Digital transformation is on the agenda of most companies today, but achieving success in this area is not easy. More than seven in 10 survey respondents working at firms pursuing digital transformation say the progress of these efforts has slowed or stalled at some point, according to a McKinsey Digital research titled "How to restart your stalled digital transformation".
The research surveyed 1,256 C-level executives and senior managers worldwide and found that more than 60% of respondents who report stalled digital transformations attribute the problem to factors that - with the right discipline and focus - organisations can control in the near to medium term. This funding, according to McKinsey, runs counter to common assumptions that external pressures, such as regulatory changes or market disruptions, pose "the biggest threats" to digital initiatives.
The most commonly cited factor in the research was resourcing issues (20%). According to McKinsey, this reveals that "the trouble is not simply a matter of allocating sufficient funding or talent" when it comes to digital transformation.
More than half of respondents (53%) said their resourcing problems result from the ways funds are earmarked or allocated among initiatives.
Meanwhile, other factors cited included misaligned culture and ways of working (18%), lack of core competencies (15%), insufficient alignment and/or commitment across organisation (14%), and lack of clarity on transformation strategy (14%).
According to McKinsey, some of these factors typically take longer to address and are harder to overcome. An ineffective or misinformed transformation strategy (20%), and lack of clarity on transformation strategy (26%) have the lowest success rate. Meanwhile, nearly 40% of respondents identified misaligned culture and ways of working as the main cause of digital transformation stalling.
This group of respondents cited hierarchical cultures and siloed ways of working as 'the biggest killers' of digital momentum.
McKinsey explained that adapting the company's culture to hasten innovation is a struggle that takes time to address for many organisations. "Overall, internal challenges pose more problems than external ones do. Only 6% of respondents attribute the derailed momentum to a major disruption in the market or business landscape.
Interventions commonly undertaken when digital transformation stalls
When it comes to jump-starting stalled digital interventions, undertaking a rigorous change-management programme (28%), improving the economic model for the transformation's timing and impact (21%), as well as developing a robust internal communications plan (21%) were most associated with success. These percentages represent the difference in response rates at companies regaining momentum when implementing these three interventions, compared to companies not regaining momentum.
Meanwhile, all three were among the five most common interventions that companies initiate, with the most common one being hiring a new transformation leader (30%).
Tips to avoid digital transformation stalling
Companies should build strategic clarity and commitment across the firm. A lack of clarity and commitment might be one of the most common challenges and also one of the hardest to overcome. However, McKinsey said executives can create a clear, simple, and inspiring strategy that describes how digital technologies and ways of working will enable new value propositions and business models. The strategy can then be implemented throughout the organisation.
This strategy should also be translated into specific implications for each role and division to build both clarity and commitment.
Another tip is for companies to have a digital transformation plan that is grounded in a rigorous, realistic model of the transformation's specific economic objectives and the overall business outcomes it will produce. McKinsey said that such a model needs to be updated frequently.
"Leaders must revisit assumptions about the business model and expected financial outcomes so they can make investment decisions and trade-offs that will keep the organisation moving on its digital journey," it added.
Lastly, companies should set aside resources and execution capabilities. To carry out digital transformation, firms should also change their approaches to talent acquisition and development, their ways of working, and their operating processes in ways that go beyond the light-touch adjustments needed to complete pilot projects.
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