Boston Consulting Group identified six success factors, including an agile approach to all operations and putting digital natives in leadership roles.
Business leaders need to adopt agile principles to increase the chances of success for digital transformation projects, according to new research from Boston Consulting Group (BCG). The four authors of "Flipping the Odds of Digital Transformation Success" found that tech is important, but a company's organizational structure, operating model, processes, and culture are the determining factor in transformational work.
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Four managing directors at BCG used client experience and a global survey of senior executives to identify these six critical success factors:
- Setting a strategy that covers what, why, and how and defines specific business outcomes.
- Winning leadership commitment from CEO through middle management.
- Finding the most capable people to drive the program.
- Developing an agile governance mindset that is flexible and adaptable.
- Establishing clear metrics for processes and outcomes.
- Building modular tech and data platforms driven by business needs.
Digital leaders accomplish earnings growth that is 1.8 times higher than companies that are resisting the drive to modernize. The catch is that only 30% of digital transformation projects hit the goals.
Companies that got these six elements right had an 80% chance of success. The key is addressing all six factors in the planning, preparation, and execution of digital transformation work and to address all six factors. The report's authors found that these six factors are correlated with each other, for example:
"...adopting an agile governance mindset correlates strongly with the adoption of agile principles and culture through the organization."
The survey results showed that only 30% of companies made it to the win zone with goals met or exceeded and sustainable change accomplished. About 44% created some value but missed goals and resulted in only some long-term change. These companies are in the worry zone. Twenty-six percent of respondents were in the woe zone with no sustainable change to show for their efforts.
Companies that succeeded at transforming their tech stack and making other significant changes saw 66% more value, improved corporate capabilities by 82%, and met 120% more of their targets compared to companies in the woe zone.
The authors of the report found that the same six success factors are critical for all transformations, whether the project was a single digital initiative or multiple transformations going on at once. Also, there is no difference in success between digital transformations that include just one business unit and those that are company-wide.
Here is a closer look at two of these critical factors: The need to adopt an agile approach and to get the right people to lead this work.
Agile is the key
The report's authors emphasized the need for companies to make sure all operations adopted an agile approach to work. This means learning continuously, acting as one team, being outcome oriented, and adopting a bias to action.
The report quoted a BCG client who said that the leadership knew that deploying new IT architecture without addressing product and process complexity would have minimal business impact. Another executive quoted in the report said, "All IT teams were mandated to adopt agile DevOps, and this enabled tight business ownership, rapid iterations, and continuous feedback."
The key to making this shift is driving agile behaviors into the entire company. This requires "an authentic belief in the behavioral changes required, as well as playbooks, processes, and support ... to work in a cross-functional, mission-oriented way."
Another client said in the report that her team had an "impediments" agenda item on all weekly meetings so that program leaders could tell executives what the roadblocks were.
Soft skills are as important as tech skills
Another key factor was spending enough time to get the right people in place and then supporting those people. The report's authors found companies tended to underestimate the skills and expertise required to pull off a successful digital transformation. The report's authors found these skills to be as important as tech skills: ersistence, pragmatism, resilience, collaboration, critical thinking, creativity, emotional intelligence, and learning agility.
Leaders need to find the best people with the highest potential to lead a successful transformation. The report's authors recommend using this readiness checklist to assess the transformation team:
- Have you sent a clear signal that this is a career-advancing position?
- Have you taken extra care to fill pivotal roles such as program manager?
- Are there enough digitally literate people to drive new thinking?
- Have you sourced team members tactically from business units so that they can become champions in critical areas?
- Are there processes in place to replace poor performers?
- Do you have a detailed assessment of the skills required and gaps to be filled?
How to stay on track
In addition to tracking progress toward goals, company leaders should track the momentum of the project. Project leaders should ask these questions to measure momentum:
- How strong is the business pull for digital solutions versus the program push?
- How do the most talented people in the company feel about joining the program, wary or excited?
- Are executives diverting funding to other initiatives or defending the transformation project?
- Are people trying to lower expectations about the work or talking up the advancements?
These "threshold behaviors" are a good indicator of whether the work is headed in the right direction or stalled out.
The authors of the report include Patrick Forth, a managing director, Sydney; Romain de Laubier, managing director, Tokyo; Tom Reichert, managing director, New York City; and Saibal Chakraborty, managing director, New Delhi.
The internal data in the report comes from BCG's work with 70 global companies and the survey data includes responses from 825 senior executives in a detailed survey about their transformation experience.
In the survey of company leaders who had led digital transformation work, BCG asked executives to assess this work on a scale of 1 to 10. Success was measured by the percentage of targets met and value created, the percentage of goals met on time, success relative to other transformations, and success relative to management's aspirations for sustainable change.
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