If you believe that the world today is a very different place than what it was even four years ago, there's a new set of hard data to back you up. Businesses all over the globe are struggling to keep pace with an unprecedented rate of change in technology and culture. New research shows that many firms are not satisfied with their attempts so far and that only a few transforming organizations have both measurably improved their performance in the market and were able to hold on to those improvements.
The McKinsey report compared the results of business transformation initiatives in the prior year against a similar study conducted in 2014. The study showed that more than half of the business surveyed were involved in digital transformation and that this has rewritten the rules of change management. Just over a third (37 percent) of respondents reported successful implementations. Their answers imply best practices that can improve the odds for other companies seeking to execute transformative and sustainable digital restructuring.
3 Practices for More Effective Transformation
The greatest difference between high and low performers in transformation projects was evident in their responses to questions about communication, prioritization and expertise.
Specifically, the three most important practices that had the greatest impact the success of digital transformation programs were:
1. Clear communications — Survey respondents were 3.5x more likely to report success when they agreed that business leaders clearly stated the desired outcomes for the project.
2. Alignment around priorities — When there was no question about which potential pathway should take priority, organizations were 2.7x more likely to succeed.
3. Reliance on subject matter expertise — The development of the business case was handled by professionals with the greatest relevant expertise within the area of transformation for 47 percent of winning projects. For failed projects, the business case was most often developed by other departments, such as program management.
This set of recommendations for high level digital transformation closely mirrors our own findings on best practices for sales and marketing transformation. In particular, our customers reported that successful projects were characterized by the following:
- Aligning a digital mindset to strategic planning at executive levels was a priority.
- Accountability was driven from sales leadership to sales professionals to shift behavior.
- Digital sales strategy was woven into existing sales methodology, process, measurement and tools.
- Cross functional collaboration with sales, marketing and enablement was at the core.
- Continuous learning culture was enabled and measured.
- Leadership was resilient in driving change and focusing on the future state.
The Greatest Differences From 2014 Data
Over the past four years, the world has gone digital in many ways. The business community has seen a 9x spike in mobile data traffic, North America led the world with the most rapid adoption of 4G broadband and Amazon launched Alexa to herald a new era of voice-controlled automation. Since 2014, more than $6 billion has been invested in AI for business while vast numbers of jobs at department stores and telecom carriers have been replaced by automation.
In terms of change management processes for digital initiatives, more than two-thirds of transformation survey respondents said that the ability to execute was more important for successful outcomes of major change efforts than they were four years ago.
McKinsey analysts concluded that "digitization poses new and meaningful disruptions to implementing organizational change." While organizations recognized that they needed to bring in new talents and skills, especially around piloting digital programs and rapid prototyping, they did not have a process in place for externally sourcing these types of skills.
The effectiveness of key performance indicators (KPIs) represented another factor that is significantly different from the earlier study. Fifty-one percent of companies that monitored KPIs established during the planning phase reported success with digitization. In comparison, only 13 percent of companies were able to achieve success without dedicated attention to their initial KPIs.
Implementing change is one thing, but sustaining your gains has proven to be far more difficult. The study found that the most critical piece for ongoing improvement was a facility for embedding specific KPIs developed during setup into strategic direction at the leadership level. Organizations that followed up changes with KPI tracking and recurrent training were 7x more likely to succeed in the long run.
Just two practices are responsible for 4x improvement in the odds of success: reviewing compliance post-implementation and placing the responsibility for continued improvement in the hands of employees across the organization.
That backs up research on digital transformation within sales organizations that shows how closer attention to specific KPIs related to social selling have resulted in:
- Operating profits 8x larger than industry averages
- Revenue growth 5x stronger than competitors
- 40-50 percent new business, with customer retention rate of 80-90 percent
At the current rate of change, there is likely to be even greater disconnects ahead between executive strategic goals and digital implementation reality. Better communication from the start, agreement on priorities and reliance on subject matter expertise are the keys to get change projects done right the first time. Holding onto those changes, and posting sustained revenue performance, comes from recurrent training and continuous improvement on the front lines of digital sales.