The two big reasons that digital transformations fail

By Mike Sutcliff, Raghav Narsalay & Aarohi Sen

Plenty of cash is flowing into digital initiatives at large, industrial companies. In fact, the executives we surveyed recently at 1,350 of these businesses globally reported investments in digital reinvention, totaling more than $100 billion between 2016 and 2018.

Most of the leaders we surveyed (companies representing 17 countries and 13 industries) reported poor returns on their digital investments. The primary reason: unsuccessful efforts to scale digital innovations beyond early pilot work.

What are the companies that are experiencing better returns on digital investments doing differently from the rest? To answer this question, we asked the executives in our study to tell us in detail about their returns on digital investment. Then we looked at how well companies across our sample had scaled projects from the proof-of-concept stage. When we mapped those two critical parameters—higher-than-average returns and more successful scaling—we saw that 22 percent of our sample had demonstrated both.

We then dove deeper into that group to learn what they did differently. Two critical challenges—and their remedies—emerged from that analysis:

  • Unspoken disagreement among top managers about goals: If top managers aren’t on the same page, it makes it difficult for their direct reports to agree on what to prioritize and how to measure progress. The remedy: Define and articulate not only the opportunity but also the problem it solves, and how the company will build the organization around the desired solution before investing.
  • A divide between the digital capabilities supporting the pilot and the capabilities available to support scaling it: When this problem isn’t addressed, companies may face a choice between accepting long delays in ramping up production or attempts by leadership at rapid, unwieldy change to meet what they have promised. The remedy: Look outside to close gaps or nurture pilots internally, ramping up digital capabilities across the organization from the get-go.

Many of the leaders in our study have sidestepped this challenge entirely by building internal “innovation factories” inside the larger organization to develop and expand pilot projects. When companies anticipate the challenges we’ve outlined here, they’re better positioned to make a compelling case for funding. And they’re much more likely to succeed with their innovations.

Mike Sutcliff is the group chief executive of Accenture Digital. Raghav Narsalay is a managing director at Accenture Research in Mumbai. Aarohi Sen is a manager at Accenture Research in Delhi.


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