Most business leaders recognize the need to transform their organization using digital technology, a need that’s been heightened by COVID-19. However, very few organizations will ever pull off a successful digital transformation.
Up to 90% of these change programs will fail. But it’s not because of technology, it’s more because of people, processes and culture. Based on interviews with 200 digital leaders carried out by IMD professors Michael Wade and Didier Bonnet, along with the researcher Tomoko Yokoi, we know the problem is usually a failure of execution.
The trio of experts hosted a recent I by IMD Book Club discussion about their new book, Hacking Digital, which offers solutions to the most common digital transformation challenges. A fourth co-author is Nikolaus Obwegeser.
Foster digital talent
Finding enough digital talent is one key issue that participants in the webinar raised. “However successful a firm is at digital transformation, at some point they will hit the digital resourcing problem,” said Bonnet, Affiliate Professor of Strategy and Digital Transformation. “You need to work closely with human resources to make sure there is forward visibility of the kind of capabilities you need, and that they’re being introduced in the organization.”
Tear down silos
His co-author Wade said digital business model transformation cannot be achieved in organizational silos. “That is one of the reasons why the failure rate is so high,” said Wade, Professor of Innovation and Strategy. “The benefits you get from data and technology are horizontal and are amplified by width across an organization. In a silo you get limited benefits.”
A good place to start is to have a clear and common objective. You also need to look at incentives, and make sure they are aligned across the business. “People are smart, they understand motivations, they can maximize their own utility,” said Wade, who directs IMD’s Global Center for Digital Business Transformation.
Build digital governance
The role of governance is to provide this unified approach to delivering your transformation. “When you don’t have governance, you get a duplication of effort,” Bonnet said.
There is no “silver bullet” solution: the level of governance will depend on your digital ambitions, your company culture, and the level of resource-sharing required. But hybrid models — that balance centralization and devolution — tend to work the best. And you cannot leave governance to chance; it won’t occur naturally. “It’s not the most sexy thing but governance is where I see the clearest link to profitability,” said Bonnet.