A discouraging trend in business is the high failure rate organisations experience in translating strategic plans into successful results. Strategy execution is difficult for many organisations – so difficult, in fact, that two-thirds to three-quarters of large organisations struggle to implement their strategies, as a 2015 Harvard Business Review article states. In line with this, McKinsey & Co research has found that 70% of change efforts fall short of desired results, resulting in massive financial losses.
These statistics are alarming, yet the failure rates are increasing – particularly now that so many organisations are trying their hand at digital transformation. In a 2015 study McKinsey & Co found that most digital transformation projects fail. Only 26% of executives at large organisations surveyed said their transformations had been “very or completely successful at both improving performance and equipping the organisation to sustain improvements over time.”
With digital transformation becoming a necessity for organisations in order to compete – and survive – CIOs need to ensure that their well-designed strategies are effectively implemented. What does it take to turn strategies into operational reality?
Capable of doing digital
The key is to bridge strategy with operations, and this comes down to capabilities. A common mistake is to equate capabilities with business functions, but an organisational unit could be responsible for a diverse set of them. Consulting firm Deloitte defines capabilities as “the abilities of an enterprise to operate its day-to-day business as well as to grow, adapt, and seek competitive advantage in the marketplace.”
Deloitte outlines six building blocks that, as an integrated set, serve as the foundation of an organisational capability:
- Talent – The skills, incentives, and workforce planning that enable an optimal talent base to execute the capability
- Mission – The purpose of a capability, how it will operate, and what it will deliver. The mission is derived directly from the company’s strategy.
- Integration – Clear roles, decision rights, and policies that inform the organisational structure.
- Insights – The information, analytics, and decision flow that drive more informed and timely decision making.
- Process – An integrated set of processes and activities to achieve the desired outcome.
- Technology – The software and hardware required to support the capacity.
CIOs can improve on digital strategy execution by paying more attention to the capabilities they need to successfully implement their strategy. This means identifying the capabilities that are core to the strategy at the outset, from which the building blocks that need to be developed can be determined.
Power to the people
Digital transformation is about more than strategy and technology; it’s about people. Formulating a digital strategy is challenging, but translating that strategy into reality is often even more difficult. No matter how good it is, if you don’t have the right capabilities, you can’t get it done.
CIOs should keep the six building blocks of an organisational capability in mind as they consider adapting or building the skills and abilities they need to support their digital transformation strategy.