Study of 900 digital transformations: Only 30% are successful

23 February 2021 Consulting.us 5 min. read

Based on its own client partnerships and over 800 survey responses, Boston Consulting Group (BCG) has concluded that only 30% of digital transformations worldwide are actually successful. The firm lays out six factors that can help “flip these odds.”

Digital transformation encapsulates a complex range of fundamental changes to an organization – spanning people, processes, infrastructure, sustainability, and capacity to innovate in the long term.

For BCG, a successful transformation meets or exceeds expectations on each of these dimensions, within a planned timeframe. The firm looked at 70 of its own projects with leading global companies, and combined it with a survey of over 800 senior executives around the world – to find that only 30% of transformations are successful by this standard.

Study of 900 digital transformations: Only 30% are successful

These are digital leaders – who the researchers put in the ‘Win’ bracket. Of the rest, over 40% drew some value from their transformation, but fell short of targets and were unable to build sustainable change. These businesses are in the ‘Worry’ zone. The remainder – around a quarter – are in the ‘Woe’ zone, with less than half of their targets met and no long-term transformation delivered.

A 70% failure rate is worrying by any standard, particularly at a time when digital transformation is essential not only to surviving a pandemic-induced economic crisis, but also to thriving in the new normal. According to BCG, success in digital transformation boils down to six key factors, which could flip the odds from 30% to as high as 80%.

Six success factors

Number one is to have "an integrated strategy with clear transformation goals." Tom Reichert, a managing director and senior partner in BCG's New York office, describes this as “a clear vision backed by a set of strategic imperatives and quantified business outcomes, linking digital to the overall business strategy and sustainable competitive advantage.”

Study of 900 digital transformations: Only 30% are successful

This keeps efforts on track, and helps build purpose. With this is place, the second factor comes into play: "leadership commitment from CEO through middle management." A bottom-up approach tends to work best, where CEOs involve all ranks of their business in the transformation process. “Without this, middle managers often become sources of resistance, defending functional siloes and power bases,” noted Reichert.

Digital transformations can also be a cause for insecurity among the lower ranks – as any fundamental change in the direction of automation threatens jobs. BCG envisions a “bionic” organisation – where humans and technology work in collaboration to deliver outcomes. This cues in the third success factor –  "deploying high-caliber talent."

Only one in four organisations have the right mix of skills to deliver a successful transformation. A set of digital experts equipped with cutting-edge expertise and an innovative mindset must drive change, surrounded by hands-on employees set on “persistence, pragmatism, resilience, collaboration, critical thinking, creativity, emotional intelligence, and learning agility,” per the report.

A strong talent management system aside, this will also require "an agile governance mindset that drives broader adoption" – the fourth success factor. This entails dynamism, flexibility, and readiness to respond to new obstacles and challenges among leaders. It also means targeted initiatives to build an agile mindset through the ranks – complete with handbooks and clear operating models.

Study of 900 digital transformations: Only 30% are successful

Factor number five is the "effective monitoring of progress towards defined outcomes." A set of key performance indicators (KPIs) helps, supplemented with regular checks that are discussed at the strategy and implementation level. 

The last success factor is a "business-led modular technology and data platform."

“Among successful transformations, 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,” explained Reichert.

Combined, these factors can dramatically increase the odds of digital transformation success to 80%, while no one factor can do the trick on its own. As transformation climbs higher up the corporate agenda, the benefits are there for all to see.

Per the research, digital leaders clock nearly twice the earnings growth of digital laggards – all while improving productivity; delivering better customer experience; creating new growth opportunities; innovating business models; and keeping pace with the rate of change in today’s world.