Discovering the Keys to Victory in Digital Transformations

Executing digital transformations successfully is an even more challenging task than executing traditional change initiatives. However, the findings from the transformations that were the most successful indicate five key components of success.

Many businesses, in response to the profound impact that digital technologies are having on an increasing number of business sectors, are undertaking extensive transformation projects in order to capitalize on the opportunities presented by these shifts or simply to maintain parity with their rivals.

According to the findings of a recent survey on digital transformations conducted by McKinsey Global, more than eight in ten respondents indicate that their companies had engaged in such endeavors during the last five years.

However, achievement in these transitions is proving to be difficult to achieve. Our earlier research found that fewer than one-third of organizational transformations are successful at improving a company’s performance and maintaining those gains. However, our most recent findings find that the success rate of digital transformations is even lower than the success rate of organizational transformations.

The findings from respondents who do claim success indicate a total of 21 recommended practices that, when implemented, make it more likely that a digital transformation will be successful. These qualities may be broken down into five categories: leadership, competency building, worker empowerment, tool upgrading, and communication.

These categories outline where and how businesses should begin to enhance their odds of effectively implementing digital improvements to their operations in order to increase their chances of success.

Both traditional and digital transitions are challenging

The success rate of changes has been persistently low, at less than 30%, according to years of research. 2 The data from this year suggests that digital transitions are even more challenging than last. Just 16% of people polled believe their company’s digital transformation has improved performance and given it the tools to keep the improvements in place. Another 7% claim that performance did increase, but it was not maintained.

The computer, media, and telecommunications sectors, which should be particularly well-suited to the digital age, are also suffering. Only 26% of businesses in these sectors are successful. Success rates for digital transformations range from 4% to 11% in more conventional industries like oil and gas, automotive, infrastructure, and pharmaceuticals.

The rate of success likewise varies depending on the size of the organization. A successful digital transformation is 2.7 times more likely to be reported by respondents from firms with less than 100 workers compared to those from enterprises with more than 50,000 employees.

Analysis of how digital transformations are structured

Whether an initiative to effect change was successful or not, there are commonalities among the digital changes taking place today that may be drawn upon. One reason is that while making adjustments, businesses look within. Sixty-eight percent of respondents named this as the primary goal of digital changes for their organizations.

Fewer than half of those who used digital channels to accomplish their goals said they did so to promote the introduction of new products or services or to facilitate communication with external partners. Additionally, digital transitions typically cover a lot of ground.

Eight out of ten respondents said their most recent change initiatives covered numerous roles, business units, or the whole organization. Adoption of new technologies is also essential to digital transformations. Four out of eleven technologies we asked about are being employed by companies on average, with the most common being “conventional web tools” used in the great majority of these endeavors.

While successful transitions are associated with increased technology deployment, this is not always the case. This may seem contradictory, given that having access to a wider variety of technologies may make the implementation of transformation projects more difficult, leading to increased risk of failure. In contrast, firms that have successfully undergone transitions are more likely to employ cutting-edge technologies such as AI, IoT, and neural machine learning.

Achieving success relies on a few crucial factors

The availability of such resources is only half the story. Companies may use the survey results to guide their technologically-supported adjustments that will set them apart in digital transformation.

Our findings suggest a number of variables that may increase the likelihood of a successful transition. All of these elements may be broken down into the following five classes:

• having the proper, digitally aware executives in place,
• constructing skills for the workforce of the future,
• enabling employees to work in new ways,
• providing with day-to-day technological progress,
• communicating via traditional and digital means.

Having the proper, digitally aware executives in place

Digital transformations change everything, especially talent and skills. Nearly 70% of respondents indicate their firms’ top teams changed throughout the transition, most often when digital leaders joined the management team.

Transformation success requires such a leader. Transformation-specific roles—leaders of particular projects and program-management or transformation office executives who work full time on change—are also important. Leadership commitment helps too. Digital transformations succeed when top management and transformation-specific staff are more involved than in previous change attempts.

Other studies show that successful transformations feature digital-savvy leaders. Only 30% of respondents have hired a chief digital officer (CDO) to assist their transitions. But they are 1.6 times more likely to claim a successful digital transition.

Constructing skills for the workforce of the future

The poll shows that cultivating talent and skills throughout the organization—a key step in traditional transformations—is crucial to digital transition success. Three of our 21 success factors include worker digital skills. First, aligning roles and responsibilities with a transformation’s goals can assist identify the organization’s requirements. This strategy makes digital transformation 1.5 times more likely.

Integrators and technology-innovation managers, who bridge conventional and digital business areas, are two more essential. These jobs help colleagues develop internal skills. Integrators apply new digital processes to established labor procedures.

Integrators can bridge the firm’s conventional and digital sides since they have business expertise and understand digital technologies’ technical and business possibilities. Technology-innovation managers lead digital innovation projects and have technical expertise.

Beyond these three pillars, winning transformations have better-funded and more strong talent strategies. When respondents feel their companies have invested enough in digital talent, transformation success is three times more likely.

Scaling up staff planning and talent development also increases success (Exhibit 3). For instance, 27 percent of respondents report successful transitions when their firms set cross-functional or enterprise-wide hiring targets based on particular skill needs—nearly double the percentage of respondents whose organizations do not.

Using more methods throughout recruiting helps too. Public job postings and employee referrals do not affect success, but newer or less prevalent recruitment strategies do. Innovative recruiting campaigns—such as having candidates play games or locate hidden messages in source code—or technology conferences or “hackathons” double success rates.

Enabling employees to work in new ways

Our study shows that digital revolutions involve cultural and behavioral shifts, including measured risk-taking, improved cooperation, and customer centricity. This poll found two main ways effective transformations encourage workers to accept change.

Formal procedures to reinforce new behaviors and ways of working have long supported organizational development. New work habits are another crucial to transformation success.

Organizations that implemented at least one new method of working, such as continuous learning or open work environments, are more likely to succeed in their changes. Another aspect is letting employees decide where to digitize. Employees that propose digitizing ideas are more likely to succeed by 1.4 times.

Providing with day-to-day technological progress

The survey results demonstrate how and to what extent digitizing tools and procedures may enable people to operate differently. We questioned respondents about seven fundamental adjustments their businesses had undertaken since transitions began. Three of these changes—making digital tools a new organizational norm—were crucial to success.

Adopting digital solutions to make information more available across the company increases the odds of a successful transition. Digital self-serve technology for workers, business partners, or both groups doubles transformation success. Third, companies should update their SOPs to embrace new technologies. Beyond these elements, data-based decision making and visible usage of interactive technologies may more than quadruple a transformation’s effectiveness.

Communicating via traditional and digital means

As with conventional change attempts, digital transformations require effective communication. Communicating a change narrative helps employees understand the organization’s direction, why it’s changing, and why it’s vital. This technique triples the odds of transformation success for enterprises.

Senior leaders must communicate well to instill urgency in their units to make transformational changes. Successful firms tell richer transformation stories, according to other findings. Clear KPI objectives and schedule communication have the biggest impact on success.

Remote and digital communications complement the transformation’s goal more than in-person or traditional methods. Senior managers and initiative leaders had three times more success reaching employees remotely via new digital channels.

Forward-looking

While respondents think many digital transitions fail to improve performance and enable firms to maintain changes, lessons may be learnt from those that succeed. According to the poll, organizations may improve their chances of success during a change by:

Workspace redesign

According to earlier McKinsey studies, success needs digital-savvy executives and a staff that can implement digital transformation initiatives. 5 Digitization, automation, and other technology advancements will need firms to invest in and employ for quite distinct talents and competences.

Whether or not an organization has started a digital transformation, all firms should critically consider how digitization might affect their operations in the medium and long term and the skills they will need to keep up. Organizations must create workforce plans to identify their existing and future digital skills and competencies.

Upgrade the company’s “hard wiring”

Employees must be enabled to operate differently and keep up with the quicker pace of the company as digital necessitates new methods of working and culture changes. These changes will be supported by digital technologies, process improvements, and a more agile operating style.

Of course, leaders must let go of outdated methods (command-and-control supervision, for example). Since not all leaders have the experience to support or conduct such changes, specific leadership-development programs might help leaders and workers achieve the essential mindset and behavior changes.

Communicate differently

Traditional change attempts relied on good communication, and digital transformations do too. To allow new, faster methods of working and faster mind-set and behavior changes that a digital transformation needs, firms must be more creative in their channels.

One shift is to use internal social media instead of company-wide emails, which only allow one-way communication. Better organization-wide communication requires shorter, more personalized messages.