Tech companies win digital transformation but struggle with leadership and governance

Boston Consulting Group analyzed the projects of 950 companies and reported success and failure rates by industry.

Digital Transformation
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Boston Consulting Group analyzed digital transformation work at 950 companies and found that only a third of these efforts were successful. Report published this week measure success rates and predict future priorities of digital transformation. In addition to the overall analysis, the researchers examined the successes and failures of industries including the tech world.

The successful conversion rate in 2021 is 35%, up from 30% in 2020. BCG classifies companies in one of three categories:

  • Winning zone: Reach or exceed target value and achieve sustainable change
  • Anxiety Zone: Creates some value but limits change in the long term
  • The Misery: Limited Value Creation and No Sustainable Change

In 2020, BCG sets the following six goals for digital transformation:

  1. Build a clear integration strategy
  2. Commitment to leadership from the top to the middle level
  3. Putting the best people in the right places
  4. Adopt an agile management mindset
  5. Track and measure your conversions
  6. Create an enterprise-led data and technology platform

The analysts found that companies that address these six factors reported a 21% increase in EBIT in businesses in the conversion range compared to an average increase of only 10% for companies that did not. .

To see how well companies have met those goals, BCG researchers analyzed 30 successful digital transformations from customer work and surveyed 860 VPs and CxOs who served as their organization’s key digital transformation decision maker for the past 5 years. The researchers also interviewed BCG digital leaders and customers and conducted a literature review of leading publications and academic research.

BCG publishes a report on digital transformation in five areas:

  • Telecommunication
  • Media
  • Hardware
  • Software and services
  • IT services

Here are the top findings for IT hardware, software and services companies.

Successful digital transformation between software and service companies

Software and service company has a success rate of 60%, the highest of all fields. This is due to the fact that these companies are inherently digital, and leaders are naturally seen as early adopters of digital advancements, according to the report authors. The researchers also identified the following key findings:

  • Successful digital players are prioritizing areas that have not yet become universal priorities, such as automated lead generation, personalization, and automated disruption reduction.
  • Software companies have a complex forward-looking digital agenda in customer experience and service, security functions, and support.
  • ESG is becoming more and more important on the digital agenda, especially in terms of supply chain, customer and employee data risks, and cyber resilience.
  • Top companies play a key role in the six success factors, while average companies struggle the most with talent.
  • Software companies pursue digital initiatives more broadly than companies in other industries, with an emphasis on customer experience, marketing and pricing, and innovation.

Research also shows that nearly all software companies intend to spend 50% of their investment on customer experience and service delivery.

Digital transformation and hardware companies

Companies that manufacture hardware devices, components and semiconductors more successful in digital transformation than some other sectors, according to the report. Half of these companies hit winning zones, well above the industry average. The main findings for the field are:

  • Hardware companies rate other industries highly on individual success factors, especially leadership and strategy, but they struggle with agile governance, showing that agility Agility at scale remains a major drag for companies that produce physical goods.
  • Hardware companies place less emphasis on customer experience than companies in other industries, instead putting their first priority on business model growth and innovation as well as accelerating sales and marketing.
  • Successful digital players are prioritizing areas that align well with AI solutions, such as automated lead generation, dynamic pricing, predictive maintenance, and demand forecasting.
  • ESG considerations of reduced energy consumption, data security, and cyber resilience are becoming more important.

According to the report’s authors, anxious and distressed organizations should shift their focus from core operations to sales, marketing, and innovation-driven achievements.

IT Services and Digital Transformation

The most leading IT services organizations focused on digital transformation on external or customer-facing initiatives such as customer journeys and experiences, business model growth and innovation, sales and marketing acceleration, and partnerships. Only 45% of these companies are in the winning zone, a lower percentage than other technology, media and telecom companies, including internet-based companies (58%) and other companies. hardware and equipment company (52%).

BCG researchers recommend that IT service companies accelerate digital adoption, and note that successful digital players are moving towards internal digitization efforts as the journey of staff and support functions. Other findings in this area include:

  • The IT services sector has faced significant talent and agile governance challenges.
  • The forward-looking digital program for IT services companies includes service delivery and operations, sales and marketing, security, support functions, and R&D.
  • ESG considerations related to data privacy, cyber resilience, and the use of analytics to reduce emissions are becoming more important.

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