Over the last 20 years of our experience helping companies achieve innovation and digital transformation success, we have observed that there are three critical resources an enterprise has at its disposal, that must be leveraged in an optimal way, to create success. Namely: time, political support, and investment capital – all of which tend to be in short supply.
We have also found that when we are trying to impart systemic change into the hearts and minds and ultimately execution machines of our enterprise clients that are trying to achieve digital transformation success, the habits and practices of innovation and agility are extremely effective in helping large enterprises overcome what we call “transformational inertia.”
A staggering 84% of companies fail in their digital transformation process, according to a research report by Forbes. It goes without saying that digital transformation is paramount to improving productivity, increasing agility, and unlocking new value for any business. Ultimately, however, the success of a digital transformation process is as reliant on cultivating a strong company culture and leadership model as it is on integrating effective technologies.
All innovations eventually arrive at what has been called the Innovation “Valley of Death” (possibly first coined by: C. Frank, C. Sink, L. Mynatt, R. Rogers, and A. Rappazzo, Surviving the “Valley of Death”: A Comparative Analysis, 21 Journal of Technology Transfer 61-69 (1996)) – the long hard gap between two outcomes, failed experiment or adopted innovation. Just like any difficult and long journey, the careful stewardship of resources is key to your success.
In the case of innovation and digital transformation, the above triumvirate of time, resources, and political capital is your only hope for crossing that valley of death. Through that careful stewardship of resources, you can cross that valley, and reach what we term the “innovation action potential” (where the innovation or transformed process has accumulated enough incremental value to be adopted organizationally).
In our digital transformation work, we’ve observed that in practice this translates into laser-focus on prioritizing incremental unlocks of business value and ROI while being ever-watchful for places where you are stalled or stuck and resources are being wasted. In any digital transformation, new or even ongoing, you don’t need to look very hard to find the bits that are stalled or stuck and simply not moving forward. Those pieces we aggregate into transformational inertia, the collective factors that influence that organizations inability, unwillingness, and ultimately velocity to change and transform.
According to McKinsey, 70% of complex, large-scale change programs encounter several pitfalls, including employee engagement, inadequate management support, poor or nonexistent cross-functional collaboration, and a lack of accountability. For me, the most significant aspect of sustaining the impact of a transformation is the successful execution of resetting mindsets and attitudes toward embracing enterprise agility, which we find at the root of every successful digital transformation. A report by Whatfix emphasizes the importance of overcoming obstacles such as reluctance to change in management strategy, adoption of new digital tools, and navigating the continuous ever-changing needs of consumers.
When we are engaged to assist with digital transformation projects, we typically conduct an enterprise agility diagnostic/due diligence process that helps us dimensionalize where and how a company should prioritize its efforts to optimize their chances of success. We look across six pillars of enterprise agility (Lean Portfolio Management, Agile Execution, Technical Agility, Customer Centricity, People Enablement, Leadership and Culture), and categorize next steps into “do now,” “do next,” and “do later activities.”
The bulk of our “do now” recommendations are usually targeted at overcoming transformational inertia by increasing focus and strengthening prioritization tools and activities, such that all of the organization’s effort can be focussed in as narrow an area as possible. This focused energy typically results in early movement and accomplishments that tend to breed follow-on productivity and success. These early successes help us to create excitement for and commitment to workstreams we typically launch in parallel that are driving toward developing and strengthening company culture around accepting and embracing change.
Key to success is a company’s ability to embrace change and for the staff at all levels to reframe the transformation as something they are an owner of and a strategic investor in, rather than it being something that is happening to them. This often requires a major change in company mentality and behavior. Altering the attitudes towards transformation in this manner can help the staff to challenge assumptions and redefine problems in an attempt to identify alternative strategies and solutions that are very likely not apparent to the leadership of the transformation. Adopting the idea that everyone is leading the transformation, and has the opportunity to be an active contributor to it, is the objective.
This requires promoting psychological safety and open communication as a cornerstone of company culture. Close collaboration and constant, effective communication with all parties can ensure the success of any given initiative, most significantly, digital transformation. This communication ensures that respect is granted to all members of the company and that they are supported throughout the transformation process.
In my opinion, the ability of individuals to work creatively in partnership together is the core engine of innovation and successful development. Respect for people and a focus on partnership, with an openness to different ideas and solutions, is key. This better allows for developing alternative strategies and solutions that might have been overlooked otherwise.
Approaching innovation in an incremental, iterative manner that encourages the development of transformational solutions that are reliable and cost-effective while continually refocusing them and de-risking them offers a better solution. Transformational inertia can be seen in the slow speed and high costs associated with exploring giant ideas with lots of incomplete work in progress and many, many unmitigated risks. For these companies, the acquisition of enterprise agility must be a top priority to redirect those 70% of transformation initiatives that are destined for failure, back toward the pathway of success.
The consequences of a failed digital transformation for a business and its clients are quite considerable. In a climate of increasing competitiveness and constricting financial conditions, digital transformation can better prepare companies to compete in an economic, regulatory, and competitive environment that is constantly evolving in response to emerging technological advancements and evolutions. Digital transformation requires a significant shift away from traditional thinking and toward an approach that focuses largely on collaboration and experimentation. Unwillingness to adopt this approach can mean missing out on increased efficiency, failing to achieve greater business agility and unlocking new value for employees, customers, and shareholders.
For companies that acquire enterprise agility, incremental failures throughout a digital innovation journey are not fatal. Rather, for those companies, they become early and cost-efficient mechanisms for learning and risk reduction, which inform the future efforts and prioritization of their transformation journey. When those companies create effective and compelling engagement in the transformation with employees at every level, they all begin to pull in the same direction and easily overcome their own transformational inertia and are better equipped to ensure they are in the 16% of companies who succeed on their transformation journey.