While many digital transformation project fail, there’s still hope if an organisation can ensure that six critical success factors are in place, said Boston Consulting Group recently.
These critical factors can reverse the odds of success from 30% to 80%, the company pointed out.
According to Flipping the Odds of Digital Transformation Success — a new report released by BCG recently, only 30% of transformations met or exceeded their target value and resulted in sustainable change.
The report is based on BCG’s research involving both internal and external data sets: internal data from BCG’s experience working with 70 leading companies worldwide on their digital transformations over the past several years and external data from the responses of 825 senior executives in a detailed survey about their transformation experience, the company said.
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, the report adds.
From a comparative point of view, successful transformations created, on average, 66% more value, improved corporate capabilities by 82%, and met 120% more of their targets on time than transformations that created only limited value, BCG said.
Compared with those that created some value, winners created 29% more value, improved capabilities by 20%, and met 32% more targets on time, BCG noted.
Digital leaders achieve earnings growth that is 1.8 times higher than digital laggards—and more than double the growth in total enterprise value, the firm added.
In the short term, digital technologies and ways of working offer productivity improvements and better customer experiences, said Patrick Forth, a BCG managing director and senior partner and a coauthor of the report.
“In the medium term, digital opens up new growth opportunities and business model innovation. Successful transformations also set companies up for sustained success; they won’t have to digitally transform again as they master continuous innovation,” he noted.
The six critical success factors
According to BCG, the six success factors are:
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.
Leadership commitment from CEO through middle management. The company has high leadership engagement and alignment, including often-overlooked middle-management ownership and accountability.
Deploying high-caliber talent. Management identifies and frees up the most capable resources to drive the transformation program.
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.
Effective monitoring of progress toward defined outcomes. The company establishes clear metrics and targets around processes and outcomes, with sufficient data availability and quality.
Business-led modular technology and data platform. The company puts in place a fit-for-purpose, modern technology architecture driven by business needs to enable secure, scalable performance, rapid change deployment, and seamless ecosystem integration.
The two necessary conditions
When tackling these six factors, companies must satisfy two conditions, BCG pointed out.
First, management needs to make sure that each of the six is adequately addressed in their planning, preparation, and execution, according to the report.
Most companies put effort into this, but the majority of these organizations do not address each factor sufficiently, BCG noted.
Second, it is crucial to address all six factors, the firm advised.
Companies that adequately addressed only three or four failed, BCG pointed out.
Of all of the possible combinations examined, none had the same impact on success as these six, the company added.
