Here’s how to flip the odds in favour of your digital transformation
The Davos agenda 2021
BCG, January 2021
By Patrick Forth and Tom Reichert
- COVID-19 has highlighted the need to harness disruptive technologies without delay.
- Knowledge is power: there are 6 proven ways to prepare the ground for the introduction of new tech.
- Middle managers need to be on board as much as CEOs, and agility is key.
Our research shows that more than 80% of companies plan to accelerate their companies’ digital transformation plans, against the backdrop of a global pandemic having accelerated the urgency of digital transformation for businesses.
But our research also shows that:
- Only 30% of digital transformations have achieved their objectives, which is to say that they met or exceeded their target value and resulted in sustainable change.
- Another 44% created some value but did not meet their targets and resulted in only limited long-term change.
- A final 26% created limited value (less than 50% of the target) and produced no sustainable change.
Image: BCG analysis
However, companies can flip the odds. The technology is a challenge, but the people dimension (organisation, operating model, processes and culture) is usually the determining factor.
We have identified six areas you can address to reverse the chances of success from 30% to 80%.
They are based on our empirical analysis of 70 leading companies worldwide and a detailed survey of 825 senior executives. Here they are:
- Strategy — Create an integrated strategy with clear transformation goals
- Leadership commitment — Get leadership commitment from top and middle management
- Talent — Deploy high-calibre talent
- Agile governance — Adopt an agile governance mindset that drives broader adoption
- Monitoring — Effective monitoring of progress toward defined outcomes
- Modular technology & data — Business-led modular technology and data platform
- Create an integrated strategy with clear transformation goals
Only 40% of companies create a truly integrated strategy that can be translated into specific actions embedded in an actionable business roadmap that addresses use cases and technology, people and organisational capabilities.
2. Get leadership commitment from top and middle management
Successful companies have high leadership engagement and alignment, including often-overlooked middle-management ownership and accountability. Most CEOs and other top executives understand the importance of them committing to large-scale change. And yet this, by itself, is not enough.
Companies must also involve the relevant middle managers in the planning and execution of the transformation program to make sure they buy into the goals and strategy. As one executive put it, “We knew that it was absolutely critical to address the ‘frozen middle’. We couldn’t afford our middle management to be cynical or to want to preserve the status quo.”
3. Deploy high-calibre talent
Management should identify and free up the most capable resources they have, to drive the transformation program. Companies often do not have the mix of skills that they need, and they tend to underestimate the skills and expertise of the people required to execute a successful digital transformation.
In fact, only one in four organisations in our research cleared the hurdle on this dimension.
The successful companies paid particular attention to transformation leadership positions, addressing both digital expertise and broader skills.
4. Adopt an agile governance mindset that drives broader adoption
Successful leaders address roadblocks quickly, adapt to changing contexts, and drive cross-functional, mission-oriented, “fail-fast-learn” behavioural change into the wider organisation. They deal with individual challenges without losing sight of the broader goals.
Leaders should also be prepared to adapt the governance and adjust priorities on the basis of changing contexts. In doing so, they demonstrate resilience and reinforce commitment to the vision and goals, especially when there are setbacks or moments of truth, such as pressures regarding funding or competitors.
Driving agile behaviours broadly into the organisation requires belief in the behavioural changes required, as well as playbooks, processes and support to enable the organisation to work in a cross-functional, mission-oriented way.
5. Effective monitoring of progress toward defined outcomes
Successful companies also stand out for establishing clear metrics and targets around processes and outcomes, with sufficient data availability and quality. Only two out of five organisations in our study addressed this factor adequately, compared with 90% of organisations with winning transformation programs.
For example, one organisation implementing a new technology stack developed a comprehensive set of KPIs around the delivery of specified functionality. Management used data from the software teams to develop company-wide measures of productivity and defect rates as well as to assess progress toward agreed-upon milestones.
It also developed metrics for value realisation, measuring customer migration, operational efficiency (such as end-to-end processing without human intervention), and associated productivity benefits.
6. Business-led modular technology and data platform
More than half of the companies in our research struggled with a lack of flexibility in their technology platforms. Among successful transformations, however, two out of three invested in a business-led, modern, fit-for-purpose technology and data platform to support the development and scaling of digital use cases.
Successful CIOs reinforce that technology and data platforms must be designed around business priorities. They then implement them using best practices for modularity, flexibility, and scalability, with continuous learning and delivery.
A six-pronged attack with equal attention given to all
When tackling these six factors, companies must also satisfy two conditions.
First, management needs to make sure that each of the six is adequately addressed in their planning, preparation and execution. Most companies put effort into this, but the majority of these organisations do not address each factor sufficiently.
Second, it is crucial to address all six factors together. Companies that adequately addressed only three or four failed on average. Of all of the possible combinations of about 50 other factors examined, none had the same impact on success as these six.
Image: BCG analysis
In all industries, COVID-19 has accelerated the need for companies to transform their digital capabilities, and there is now no time for incremental outcomes. Whilst the costs of failure are high, the rewards of success are great.
About the authors:
Patrick Forth, Managing Director and Senior Partner, Boston Consulting Group
Tom Reichert, Managing Director and Senior Partner, Chair of the Practice Areas, and Global Leader of DigitalBCG, Boston Consulting Group
The views expressed in this article are those of the author alone and not the World Economic Forum.
Edited for Brazil by:
Joaquim Cardoso do Rosário
Senior Advisor of Health care to BCG — Boston Consulting Group.
cardoso.joaquim@advisor.bcg.com
