Why is digital transformation difficult for large companies?

In 2012, Procter & Gamble (P&G) announced a $10 billion investment in digital transformation. Their goal was to become a digitally enabled organisation with the ability to compete in the digital age and serve its customers faster and more accurately.

P&G's digital transformation encompassed several initiatives, including:

• Investing in new digital technologies - big data and analytics
• Reorganising the company around customer segments
• Creating new digital products and services
• Transforming the way P&G sells and markets its products

But there were challenges that needed to be overcome. P&G is huge – over 100,000 employees, operating in more than 70 countries. That meant coordinating and implementing changes across the board wasn’t going to be an easy task. They didn’t have the most effective communication tools or tracking methods, and so ran into problems trying to keep everyone on the same page and pulling towards the same goal.

Added to this, the company culture created a blocker. With a long history of success, there was considerable resistance to change, especially digital change, from employees who were perfectly happy doing things the way they’d always been done.

But all of this was compounded by the fact there were new competitors entering the space, and these companies were digital natives. They were agile and nimble, so were quicker to take advantage of new digital opportunities and technologies. P&G, on the other hand, was the proverbial oil tanker, attempting to change direction.

As a result, P&G's digital transformation was not as successful as the company had hoped. While they made some progress in their digital transformation, there experience was similar to many larger organisations that attempt it – they didn’t achieve the level of success they hoped for, and long term, they had to go back and revisit numerous areas to try and increase the value of the implemented tools and processes.

There are lessons we can learn from P&G's digital transformation failure.

Our research suggests that one of the key factors that flips the success for a digital transformation from 30% to almost 80% is the strategy. While most companies will have a dedicated strategy planning phase before they begin their transformation, only about 20% really clear the bar in creating an integrated strategy with clear transformation goals. But the ones that push forward integration are 81% more likely to see return on investment.

An integrated strategy is one that looks at all the areas of the business and considers all of the processes that might enhance competitiveness, efficiency, effectiveness or market share.

There are six actions we suggest taking to make sure you have an integrated strategy for your digital transformation process. 

1. Define the overarching vision or purpose. Work together with leaders across the business to set a clear aspiration for digital which links to competitive advantage and value creation.
2. Embed digital into the overall business strategy. It shouldn’t be an add on – instead make sure that your business goals require the success of your digital transformation.
3. Anchor around discrete business use cases. Focus on just a on a few prioritised business cases with clear outcomes and committed, accountable business owners. The success of these will help you build momentum and increase support across the business.
4. Ensure a clear tech and data strategy. Scope out the tech and data platform requirements based on the specifics of the strategy and business needs. This means understanding the problems that need solving and getting advice on the tech to solve it.
5. Align your leadership team and create a change agenda. Make sure everyone is on the same page on what it will take to drive the change required in skills and behaviours across the organisation. Embed these actions into your leadership team’s targets.
6. Develop a roadmap with prioritised initiatives. A good roadmap should create transparency around prioritised activities, deliverables, timelines, financial & people resources, and a dynamic process to govern?

The starting point must be a clear vision. Be bold in setting your aspiration for digitisation. Shoot high, and ensure you have the resources you need to reach you goals - for example, a multi-year funding plan. And finally, embed data in your digital and business strategy. Know what you’re going to collect and what to use it for.

Companies with a strong commitment from effective leaders - the CEO down to middle management - are 65% more likely to succeed in their digital transformations.There are two key problems that need to be solved here – having visible commitment and leadership from the CEO and engaging middle management to lead their teams and embed the principles day-to-day.

The organisations that meet or exceed their targets for digital transformation are the ones that have CEOs checking in at least quarterly with the progress of projects and steer the effort. Over 90% of the companies who have succeeded had digital transformation on the CEO or board agenda.

 This means it’s crucial that the leader and key executives have a high profile and active role in communicating the importance of the transformation. They should be seen as driving the initiatives, meeting with the transformation team regularly to support them and resolve any issues that arise. Senior leaders should participate in frequent, forensic reviews of progress, and they should be seen by the whole business giving regular updates on this progress, with enthusiasm and purpose. 

• Leaders must rethink how to engage and create excitement about the transformation.
• Leaders must demonstrate compassion and care – layoffs, reskilling and redeployment are inevitable.
• Be agile and ready to make bold decisions to drive commitment – be open to reassessing the vison and changing the leadership.

Engaging with middle management can be tough – often they don’t buy into the transformation because their goals and incentives are not aligned with the digital transformation efforts. But it’s crucial to get the ‘frozen middle’ on board. Middle managers should be involved from early in the process, developing the objectives, business cases and approach to transformation, and making these relevant for their team/business area.

Make sure middle managers have the support, information and tools in place to cascade the same communication messages to their teams. Link their performance objectives to the success of the digital transformation, and take a head on approach to rewarding those who become champions of digital progress and side-lining people who act as blockers.

Finally, make sure that mentoring and feedback are provided to middle managers to help them understand the impact of the digital initiatives and empower them to lead change. Purpose motivates people, so ensuring they know the purpose and buy into the vision is crucial.

Companies who are able to identify, attract and retain the best talent are 47% more likely to succeed in their digital transformation efforts. Those who see meaningful success in their digital transformations, are the organisations who not only employ top people, but give them central roles that are career advancing. They also ensure they have a diverse team with a good mix of digital expertise and general organisational experience.

Show visible commitment though resourcing decisions. Clearly communicate that the best performers will be involved in the digital transformation efforts and that these projects will be career advancing. Don’t be afraid to bring in external experts to fill or support pivotal roles - especially where digital skills that are in short supply are required.

Take an open source approach to finding talent. Start with a detailed assessment of the skills required, highlighting where the gaps are. Then create a talent acquisition plan that fills these gaps through re-deployment, hiring new talent or accessing external resources such as agencies or freelancers.

Ensure effective team composition. The team needs to be made up of digitally literate people from a wide cross section of business departments to drive new thinking and become champions in their critical areas.

Manage talent dynamically to sustain employee engagement and morale. Before starting you need to have processes in place to evaluate, develop team members, rewarding those who do well and replacing poor performers. It’s important to have visible ways to celebrate success and manage morale, especially when things get tough.

Critical digital capabilities are in low supply and high demand, so it’s important to keep an eye on what talent is needed and when and keep an open pipeline to fill gaps early. Part of this is upskilling across the breadth of the company. Digital skills are not just for teams directly involved in digital transformation – they need to be cascaded throughout.

It’s also important that the offer is attractive for the best talent in a competitive market. This means creating an EVP that people buy into. People want purpose and they buy into companies who can authentically communicate what they stand for and demonstrate the value they will create.

We live in a time where people are more concerned with wellbeing and work life balance than ever before, so offer flexibility alongside career advancement opportunities. People also want to know that they’re contributing to something high quality, so leverage your own industry successes to attract people.

We talk about agile working regularly, and with good reason. Adopting an agile mindset and methodologies will make you 43% more likely to succeed in a digital transformation project. The ability to continue despite setbacks and treat failures as opportunities to learn and pivot will be critical to any level of success. Leaders who display this kind of perseverance are 4 times more likely to deliver their intended outcomes.

When developing an agile mindset, leadership must have the determination to regroup and push ahead. This is considerably easier if the organisation perceived the leadership as authentic in its commitment to digital transformation success.

Put in place pragmatic support for eliminating roadblocks by listening to your teams and supporting them when they foresee issues. Proactively adapt when new information is presented – whether this means more delegation, bringing in external support or reprioritising resources.

Doing these things should begin to lead to behavioural change across the organisation. This should start with commitment from the top to new ways of working, and an investment in skills, processes and dedicated positions to scale agile behaviours. From here, agile principles should be embedded into teams. That means they need to become used to working cross-functionally through sprints, rapid escalation and a fail-fast-learn approach.

• Start with why – agile is a means to an end, not the goal in itself. Leaders should demonstrate the value and guard against backsliding into old ways of working.
• Adopt the principles and adapt the practices – leaders should adopt and actively promote agile principles and ways of working, but adapt them to their teams specific needs.
• Align to empower – give people the ability to act autonomously – this will spur ownership and creativity, allowing agile teams to move fast. The more alignment leaders can establish, the more autonomy they can afford to give.
• Learn and adapt at speed – agile puts a premium on feedback and learning. Willingness to adapt is more important than following a plan.

Companies that track their progress against clear goals are 74% more likely to succeed than those who don’t. But in a large organisation, it can be hard to know where to start.

Quantifying the expected outcomes is the crucial first step for ensuring the effort is targeting true areas of value. Do this before you start – even if these outcomes change, it’s important to have a starting point to help you decide direction.

Tracking progress is the next step - 75% of successful transformations have effective monitoring and data analytics. Proper monitoring enables 50% improvement in dynamic adjustment of financing throughout the transformation.

Having a strong central entity such as a transformation management office improves monitoring by 30%, as it ensures someone is responsible for tracking metrics. Reporting is more effective when it starts with a trusted reporting entity with a clear activist mandate who can challenge leaders, track progress and hold people accountable for delivering against set targets. The metrics used should be simple, clear and critical, and directly tied to the strategic intent of the project and the business outcomes. All the targets put in place should have a person or a team who are directly accountable for delivery of that target.

And finally (and most crucially), there should be a single source of truth for data. All operational and finance data should marry up. Having one source of data truth enables businesses to resolve issues such as baselines, net verses gross benefits and double counting.

Some consideration to help you find success in your measurement:

• Progress monitoring. Set up initiatives for success by assigning specific business owners and a clear understanding of starting point.
• Minimise the burden on the organisation. Tracking should, wherever possible be simple and automated. It makes sense to keep things manageable, so the tracking gets done, rather than creating something overly complex that ends up falling by the wayside.
• Empower data owners. They need to be able call out impediments to progress, so give them the ability to identify the blockers. Tracking is a means for pushing the transformation forward, so ensure there is full transparency of what needs to be fixed and allow data collection to focus on resolving issues. Where blocks exist see them as a request for help.

Effective monitoring of results is the only way to show real ROI, and it’s ROI based performance that will enable to project to continue with momentum and support from the right places.

Turning an oil tanker around is no easy feat. Doing it alone makes the job harder – there’s a lack of visibility, a lack of momentum, a lack of support. A turning oil tanker is disruptive, cumbersome and slow. But when it’s finally pointing in the right direction it can be a powerhouse.

Analogies aside, going through a digital transformation becomes more challenging the larger the organisation undertaking it. It becomes more difficult to communicate the goals, the benefits and the successes. It becomes more complicated to affect change across the board. It becomes harder to gain the momentum to keep driving forward at pace.

Bringing in outside perspective and expertise can alleviate a lot of the challenges larger companies experience. They can identify the best areas for quick wins. They can be responsible for crafting the message and increasing visibility. They can bring fresh perspectives and new ways of working, set objectives and keep everyone on track.

They also bring with them the experience of a wide range of tools and technologies, and the understanding of which would work best in different contexts. They can help with training, upskilling and embedding agile methodologies and practices.

Having external support for your digital transformation efforts certainly isn’t a necessity, and this guide should aid you to undertake successful digital initiatives, but sometimes a fresh pair of eyes can help you get to where you want to be quicker and with fewer bumps in the road.