The keys to success in digital transformations

Here is a brief excerpt from an analysis by Blake Lindsay, Eugéne Smit, and Nick Waugh for the McKinsey Quarterly, published by McKinsey & Company. To read the complete article, check out other resources, learn more about the firm, obtain subscription information, and register to receive email alerts, please click here.

To learn more about the McKinsey Quarterly, please click here.

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In addition to assessing the outcomes of the overall transformations, respondents whose organizations have implemented a digital solution were asked to evaluate their organizations’ execution of four phases of a digital transformation: setup, piloting, scaling and implementation, and sustaining changes. Notably, while following every practice within each phase correlates with more successful outcomes, the responses suggest that some practices in each stage are particularly critical.

Setup

During the setup of a digital transformation, the results suggest that communicating clearly and establishing priorities are the most important practices for the successful management of that effort (Exhibit 3). When respondents agree that their organizations’ desired outcome for the digital solution was clearly communicated prior to its launch, they are 3.5 times likelier than others to report a successful transformation. When potential ideas for the digital solution are prioritized clearly, success is 2.7 times more likely. Expertise is also a success factor. Forty-seven percent of respondents report that implementation is successful when people with the most relevant expertise develop the business case for the digital solutions. When the business case was developed by others in the organization, such as the program-management office, just 18 percent of respondents report success.

During the setup of a digital transformation, respondents say clear communication and prioritization, and relevant expertise, matter most.

Piloting

Communication also is a differentiator for success among the piloting practices. Half of respondents report success when the timeline for implementation is communicated clearly; only 16 percent report success when it isn’t. Likewise, skills management has a strong bearing on transformation outcomes. Respondents are three times more likely to report success when piloting and rapid prototyping help to identify necessary new skills, and more than two times likelier to report it when their organizations have clear processes for identifying the necessary external skills.

Scaling and implementation

In 2014, respondents cited scaling and implementing as the phase most critical to a major change effort’s success. In the newest survey, responses point to the importance of key performance indicators (KPIs) to ensure that the solution is having the desired effects (Exhibit 4). Among respondents who say that their organizations monitor KPIs as part of implementation, 51 percent report success, compared with only 13 percent who report it where KPIs are not monitored. Success is also over three times more likely when organizations train employees to use the digital solution, establish clear processes for handing off solutions to specific business units, and enable employees to master solutions as soon as they are implemented.

When a company monitors key performance indicators during a transformation, its change effort’s success is four times likelier.

Sustaining changes

Finally, once a digital solution has been implemented, the most important practice for sustaining changes is embedding the solution’s KPIs (developed during setup and tracked during scaling and implementation) into the organization’s long-term processes. The responses suggest that organizations following this practice are seven times more likely than others to see successful transformations. Further, success is more than four times likelier when the organization focuses on two other practices: ensuring meaningful change in how the organization operates after the solution is implemented and allowing employees across the organization to improve and refine the new solution continually.

Looking ahead

In response to challenges the survey results revealed, here are some steps executives and their companies can take to improve the implementation of major change efforts—and digital change efforts in particular:

  • Stay engaged and be aware of blind spots. Given the importance of effective implementation, leaders of companies undergoing both traditional and digital transformations must be fully engaged in the effort. A lack of leadership engagement can put the success of any major change effort at risk. The most senior people can lead the way in a change effort by role modeling new behaviors the transformation requires, for example, and by being conscious of the organization’s ability—or inability—to execute in priority areas. It’s just as important to mind the blind spots and potential problems as it is to know an organization’s strengths of execution.
  • Allocate time to finding the right skills. One challenge, even for the best organizations, is sourcing the right resources and capabilities for implementation. It’s critical that companies spend more time deciding which resources, skills, and even individual employees can best support the changes at hand. Once the right teams are on the ground, leaders and managers must allocate time to helping employees prioritize their work. With digital transformations spanning more business units (and often involving more initiatives) than traditional change efforts, it is even more difficult for employees to focus on the right activities. Leaders should be clear about their objectives and communicate early and often with employees to confirm that people focus on the right activities and that their work adds value to the broader transformation.
  • Lead with agility. A digital transformation in particular calls for flexibility and agility from both leaders and teams. It’s critical that employees have targeted actions to take, but leaders need to assess progress more effectively and to make adjustments as needed. The reason to focus on KPIs during scaling, implementing, and sustaining changes in a digital transformation stems from the need to respond quickly to a rapidly changing environment. Leaders must be able and willing to assess their change programs continually and not be afraid to pivot to higher-value work when the KPIs tell them to do so.

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Here is a direct link to the complete article.

The contributors to the development and analysis of this survey include Blake Lindsay, a senior implementation leader in McKinsey’s Denver office, as well as Eugéne Smit, a partner, and Nick Waugh, a senior implementation leader, in that office.

They would like to thank Mehmet Baser and Bruce Delteil for their contributions to this work.

 

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