As digital technologies dramatically reshape industry after industry, many companies are pursuing large-scale change efforts to capture the benefits of these trends or simply to keep up with competitors. In a new McKinsey Global Survey on digital transformations, more than eight in ten respondents say their organizations have undertaken such efforts in the past five years.1 Yet success in these transformations is proving to be elusive. While our earlier research has found that fewer than one-third of organizational transformations succeed at improving a company’s performance and sustaining those gains, the latest results find that the success rate of digital transformations is even lower.
The results from respondents who do report success point to 21 best practices, all of which make a digital transformation more likely to succeed. These characteristics fall into five categories: leadership, capability building, empowering workers, upgrading tools, and communication. These categories suggest where and how companies can start to improve their chances of successfully making digital changes to their business.
Transformations are hard, and digital ones are harder
Years of research on transformations has shown that the success rate for these efforts is consistently low: less than 30 percent succeed. 2 This year’s results suggest that digital transformations are even more difficult. Only 16 percent of respondents say their organizations’ digital transformations have successfully improved performance and also equipped them to sustain changes in the long term. An additional 7 percent say that performance improved but that those improvements were not sustained.
Even digitally savvy industries, such as high tech, media, and telecom, are struggling. Among these industries, the success rate does not exceed 26 percent. But in more traditional industries, such as oil and gas, automotive, infrastructure, and pharmaceuticals, digital transformations are even more challenging: success rates fall between 4 and 11 percent.
Success rates also vary by company size. At organizations with fewer than 100 employees, respondents are 2.7 times more likely to report a successful digital transformation than are those from organizations with more than 50,000 employees.
The anatomy of digital transformations
Whether a change effort has succeeded or not, the results point to a few shared traits of today’s digital transformations. For one, organizations tend to look inward when making such changes. The most commonly cited objective for digital transformations is digitizing the organization’s operating model, cited by 68 percent of respondents. Less than half say their objective was either launching new products or services or interacting with external partners through digital channels. Digital transformations also tend to be wide in scope. Eight in ten respondents say their recent change efforts involved either multiple functions or business units or the whole enterprise. Additionally, the adoption of technologies plays an important role across digital transformations. On average, respondents say their organizations are using four of 11 technologies we asked about, with traditional web tools cited most often and used in the vast majority of these efforts.
At the same time, the results from successful transformations show that these organizations deploy more technologies than others do (Exhibit 1). This might seem counterintuitive, given that a broader suite of technologies could result in more complex execution of transformation initiatives and, therefore, more opportunities to fail. But the organizations with successful transformations are likelier than others to use more sophisticated technologies, such as artificial intelligence, the Internet of Things, and advanced neural machine-learning techniques.