smooth transition to use digital technology, the Director/Owners must create an agreement among senior management teams on the strategy clarifying job roles, with clearly defined goals. This will help to motivate the wider team to accomplish these strategic objectives (Hartnell et al., 2016). Having the management team behind the Directors allows the business to work using the Functional Leadership Theory (Hackman and Walton, 1986; McGrath, 1962) the wider team are then able to contribute to the business effectiveness. In a functional leadership model, leadership does lie with a single person but on the group as a whole in the behaviours of how they things done. Any member of the group can perform these behaviours, so any member can become a leader in a ‘get the job done’ sense. This places greater emphasis on how an organisation like AFS is being led rather than who has been formally assigned a leadership role. If this model can be successfully introduced at AFS it will start to move the MD away from being an autocratic style leader with a step towards being more democratic. It enables those members of the wider team to use the skills they already have using technology for example, allowing the Administration Officer to run some of the social media platforms because she is 22 years old and a millennial who is using social media throughout the work day and in their personal time. It will engage her more effectively through the work day, where she has asked for more responsibility as she is bored. It will then help the business transition of incorporating digital technology where the devolved responsibilities may achieve better ‘buy-in’ from those further down the corporate ladder who often feel excluded from business decisions.
A considerable amount of literature has been written about what degree the management culture is influenced by the Owner/Director and the impact of this on digital progression (Hartnell, C.A. et al, 2016). The latest theory looks at any variances in CEO leadership styles whilst incorporating the organisations culture and do these variances play a part in the business operations (Hartnell et al 2016). It contextualises CEO leaderships effects. CEOs lead their organisations within the context of an existing organisational culture (Klimoski, 2013). In looking at these aspects they look at the impact a CEO or in the case of AFS, MD, has on the organisational culture and what effect each type of behaviours creates in the workplace. As businesses accept challenges of the increasingly competitive environment with digital technology, they recognise better approaches to compete with to meet the customers’ demands. It has been theorised that it may work in their favour to have differences between leadership and culture (Hartnell et al, 2016). It is important for the business owners to remember they may need to modify their style over time to continue being effective, it is easier to change one’s leadership behaviour than to change an organisation’s culture.
With the introduction of the General Behavior Model and New Definitions of Organizational Cultures (Wu, Jay Y 2008), the accepted definitions of organisational culture to better understand the drive for digital and whether the culture can inhibit the need to progress technologically. This research does progress the definition of culture in both the macro and micro environment and takes in more variables within the business. There has been some additional evaluation of this theory again by Wu (2008) looking at the fluidity of culture to change over time as all businesses change, organisational culture is an evolutionary process and we all learn from repeated choices. If we take this as correct and apply it to the business, then we might alter our position about the organisational culture and that it is not necessarily just derived from an autocratic style management but that it has evolved from lessons learned and changing ideas ore the past 10 years of trading. It is worth noting that it can also be impacted by how technology and culture are interlinked within society, it can be affected by national factors.
Digital transition
The aim of the business is to undergo a smooth transformation into digital technology, it makes each touch point for the customer easier and quicker. Digital conversion is a journey of multiple touch points, motivated towards improvements in processes, departments and overall business environment in the age of hyper connectivity that has resulted from the internet, mobile technology and the internet of things (The Economist, 2015).
The table below is taken from Smart Insights by Dave Chaffey, 2016
Downloads of mobile applications, or ‘‘apps,’’ will continue to grow, the table outlines the current state of digital, this has a growth, of social mobile users and as at January 2016 had grown to 17%., (Smart Insights (Marketing Intelligence) 2016). It is important the financial sector adopts a customer centric offer, but businesses like AFS cannot afford just to attach the digital technology onto existing operations, that would be just paying lip service to customers (Saul J Berman, 2012).
The customer will adapt to whatever technology is offered, (The Technology Acceptance Model, Davis et al, 1989), it is not the technology that gives a business a competitive advantage, but how it is applied (Dave Chaffey, 2016). The Technology Acceptance Model (TAM) (Davis et al., 1989) tells us that people use technology to help them perform their job better, but this has now been extended, it is no longer just about adopting technology and accepting that customers will adapt to it, it is now about how to understand how a customer feels. This model originally intended to help understand how employees adapt to new technology, but now is used to help also understand people outside their working lives. Technology in the workplace has continued to move at pace, but in our leisure time it has increased at a more rapid pace, the first mainstream smartphone, the iPhone was introduced only 10 years ago, and is already on version 7. In the world of social media platforms, customers appear to have little loyalty towards a brand (Berman, 2012). In the past banks, have been indifferent to customer needs and wants, you got what you were given and had to accept it because all the major banks were the same. Now the larger banks are beginning to see that it is the customer who will shape the trading landscape, rather than the regulatory boards that set it currently. Use of the Theory if Reasoned Action (Davis, Bagozzi and Warshaw, 1989) helps banks to predict customer intentions, which becomes key to enabling the digital technology to be effective. Customers will use whatever platform they feel is appropriate to accomplish what they need to, today people are much more comfortable using the internet to do their personal banking, but there is a caveat around that, they are happy to use the internet where they are comfortable with the safeguarding of their personal information is not hacked or cloned by third parties stealing data. Security will always remain a main priority for the financial sector because this is the customer fear, that their privacy will be accessed and used. Today’s customer is much more likely to use the internet for information gathering before they go into a branch and they are not afraid to use social media if they feel they have not been treated as they expect.
Banks must fully engage with customers’ needs today and to do this they must re-evaluate their value proposition and reshape their operating model (Saul J. Berman 2012), this is a difficult proposition for banks given today\’s omnichannel communication levels. The finance sector has been left behind in this respect because the greater market share is still with the big banks, who although have multiple touch points and more historical data to reference, are only just undertaking to align themselves more closely to their customers. A Taiwanese study looked at determines the user acceptance in internet banking (Wang et al., 2003) understanding what makes customers adapt to online banking, this study extends the TAM and Theory of Planned Behaviour. The investigation looked at Taiwanese banking customers and how they were adapting to the latest internet banking technologies, and if, not why not as millions are being spent by banks in creating these new digital systems. It looked in part at whether the perceived risk value in purchasing financial products, has increased in terms of the purchase price of said item using digital technology? If customers are happy to purchase financial products online the move to digital is obvious, but if there is any doubt still about these purchases being online, then it needs a suitable implementation strategy. There is sound reasoning for the premise that the TAM needs extending further to include internet banking and “perceived credibility” encompassing user\’s understanding. The study itself was limited in terms and not fully representative of the banking customer it was limited to millennials and Generation X but it shows that a multi-dimensional hypothesis is required and that Perceived ease of use, perceived usefulness, and perceived credibility were found to be significant experiences as to whether to customers use internet banking. This logic applied to AFS would support the MD’s desire to move to digital, if the models were applied to AFS based on the two demographics highlighted in the study but a wider understanding needs to be clarified, we do not yet understand whether other demographics would be quite as ready to adopt the digital technology, Baby Boomers who make up a third of the AFS client base.
To understand what motivates customers to adopt internet banking it needs to be examined from the customer’s perspective. As said the landscape of the financial future will be determined by the customer, the paper by Yaghoubi and Bahmani., (2010) suggests that the perceived behavioural control is the most important predictor of the intention to use online banking. Similar results were found by Taylor and Todd (1995) cited in Yaghoubi and Bahmani (2010), which indicated that perceived usefulness has both direct and indirect influences on behavioural intentions toward using technology. In addition, Pikkarainen (2004) and Chan Lu (2004) cited in Yaghoubi and Bahmani (2010), explored customer acceptance of Internet banking in Finland and Hong Kong, respectively, they both came to the same conclusion, perceived usefulness is more important than perceived ease of use when understanding the acceptance of online banking.
Banks are trying to adapt to customer’s preferred buying preferences, and by looking at how customers buy other products online, helps to form a picture of what they need to do to get customers to accept more financial products online. Initially banks adoption of internet technology was a way of making efficiencies in operations Bain,(2012 as cited in Vater and Sidebottom, 2012). A study was undertaken to understand perceived value of purchasing online and what factors influence a desire to purchase online and what suppliers must do to satisfy that desire that keeps customer\’s returning, it is necessary to understand what factors influence customer’s emotions when purchasing online rather than offline (Othman, 2013). If business like AFS is able to manage their CRM system effectively, it will improve customer satisfaction and get better customer retention, particularly applicable to financial businesses who are currently trying to make their operations more customer focused.
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