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A CEO guide for avoiding the ten traps that derail digital transformations

Source | www.mckinsey.com : By Arun Arora, Peter Dahlstrom, Pierce Groover, and Florian Wunderlich

Transforming your business has risks. Successful leaders know how to spot them and avoid them.

Business leaders are in a high-stakes game. Many have embarked on programs to reinvent their businesses. The rewards for success are enormous, while the consequences of failure are drastic, even lethal.

They could do worse than look to a quote from one of the most successful race-car drivers in history, Mario Andretti: “If everything seems under control, you’re not going fast enough.”

While Andretti’s guidance might seem unnerving at first, it is appropriate for leaders navigating the digital world. No race—or transformation—is risk free, of course, but having the courage to make decisions that push the limits of the organization is a necessity.

A clear understanding of what really matters to the success of a change program and what doesn’t, however, can make all the difference. For this reason, we analyzed dozens of both successful and less successful digital transformations to get at the root causes of where they go wrong. This analysis has yielded ten important traps that businesses frequently fall into during a digital transformation. Often overlooked or misunderstood, these traps boil down to culture, discipline, and mind-set issues. Here is what CEOs can do to overcome them and de-risk their programs so that businesses can capture the full benefits of digital.

Ten traps of a digital transformation

Excessive caution

1. Excessive caution

Paradoxical though it may sound, we believe companies need to take more risk, not less. Many senior executives look back on their transformation programs1and wish they’d been bolder. In today’s environment, making incremental changes is like rearranging the deck chairs on the Titanic.

Data tell the same story. Recent McKinsey research reveals that the companies that do best follow bold and disruptive strategies.2They make big bets on new technologies and business models, champion a test-and-learn culture where every failure is an opportunity to improve, and launch change programs that transform their whole business.

But taking on more risk doesn’t mean being more risky. Making reckless moves, ignoring common sense, and losing sight of where the value is can undo bold initiatives.

 

Fear of the unknown

2. Fear of the unknown

When information is in short supply, people fall back on experience and gut feeling. Though there’s no such thing as cast-iron certainty in a digital transformation, developing a comprehensive fact base can do much to dispel people’s understandable fears.

The best companies start by identifying where value is created and destroyed,3and they don’t confine their analysis to their own sector and competitors. This external analysis should be matched with a deep and comprehensive internal assessment. That starts with a thorough evaluation of a company’s assets—brands, capital, data, customers, products, people—and capability gaps. The best companies then also develop an objective picture of their digital quotient,4the elements of their business that add the most value, and the structural disadvantages they face.

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