Orchestrating a Successful Digital Transformation

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When Bain & Company recently surveyed 1,000 companies around the world to gauge their level of digital readiness, two things became abundantly clear: The payoff from digital transformation can be impressively high, but the success rate is regrettably low.

This gap between aspiration and reality may help explain why a surprising number of leadership teams remain tentative about investing in digital technologies and capabilities. While a strong majority of companies in every industry we surveyed told us that digital investment is among their top priorities, anecdotal evidence suggests that a great many executives are skeptical that they can translate the buzz around digital into meaningful improvements in performance.

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What’s clear from the data, however, is that the prize is there for the taking. Digital leaders in every industry outperform their competition by a wide margin. After comparing financial results for five categories of companies based on their degree of digital sophistication, we found that revenues for the digital leaders grew 14% over the past three years, more than doubling the performance of the digital laggards in their industries. Profitability followed a similar pattern—83% of the leaders increased margins over that period while less than half of the industry laggards did so. These findings leave little doubt that digital transformation can yield significant results.

Capturing those gains is another story. The data shows that digital transformations are significantly harder than conventional change management programs. In our survey, just 5% of those companies involved in digital transformation efforts reported that they had achieved or exceeded the expectations they had set for themselves (vs. a success rate of 12% for conventional transformations). A full 71% of these companies settled for dilution of value and mediocre performance.

What goes wrong? The typical digital transformation effort founders on the sheer complexity of using technology to increase a company’s speed and learning at scale. Even if some traditional companies are used to innovating in the product development realm, few are adept at rapidly deploying digital technologies to solve problems and boost performance across the organization. Most leadership teams understand the opportunity but underinvest in the broad changes to the business model and culture that enable speed, learning and agility. They focus more on what we call the “outer game” of digital investment—“Should we work on customer engagement or the supply chain?”—and less on the “inner game”—“Do we know how to choose the right investments, test them in real time and scale them for maximum impact?”

Winning is about inner-game orchestration

The true digital leaders pull away from the competition by linking a bold strategic ambition to the specific inner game capabilities and behaviors that they will need to achieve it. First they translate their strategy into a clear set of digital initiatives that point the organization toward a clear vision of full potential. Then they invest heavily in the fundamental changes to their ways of working and culture that allow them to develop those initiatives rapidly and execute them at scale.

Most of all, they recognize that sitting still is not an option—the time is now to progress down the learning curve toward becoming a connected digital leader.



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