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What Goes into a Successful Digital Transformation?

Nov. 11, 2020
With 70% of digital transformation efforts failing to meet expectations, Boston Consulting Group outlines the six elements that companies can use to increase their odds of digital transformation success.

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The integration of digital technology into all areas of a business, the phrase “digital transformation” has become a battle cry for many companies as they replace age-old ways of doing things with new, tech-enabled processes.

Along with fundamentally changing how organizations operate and deliver value to their customers, digital transformation also incorporates cultural change, continually challenging the status quo, experimentation and the ability to get “comfortable with failure,” The Enterprisers Project explains.

With more companies traveling down the digital transformation path right now, Boston Consulting Group (BCG) is looking closely at just how successful those efforts have been thus far, and what companies need to do to improve their odds of digital transformation success.

The timing of BCG’s report is impeccable in light of the many organizations turning to technology for help offsetting the impacts of the global pandemic, managing their suddenly-remote workforces and dealing with other external forces.

Digital transformations are an imperative as today’s leading corporations need to build bionic capabilities in order to harness the potential of disruptive technologies and integrate them into new processes, organization models and ways of working,” BCG points out in “Flipping the Odds of Digital Transformation Success.”This necessity has been accelerated by the pandemic.”

Falling Short

Not all of these companies are reaping maximum rewards from their digital investments. In fact, BCG says 70% of digital transformations fall short of their objectives, and often with profound consequences. It also says that 80% of companies plan to accelerate their companies’ digital transformations. “Overwhelming evidence shows that successful digital transformations drive performance and competitive advantage and propel companies toward becoming bionic,” BCG points out.

In the short term, digital technologies offer productivity improvements and better customer experiences, while in the medium term it opens up new growth opportunities and business model innovation. “Successful transformations also set companies up for sustained success,” BCG continues. “They won’t have to digitally transform again as they master continuous innovation.”

The problem is that digital transformations can be difficult to execute. While only 30% of transformations succeed in achieving their objectives, BCG says delivering fundamental change at scale in large, complex organizations is challenging. And while the technology itself is important, the people dimension (e.g., organization, operating model, processes and culture) usually determines whether an effort succeeds or fails.

“Failure should not be an option, and yet it is the most common result,” BCG explains. “The consequences in terms of investments of money, organizational effort and elapsed time are massive. Digital laggards fall behind in customer engagement, process efficiency and innovation.”

What’s the Recipe for Success?

According to BCG, companies that are experiencing the intended benefits of their digital transformations share six common success factors:

  1. An integrated strategy with clear transformation goals. The strategy describes the why, the what and the how, which are tied to specific, quantified business outcomes.

  2. Leadership commitment from the CEO through middle management. The company has high leadership engagement and alignment, including often-overlooked middle-management ownership and accountability.

  3. High-caliber talent. Management identifies and frees up the most capable resources to drive the transformation program.

  4. An agile governance mindset that drives broader adoption. Leaders address roadblocks quickly, adapt to changing contexts and drive cross-functional, mission-oriented, “fail-fast-learn” behavioral change into the wider organization. “They deal with individual challenges without losing sight of the broader goals,” BCG adds.

  5. Effective progress monitoring centered on defined outcomes. The company establishes clear metrics and targets around processes and outcomes, with sufficient data availability and quality.

  6. Modern technology architecture. “The company puts in place a fit-for-purpose, modern technology architecture,” BCG says, “driven by business needs to enable secure, scalable performance, rapid change deployment and seamless ecosystem integration.”

According to BCG the impact of these success factors—and the ways in which they materially shift the odds for success—are consistent across all types of digital transformation, geographies and industries.

“The recipe for success is the same,” it says, “although specific action plans to address each factor will vary with company context. The implications are important: Don’t get bogged down in the details until you are confident that you are configured for success.”

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