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Tech companies win at digital transformation but struggle with leadership and governance
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Boston Consulting Group analyzed projects at 950 companies and reported success and failure rates by industry.
Boston Consulting Group analyzed digital transformation work at 950 companies and found that only a third of these efforts achieve success. The report published this week measures the rates of success and predicts future priorities of digital transformations. In addition to an overall analysis, the researchers examined success and failure by industry including the tech world.
The 2021 transformation success rate was 35%, up from 30% in 2020. BCG put companies in one of three categories:
In 2020, BCG set these six goals for digital transformation:
The analysts found that companies that addressed these six factors reported a 21% EBIT increase in the businesses within the scope of the transformation compared with only a 10% increase on average for those companies that did not.
To see how well companies have met those goals, BCG researchers analyzed 30 successful digital transformations from work with clients and surveyed 860 VPs and CxOs who acted as their organization’s primary digital transformation decision maker over the past five years. The researchers also interviewed BCG digital leaders and clients and conducted a literature review of leading publications and academic research.
BCG published reports on digital transformation in five sectors:
Here are the top findings for hardware, software and IT services companies.
Software and services companies had a success rate of 60% which is the highest across all sectors. According to the report authors, this is due to the fact that these companies are inherently digital and leaders are naturally primed to be early adopters of digital advances. The researchers also identified these key findings:
The research also found that nearly all software companies intend to spend 50% of investments toward customer experience and delivery of services.
Companies that manufacture hardware devices, components and semiconductors are more successful at digital transformation than several other sectors, according to the report. Half of these firms reach the win zone, which is higher than the cross-industry average. The key findings for this sector are:
Organizations in the worry and woe categories should shift their focus from core operations to sales and marketing and innovation-oriented achievements, according to the report authors.
Most leading IT services organizations have concentrated digital transformation work on external or client-facing initiatives such as customer experience and journeys, growth and business model innovation, sales and marketing acceleration and partnerships. Only 45% of these companies are in the win zone, a lower percentage than other technology, media and telecom companies, including internet-based companies (58%) and hardware and devices companies (52%).
The BCG researchers recommend that IT service companies accelerate the pace of digital adoption and note that successful digital players are pivoting toward internal digitization efforts such as employee journeys and support functions. Other findings about the sector include:
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Tech companies win at digital transformation but struggle with leadership and governance
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