McKinsey says digital transformation needs to be holistic, not piecemeal

NOBODY said digital transformation will be easy. Leveraging technology and changing an organization’s mindset, workflows, and systems to delight customers and compete in the digital-first era is harder than it seems.

Surveys show that digital transformation projects have a high failure rate — and although leaders continue to pursue the agenda in order to retain market share, maybe there is a better way?

According to a recent whitepaper from McKinsey’s operations practice, consultants suggest that leaders should consider going against conventional wisdom and bet on massive projects that cut across business units and functions and engage a substantial share of the workforce instead of focusing on one small project after another.

The essence of the whitepaper is captured well in its introduction: “Improving the parts improves only those parts, without necessarily reaching the whole. And because the whole doesn’t change, the improvement in the parts themselves isn’t likely to last.”

Research conducted by the think tank, combined with experience working with clients, leads the consultants to the conclusion that cross-functional operations transformations typically outperform their single-function counterparts by up to 40 percent.

Further, McKinsey believes that cross-functional transformations can reduce enterprise risk, enhance resiliency across the board, and help keep up with the rapid changes brought about by competitors and the market.

Is it time to go big or go home?

The whitepaper or the think tank’s consultants don’t exactly say that companies must invest in digital transformation projects that are of significant value in order to succeed — instead, they suggest picking up projects that impact the enterprise as a whole.

Hence, cross-functional transformation projects that get different parts of the business involved, impact both the top and the bottom line, and involve more of the workforce tend to have a big impact overall. With more people contributing to the project and invested in its success, the chances of failure significantly reduce as well.

Since the whitepaper was created by the think tank’s operations practice, there’s a greater emphasis on helping business leaders understand the scope of such projects in that specific area.

It’s important, however, to remember that although bigger projects are championed, implementation depends on an organizations’ own capabilities.

The think tank believes that organizations must assess their own transformation competency and environmental complexity before making a decision.

For example, organizations with high transformation competency looking at projects with low complexity in the environment or ecosystem should take a “big bang” approach to implementation and look at a project duration of 24 to 32 weeks.

On the other hand, where organizations face geographical or technical complexity or see an intensive need to develop capabilities, an iterative approach may be followed using short sprints lasting two-weeks each and a simultaneous thematic deep-dive that lasts up to 12 weeks.

Ultimately, the message is that organizations need to re-think their digital transformation strategy. While projects might still be small in terms of the value of the investment, they need to be more holistic and impact a wider pool of employees within the organization in order to succeed at scale and bring about any real, lasting, long-term change.

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