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Why Digital Transformations Succeed or Fail

Digital technologies are reshaping industries and redefining the way we work. To keep up with these big changes and their competitors, many companies are undertaking large-scale digital transformations.

More than eight in 10 respondents in a 2018 McKinsey Global Survey said their organizations have pursued digital transformation efforts in the past five years. Earlier research discovered that less than 30% of these transformations succeeded, and in the latest survey, only 16% of respondents said their organizations’ digital transformations have improved performance and equipped them to sustain long-term changes.

Success rates vary by industry. In more traditional industries, such as oil and gas, automotive, infrastructure, and pharmaceuticals, they range between 4 and 11%; but even in high-tech, media, and telecom, they don’t exceed 26%.

Large industrial companies are also investing heavily in digital transformations and struggling with the results. A survey found that between 2016 and 2018, industrial companies in spent over $100 billion on scaling digital innovations to drive new experiences and efficiencies. But only 22% of companies achieved a return on their investments that surpassed their expectations.

So what determines success or disappointment for companies pursuing digital transformations? Here are a few research-supported best practices that make a transformation more likely to succeed.

  • Getting buy-in from top leaders

Top management must be aligned on the digital initiatives they are prioritizing and the value each one has. If leaders disagree about the organization’s direction or what the ultimate goals are for a digital transformation, its chances of success decline.

  • Developing a future-focused talent strategy

Companies must avoid the pitfall of maintaining the status quo when hiring and retaining talent. Business functions, digital technologies, and workforce capabilities are all changing rapidly. Leaders need to focus on putting the right people in the right seats to meet current and future needs, whether through permanent, full-time hires or outsourced workforce solutions.

  • Embracing new ways of working

Ideally, everything in the organization – from standard operating procedures to individuals’ day-to-day tasks and responsibilities – will align with the digital transformation’s goals. Top leaders can model this shift by encouraging employees to experiment with new ideas, challenge old processes, and test new digital solutions.

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