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Digital Content (HR and Business Transformation)
Top 10 Digital Transformation Trends For 2019

Over the past few years I have made the commitment to looking forward to the year ahead to predict some of the most significant digital transformation trends. Knowing that digital transformation is not only a technological shift, but an organizational change at the intersection of technology, business and people, such reflection must take into account countless possibilities. In this year’s predictions, I try to take a year’s worth of technology and digital transformation research to better predict where are we going? Why are we going there? And what potential surprises are in store? Hopefully, these top trends can serve as a compass of sorts, for organizations looking to move their business and digital transformations forward. While a few of my top 2019 digital transformation trends build on the trends I predicted for last year, there are definitely a few new additions as we round the bend of 2018. And as a note to everyone that reads this, remember, the technology in itself does not equate to digital transformation. The customer, culture and employees along with business continuity must be at the heart of every technology investment. Without further ado, here’s my take on what to expect in the year ahead.

  1. 5G Fixed to 5G Mobile: Here’s the thing about 5G: we’ve been talking about it for a while. And if you’re a world traveler or on certain networks like Sprint, you know it’s still possible to slip back into 3G zones from time-to-time without realizing it. So, what’s the big deal with 5G now? In short, we’re finally in a spot where we will start seeing 5G everywhere. If you have been following the tech community, you will have seen that there are a wide number of fixed and test deployments with companies like Qualcomm, Intel, Nokia, Ericcson, Samsung and Huawei all getting into the action. We are also seeing new companies like Mimosa Networks making it possible to roll 5G out to both rural and urban locations, paving the way for bullish 5G mobile providers—i.e. ATT and Verizon—to start offering new, cooler, faster, more innovative services for mobile users. It’s an exciting time for 5G and mobile alike. While 2018 was the year that fixed 5G applications found their legs, in 2019 we are going to see 5G finding its way into the upper corner of our Mobile devices, albeit for you iPhone users it is more likely going to be 2020 or later.
  2. Chatbots Good to Great: Hear me out on this one. I know we’ve all had extremely frustrating chatbot experiences as we round out 2018. But the good news is that huge steps continue to be made in the way of natural language processing and sentiment analytics—so many, in fact, that some believe NLP will shake up the entire service industry in ways we’ve never imagined. Think about all the services that could be provided without humans—fast food lines, loan processors, job recruiters! What’s more, NLP allows companies to gather insights and improve their service based on them. Some 40% of large businesses have or will adopt it by the end of 2019—which makes it one of our top 2019 digital transformation trends. Now, I know many are alarmed by where AI and Chatbots may impact the workforce, but I’m also bullish that companies are going to be upskilling their work forces rather than displacing them as machines may be good at delivering on clearcut requests but leave a lot to be desired when it comes to dealing with empathy and human emotion required to deliver great customer experiences.
  3. Connected Clouds (Public, Private, Hybrid): Honestly, we can just file this as “the continued evolution and growing pains of cloud adoption.” Basically, what’s happening is that companies are realizing that going all public cloud, private cloud, or data center isn’t the best option. Sometimes, they need a mix of all or both. Thus, connected clouds are continuing to develop to meet companies’ changing needs—whether they want to cloud-source storage, networking, security, or app deployment. Major public cloud providers like Amazon and Alibaba are answering the call, offering private cloud (or in Google’s case, container-based) options. We are also seeing Microsoft via Azure, HPE with their 2017 acquisition of Cloud Technology Partners and their consumable IT services as well as VMware with their recent acquisition of CloudHealth Technologies all show increased commitment to connecting clouds. The term, Multicloud will be the new buzzword for the cloud conversation and what I believe this movement means more than anything else is that no matter which workloads are being run in which cloud, the experience for IT and those that are utilizing the applications needs to be seamless, secure and streamlined. For most businesses this means a mix of workloads running in public, private and hybrid environments and this will be a big topic in 2019.
  4. Blockchain Finally Understood and Flops (kind of): Forget everything magical I ever said about blockchain. Just kidding—kind of, but bear with me here. As we continue to explore this technological miracle worker, we’ve come to realize that blockchain is kind of a mess. It’s too complicated for lay people to use right now, and there’s no standard way to use it because we all want to use it different. The only way to get mass blockchain adoption is to create a plug-and-play version that all of us can use and understand. I’m watching closely as leading technology firms like IBM continue to make massive commitments to the potential of Blockchain for applications beyond cryptocurrency. The financial industry are also looking at this closely as well as a mass of applications in transportation of goods and services. However, to this point, it seems more of a marketing ploy than a bonafide technology offering. My guess is a lot of smart developers will continue to work on realizing the potential of blockchain in 2019, but I’m of the mindset that it will be 2-3 more years before we start to see the traction that has been promised.
  5. Data to Analytics to Machine Learning to AI: At the center of all of these technological trends and in the center of this list falls the linchpin to so many of these trends and to digital transformation as a whole. Data is key to companies being able to make good decisions about products, services, employees, strategy and more. We won’t see a slowdown anytime soon. As recent data has shown we have created 90% of the world’s data in the past year, research is also showing that we are only using 1% of the data effectively. While being in the top 1% is often a good thing, this is a 1% that most of us preaching the power of analytics should be ashamed about. With a plethora of companies like Microsoft, SAP, SAS and Salesforce (just to name a few) showing market leadership in the promotion of data being made into meaningful business analytics, there is much to be done by data driven organizations to realize the power of the data on hand and the data that they are collecting. With improved processing power that can increase machine learning, we are going to see digital leaders investing in making more of all of their data and this will be done with machine learning and AI and I believe that 1% figure will grow to 3 or 4% by 2020; which may seem small but is a massive increase in data utilization.
  6. GDPR Forces Brand Hands: As of August 2018, about 1/3 of companies were still not compliant with the Europe’s General Data Protection Regulation (GDPR), which aims to provide huge layers of data protection for users. In fact, at this time, about 1,000 U.S. newssites still aren’t available in Europe, generally because they don’t care enough about data security to make the GDPR a priornewity. What does this mean in terms of 2019 digital transformation trends? It means informed customers will start to see which companies truly care about protecting their data, and which companies really don’t. I believe that GDPR is the start of a more global trend that will hold companies accountable for how they treat privacy and personal data. While brands do not necessarily want to have to comply, this movement will serve as a warning to companies to figure out better ways to genuinely build relationships with their audience as opposed to the often clear misuse and abuse of personal data in the name of marketing and selling.
  7. AR Yes, VR (Still) No: I’m kind of starting to feel bad for virtual reality (VR) because it’s so cool, but it just isn’t feasible beyond gaming and highly specialized applications in today’s marketplace—yet. Instead, augmented reality (AR)—VR’s less sexy little brother—continues to be the name of the game in 2019 digital transformation trends. AR has found tons of use cases in enterprise workforce training, meaning it’s not just cool, it’s useful. And that’s what technology is all about. In fact, even though some think it will be slow, I believe AR’s development will ramp up in 2019. I’m even bracing to hear something about a new AR or mixed reality product and/or developer kit on September 12 from Apple’s big announcement. Hopefully something promising.
  8. Edge to Core and IoT Much More: Last year, my first four trends were basically around IoT, AI, Machine Learning and Edge. This year, the four become one because they are so deeply interconnected. As the IoT grows—and the number of connected devices skyrockets—it makes sense that we need more space—and closer space—to process the data it’s working to capture and process. The concepts of Smart Cities and Autonomous Vehicles have zero chance of being realized if data processing has to happen in the cloud. That means we’ll be leading more and more toward edge computing in terms of 2019 digital transformation trends. Analytics and data won’t just be for processing—they’ll be for processing in real-time. And that’s something only the edge can support right now. Now, its important that I emphasize that edge and cloud are not mutually exclusive. Cisco refers to the interdependence of edge and cloud as “The Fog” as they recognize that critical data interactions that take place between the edge and the cloud to maximize data utilization. While their vernacular may or may not become ubiquitous with the connection between edge and core, you can be certain that the two will work together tirelessly to achieve the possibilities being sold to us with AI, IoT and Machine Learning.
  9. Consumption-Based IT Services for the Win (FTW): This year, we did our homework, and asked the CIOs and IT executives about their IT budgets and trends in their consumption of cloud and overall, they are interested in creating efficiency, having more flexibility with their workloads (note trend 3) and having the ability to scale up and down quickly based on the business requirements. This means, much like we saw Salesforce become a heavyweight for CRM as a Service, that the idea of anything and eveyrthing as a service is highly desirable. With the as-a-Service industry growing, companies are becoming more sophisticated in choosing “a la carte” IT services to fit their needs. This ITaaS allows for scalability, the latest technology (without the latest tech price tag), shorter procurement cycles, and increased agility. It only makes sense that companies are leaning this way and they will be more and more in 2019.
  10. CEOs Take the Reins: Honestly, it’s about time and while I’m putting this as my closing prediction, it is also the one that has me the most nervous. Countless studies have shown an overwhelming desire from employees to see digital transformation start at the very top of the company, however, trends are still showing that the task is being too often delegated to IT, Marketing or HR departments. So even though we’ve seen a range of C-suite leaders charged with taking the reins of digital transformation, I believe that the CEO will (must) finally step up in 2019, realizing digital transformation isn’t going anywhere. They’ll be making it more of a priority to hire for digital transformation, recognizing the critical nature of building cultures that can change, and the value of reskilling employees and hiring for agility—learning to trust data more than ever before. That’s good news for all companies in 2019.

If there’s one thing I know for sure, it’s that digital transformation will continue to change how we do business—in every industry. While it may be hard to see the inroads some of these technologies are making right now, their potential to change how we work, socialize, and interact is tremendous—and their implications will continue to land far beyond the year ahead.

For those that prefer a Graphic to share. Here is a visual of the 10 trends for 2019.

Top 10 Digital Transformation Trends - InfographicFUTURUM RESEARCH 

 

I am a principal analyst of Futurum Research and CEO of Broadsuite Media Group. I spend my time researching, analyzing and providing the world’s best and brightest companies with insights as to how digital transformation, disruption, innovation and the experience economy are...

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Daniel Newman is CEO of Broadsuite Media Group, principal analyst at Futurum and author of Futureproof.


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HR Technology
Strategic CHRO: Diane Gherson of IBM on How AI is Driving the Future of Work

For the next installment of our interview series with leaders who are transforming the role of the chief human resource officer, David Reimer, the CEO of Merryck & Co. Americas, and I sat down recently with Diane Gherson of IBM. Her insights and perspectives provide a clear window into how technology is fundamentally changing the HR function. Stay tuned for more interviews with other HR leaders.

Q. What are your thoughts on the phrase “strategic HR?” What does it mean to you?

A. In the old days, strategic meant taking the business strategy and translating that into what it meant for the various functional groups you might have in HR, and to a certain extent, how you would allocate your resources. But then it became much more about actually sitting at the strategy table and focusing more on, given our talent, the things that will give us a competitive advantage. So instead of just aligning with the strategy, you’re actually part of the strategy.

Then came along all these #MeToo articles that showed HR was not doing the basics in terms of sexual and verbal harassment claims. Some HR functions have fallen down on the operational side, and it’s given a black eye to the function. It is really important to have everything threaded through from strategy to operations, and if you can’t do the operations well, you’re not credible on the strategy side.

But now is the most exciting time because we’re all looking at how technology, particularly AI and automation, are changing work and jobs. What’s the future of work, and how are we going to prepare our people for it? How are we going to get a first-mover advantage in that space?

Q. Make that real for us. What does that look like? 

A. There are three ways we’ve been using AI in how we operate in HR. The first one is improving productivity, so we can deliver more value even as we cut expenses. Last year, for example, we decided we weren’t going to support first-line managers anymore with HR partners. Instead we’re going to offer them solution centers, with real experts to help managers with the typical problems they face. And then we created a bot. It’s on your phone and you can ask it anything at all hours of the day. It’s being asked thousands and thousands of questions, people are giving it feedback, and it’s getting better and better.

The next area is decision support for managers and for candidates and employees. We used to catalogue people’s skills based on them filling out a questionnaire, but it would be out of date within six months. Plus, new skills come along all the time. We needed a way to infer skills faster, so we used AI to look at your whole social footprint, which includes your resume, but also things you’ve been working on, blogging about, or conferences you may have spoken at. So now, if you want to know who in the company has experience in water conservation in Nigeria, you can find out quickly on your phone.

We can also look at the resumes of people who apply for jobs, and suggest roles they may not have thought about but that match their capabilities. It’s fantastic because a lot of young people don’t even know what jobs exist or what careers exist. We also use it when people become available internally.

Q. What else?

A. Learning is the most important part of our organization right now because we’re so focused on re-skilling and getting people ready for the future. We threw out our old learning system and created a really consumable experience by creating a Netflix-like experience. We have different channels, it knows who you are, what you’ve taken, what your career goals are. So it will say to you, in effect, “These are the skills that you need if you want to progress in your career, and here’s what other people have taken who are like you and here’s how they rated those programs.” They could be internal, external, articles or videos or an online college course – whatever those things are to close the gap between where you are and where you want to go. And then you can queue it up in your schedule.

The other thing we do is nudge managers in various ways, because we’ve got a lot of data about their people. Managers all want to be good managers, but they don’t necessarily have the time or attention at all times. Early on, we used analytics to determine who had a high propensity to leave. The advantage of big data is that it looks at everything – like the  school you went to, your friends who went to the same school and graduated the same year and got promoted recently but you didn’t, and therefore you’re likely to leave. It can build a pattern out of some very small niche group or something just out of the ordinary, like the length of your commute.

Now we’re using deep learning and it’s just so accurate. The first few years we did it,  our managers said we wrong about someone being likely to leave. And then slowly we’d start getting these notes back saying, “How did you know? He just gave his notice.” It’s saved us $330 million so far since the year we started in 2009.

Q. Have you been in roles earlier in your career when people actually didn’t want you to be strategic and help drive the business?

A. In my very first job out of my graduate program, I worked for this guy who was very smart. I remember going to him and I said, “I’ve got this idea on how we could improve.” He listened to me very carefully and said, “That’s a really good idea. Now, you know what we do with good ideas here.” He opened up his drawer, and in his drawer were all these little. carefully folded notes. And he said, “We put them in our desk and we pull them out when it’s appropriate.”

Q. That sounds like a Monty Python skit: “The Drawer of Good Ideas.”

A. It was amazing. That really framed for me how this kind of thinking is the problem with a lot of big corporations. 

Q. What are we going to be talking about in five years as the key issues facing HR?

A. The ability of an organization to learn is the biggest issue. People have been talking about it for years, but now we’re actually much more serious about how work gets done so people can learn. It used to be that people would learn in classrooms, and then there was a brief period where we thought everyone could learn virtually, and now people are learning on the fly. All that is great, but until it’s embedded in the workflow, you won’t get the exponential learning that is going to be required. The half-life of skills is shortening – that is just a massive social problem, let alone an organizational problem. And I think it’s really incumbent on all of us in HR to be very, very focused on how are we going to make this happen.

That also puts more of a premium on selecting the right talent in the first place. Once you make a hiring decision, it should be a person who can last through several cycles of technological change. I don’t think companies are investing enough on selection because they’re buying somebody for their skill today, rather than thinking about whether they have the capacity to learn. You want people to have a track record of reinventing themselves.

Q. If you were speaking to a room full of new CHROs, what would be your advice to them?

A. They grew up in a world of process, and that is the world we’re leaving behind. So it’s important for CHROs to get out in front of that and get into the world of outcomes and particularly experiences that they’re creating, and that means reinventing pretty much everything they do.

There used to be a front office and a back office and you outsourced the back office to focus on coaching and things like that in the front office. That’s gone. It’s the whole end-to-end experience that you’re creating, and it means owning more than just what typically falls under HR.

Q. If somebody had three really interesting CHRO offers on the table, what would be your guidance to them on what to ask the CEOs about the role as part of their due diligence?  

A. If you’re coming in from the outside into that role, you’ve got to figure out whether you can quickly build credibility with something that matters to the CEO, because that, in turn, will give you the ability to start making the other changes that you have to make. So you should ask them, “If, in my first 90 days, I could make a change, what would that be and how would you support me in making it? What are the obstacles that would likely come in my way and how are we going to work to make that effective.”

It’s about making a plan instead of just talking in flowery language about a strategic HR function. You need to really get inside the CEO’s head to understand in a visceral way what they’re prepared to do in the next 90 days.

Q. What have been the most important leadership lessons for you personally?

A. I grew up in Ottawa. At the age of 11, I was carted off to boarding school because my dad was in the Department of External Affairs. I went from a very protected background to suddenly being in this big world in the United Kingdom, and it was a little for me like Lord of the Flies. There were bullies and it was very hard, and I was rather fearful at first.

And yet, seven years later, I ended up being head of school. I figured out how to work in that environment so that I could not just survive but thrive. It required huge levels of adaptability. For me, it’s really important that you become attuned to the group that you’re with and understand them. The other thing that I took away from that is that I enjoy being the outsider, the person who’s not a mainstream figure but who can fit in and has a different perspective.

I learned another lesson when I went into consulting early in my career. I was in a small office, and it wasn’t doing very well, and a lot of the partners left. But leads were coming in over the phone, and even though I was very junior at the time, I decided just to take the leads and pretend I was more senior than I really was, and I sold work.

Because I was in a small office and therefore had a ton more autonomy, I was able to control my own destiny much more, and I got to progress much faster. So what I got out of that, and the way I definitely lead, is to give people autonomy. Help them figure out how they’re going to solve the toughest issues because if you do, they’ll come out stronger.

Q. What is your favorite question when you’re interviewing job candidates?

A.  Tell me about the high points and low points of your career. I know that’s pretty standard, but the stories that people will tell you will give you such a window into how they operate, and it does require a certain level of introspection.

I’m also looking for the twinkle in their eye when they talk about things that they really enjoyed. And I’m looking for the energy that they got out of the things that were the low points, as opposed to the drag on energy that sometimes people carry around with them. That’s a warning flag for me. 


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Digital Content (HR and Business Transformation)
The Four Building Blocks of Transformation

If you are a business leader, you are probably thinking about radical change. New industrial platforms, geopolitical shifts, global competition, and changing consumer demand are reshaping your world. You face upstart competitors with high valuations encroaching on your business, and activist investors looking for targets. Meanwhile, you have your own aspirations for your company: to be a profitable innovator, to seize opportunities, to lead and dominate your industry, to attract highly committed talent, and to carve out a socially responsible role in which your organization makes a difference. You also probably want to clear away the deadwood in your legacy system: practices, structures, technologies, and cultural habits that hold your company back.

The conventional response is a transformation initiative — a top-down restructuring, accompanied by across-the-board cost cutting, a technological reboot, and some reengineering. Maybe you’ve been through a few such initiatives. If so, you know firsthand how difficult it is for them to succeed. These efforts tend to come in late and over budget, leaving the organization fatigued, demoralized, and not much changed. They don’t take into account the fundamentally new kinds of leverage available to businesses that have emerged in the last 10 years: new networks, new data gathering and analysis resources, and new ways of codifying knowledge (see “Leading a Bionic Transformation,” by Miles Everson, John Sviokla, and Kelly Barnes).

Successful transformations may be relatively rare, but they do exist — and yours can succeed as well. A transformation, in this context, is a major shift in an organization’s capabilities and identity so that it can deliver valuable results, relevant to its purpose, that it couldn’t master before. It doesn’t necessarily involve a single major initiative (though it could); but the company develops an ongoing mastery of change, in which adaptability feels natural to leaders and employees.

An effort of this sort can take place on a large or small scale; it can involve the front, middle, or back office; it can be conducted by any type of enterprise, from a startup to a global enterprise; and it will affect every aspect of the organization’s structure, including such functions as innovation, finance, marketing, sales, human resources, and operations. At any scale, it requires a cultural shift and highly engaged leaders, who take control of the organization’s future in these four ways:

• Create a strategic identity. Articulate a single desirable future for your enterprise and focus all your efforts on achieving it.

• Design for trust. Develop ways to attract and deserve the commitment of everyone related to your enterprise — particularly customers and employees.

• Master the pivot from sprint to scale. Test new practices in an intensive, experimental, startup-style manner. Pick the approaches that work, and rapidly implement them throughout the larger system.

• Treat your legacy as an asset. Save the best of your past, divest the rest for advantage, and use the income to fund the future.

We think of these as the basic building blocks of any successful transformation. They aren’t specific steps, stages, or organizational designs. Those will vary from one enterprise to the next. Rather, they are ways of thinking about influence and change: perspectives on how to shift organizational and individual behavior in a more productive, competitive, and engaging direction.

We identified these elements through a comprehensive research and synthesis project that took place early in 2018. We convened a broad, global group of PwC’s most knowledgeable experts on organizational change, particularly change at the nexus of business strategy, customer experience design, and advanced digital technology. At an extended in-depth session with 35 members of this group, we studied examples of successful transformations and articulated the factors common to them. Then we tested our findings in follow-up research and discussions with other experts, inside and outside PwC, and with clients. Though the cases varied widely — by region, industry, circumstance, and personality — the four building blocks were consistently pivotal to success. The transformation initiatives we studied (described here and included in our library of case studies on the PwC website) have helped companies shake free of their self-imposed shackles, adopt dynamic new business models, and raise their game in a swiftly changing world.

Create a Strategic Identity

Every company today needs to make a distinctive mark. This is a matter of building not just a brand, but a powerful identity, in which the company’s value proposition, core capabilities, customer and employee experience, and culture all reinforce one another. Companies with a fully coherent, differentiated, strategic identity — the likes of Apple, IKEA, Starbucks, and Honda — become iconic. They make an absolute commitment to a single overarching way of doing business, and to a grand vision of the company they need to be. Sean Connolly, president and CEO of Conagra Brands, offered his view about this sort of organizational change in a 2016 interview with the Chicago Tribune: “[It] is not for the faint of heart.”

At the time of that interview, Conagra was still in the early stages of its celebrated transformation — from a diffuse, US$18 billion conglomerate of agricultural and food-related businesses (described in the press as a potential takeover target) to a focused $8 billion purveyor of consumer food brands in North America. Connolly had been hired in April 2015 after serving as the CEO of Hillshire Brands. At Conagra he was charged with refocusing the company’s mission and turning it around. That mandate intensified a few months later, when the activist hedge fund Jana Partners bought a stake in Conagra and gained two seats on its board.

 
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On the most practical level, Conagra’s transformation initiative involved deals and structural moves: selling a private-label business, spinning off a vertically integrated potato business, relocating headquarters, resetting the cost structure, acquiring contemporary brands, realigning its operating model, eliminating unprofitable legacy practices (including the indiscriminate use of discount promotions), and changing the company name from ConAgra Foods to Conagra Brands. At the heart of all this activity was a new concept of the company’s identity: a nimble innovator, with (according to its vision statement) “the most energized, highest-impact culture” in the food industry. Conagra’s brands would now be required to be the first or second in their sector, and to be known for attracting highly loyal followers (for example, Hunt’s, Peter Pan, Orville Redenbacher’s, Reddi-wip, Slim Jim), defining a prepared food niche (Bertolli, Hebrew National, Marie Callender’s), or emphasizing quality ingredients and health (Alexia, Blake’s, Frontera, Healthy Choice). “This is a totally new era,” Connolly told stock analysts in October 2016. “We are not the ag business that we started as almost 100 years ago. We are certainly not the global conglomerate that we’ve been for decades. For the first time in our history, we will be a branded CPG pure play.”

The related new body of operations practices, dubbed the “Conagra Way,” was modeled after smaller, more flexible companies. The new IT system, built on a cloud-based infrastructure, was oriented toward rapid innovation and communication across internal silos. “Where there is friction [in the digital infrastructure], there is opportunity,” CIO Mindy Simon told CIO Magazine. “How can we use analytics to help our chefs develop new products? How can we use sensors to improve our distribution?”

The results include more than $300 million in annual savings and quick growth in financial metrics, including more than 40 percent growth in total shareholder return between May 2015 and May 2017. Employees and retailers describe Conagra Brands as an entirely different company. And its 2018 acquisition (for $10.9 billion) of Pinnacle Foods (with brands such as Birds Eye, Gardein, EVOL, and Smart Balance) makes Conagra the second-largest frozen food company in the U.S., after Nestlé. The Conagra story shows how a well-considered shift in identity can take hold in even the largest and most established companies.

As you take on the mind-set of an upstart, and articulate a bold new vision to establish your company’s new identity, keep these precepts in mind:

Tell a good story. All too often, the leaders of a transforming company use dry, technocratic language to explain the change and its rationale. But in a successful effort, the business leader sets the tone by translating the company’s new strategic identity into vivid, everyday language — so that everyone can see how their jobs contribute, and why each part of the change matters.

This may well mean articulating a company purpose that goes beyond making money. Employees and customers understand that enterprises are powerful, and that they exist to achieve something with that power — connecting people, producing wealth, creating products and services, or bringing new forms of value to society. When there is a clear, evocative statement of how the company creates value, not just for the shareholders and owners but for the greater world around it, employees feel a connection with the new identity. They understand how it will help them prosper and make them proud to be associated with it.

Use symbolic gestures to represent this clarity of purpose and bring the identity to life. For example, Conagra consolidated all its Chicago-area suburban offices into one downtown building to attract talent, create a high-energy collaborative environment, and accelerate decision making. Connolly explained it this way: “[We can] see each other in the hallway, and get business done in five minutes, rather than on a conference call five days later. Everything [is] recharged.”

Link your strategic identity to your most distinctive capabilities and skills. If you take a hard look at your core business, you’ll probably find it’s not a core at all. Rather, it’s a portfolio of non-synergistic offerings, often requiring very different capabilities. This transformation is your opportunity to focus on what you’re really good at, and cut back the rest. Everything you do afterward, including your digitization, cost management, and product and service line development, should relate directly to these distinctive strengths. For example, Bosch Rexroth, a global electronics and engineering company based in Germany, is creating a new identity as the hub of an Industrial Internet platform. Grounded in its sensor and Internet of Things businesses, the identity is aimed at “smart city” projects and middle-market companies. The company is demonstrating its value by using its expertise in sensors and analytics to trim its own operational expenses. Company leaders talk of saving €1 billion (US$1.2 billion) internally by 2020 and thus building a company that can uniquely offer comparable savings to its customers.

Stretch your aspirations. When explaining the need for transformation, don’t just talk about threats or “burning platforms.” Fear paralyzes and distracts people. It creates a toxicity that can take years to remove. Instead, talk about the company you want to (and may need to) create — a company that can do things it can’t do now. Show how your people’s strengths and talents are uniquely qualified to realize this vision, and how you can build or buy the collective capabilities to support them. To really inspire commitment, the new aspiration should be a genuine stretch — one that will take unprecedented energy and skill to fulfill, and will deliver an equally unprecedented payoff. Hearing it described should make your company’s leaders, employees, and other primary stakeholders feel simultaneously intrigued, energized, and uncomfortable; otherwise, it’s probably not complete.

When explaining the need for transformation, don’t just talk about threats or “burning platforms.” Fear paralyzes and distracts people. Instead, talk about the company you want to (and may need to) create.

The state-owned insurance company Accident Compensation Corporation (ACC) in New Zealand is transforming itself this way — from being an established facilitator of claims to being, in the words of the 2017 annual report (pdf), a company dedicated to “improving quality of life by minimizing the incidence and impact of injury.” It is building the capabilities to help New Zealanders prepare for crisis and prevent accidents, not just recover from them.

Invite participation. Talk to employees; invite them to put their fingerprints on the future and to help design aspects of it with you. People are more likely to adopt what they help to create. Other stakeholders may also have powerful contributions to make. Investors, for instance, recognize the market forces driving change for your company as few others do. If they’re interested in long-term involvement with your enterprise, they’ll appreciate the power of a truly viable strategic identity.

Name the challenges you face. You’re seeking not only greater efficiency, or only the ability to employ three sales associates where once you had five. You might need a breakthrough in revenues, a step change in safety and reliability, the ability to compete in a new arena (a geographic market or a customer group), or a boost in customer loyalty. Consider every option for dealing with those challenges, including the formerly unthinkable. Call out the trade-offs you face, and the difficult choices you have to make. Name the choices you’re not going to pursue, and explain why. Choose your financial targets and milestones carefully, to show sustained movement toward your goal, not just good results for a quarter or two. Similarly, pick tough targets for improving your reputation — e.g., would a customer, competitor, or community member who’s been observing your company over the last few years agree that it has improved?

Connect with the community. You are remaking your company to be the kind of enterprise your employees want to be associated with. They will be concerned about its reputation (and their own) outside the company walls. Consider what social values your company should adopt. They may involve environmental quality, sustainable use of resources, frugality, integrity, ethics, community leadership, or other ways of serving society. Metrics such as Total Impact can help you identify opportunities that fit your company’s staff and capabilities. Take on only those goals your company can authentically stand behind.

Bring it all together into a “critical few” elements. Resist the temptation to include everyone’s ideas. Tell a simple, clear story that gets to the heart of the company you will create. In their forthcoming book, The Critical Few: Energize Your Company’s Culture by Choosing What Really Matters, Jon Katzenbach, James Thomas, and Gretchen Anderson suggest that you can distill all the complexity of change into a few cultural elements. Pick two or three traits that represent the company you want to become (such as Conagra’s nutritional consciousness, Bosch’s technological acumen, or ACC’s proactive approach to its customers); a few behaviors that you’ll need to realize the new company’s success (such as faster decision making or better collaboration across internal boundaries); and a few key people from throughout the enterprise who exemplify the new approach. It takes time to winnow the many down to the critical few. But once you’ve done this, you’ll be able to move forward much more quickly, and everybody will be able to operate more effectively, because they will understand the new company’s identity and how their job fits into it.

Design for Trust

It’s often possible to tell how a transformation is going by the way people feel about it. Many difficult options may be on the table, including selling part of the firm, reducing staff, and making radical shifts in strategy. But if people see reason for hope, they will invest their time and effort in building the new identity. They will trust the enterprise to deliver what it has promised.

Building trust is not just a matter of gaining buy-in. You put psychology first: designing every move so that it resonates with customers, employees, investors, regulators, and other stakeholders. This requires care, planning, and an attitude about people that often goes against the grain. Many executives believe, deep down, that people are “fixed”: once set in their ways, they will not budge. But the truth is that people can shift even their most fundamental attitudes, beliefs, and behaviors if they recognize the value of doing so and are given the opportunity to develop their skills. Stanford University psychologist Carol Dweck calls this perspective the “growth mind-set.” If you don’t believe in the flexibility of your company’s employees, you won’t believe in the transformability of your company. Such disbelief is likely to become a self-fulfilling prophecy.

How do you learn that people will change? By designing an approach that gives you and your employees reason to trust one another. Dŵr Cymru Welsh Water, the sixth-largest of the 10 regulated water and wastewater utilities in England and Wales, accomplished this when it transformed its retail business in 2015. To reduce an excessive level of bad debt and drive its costs back into line, the company required more than 3,000 employees to reapply for their jobs; 40 percent of them were not rehired. Yet when Welsh Water conducted an employee engagement survey afterward, the remaining employees responded in record numbers, and the company’s engagement score (a measure of satisfaction and commitment, derived from that staff survey) rose substantially. There was also a significant improvement in cost-to-serve, an increase of more than 20 percent in capacity per pound invested, and a 73 percent improvement in cash collection rates.

The factors that made a difference were intangible, but all related to building trust. Welsh Water’s leaders were clear with employees about the criteria for being rehired. These leaders demonstrated a growing competence in their own managerial decisions, in part because of improvements in the way they used data. Data about customer use and operational efficiencies had been kept in organizational silos; as a result, finances had been mismanaged, excessive debt and overhead had accumulated, and customer experience had declined. To fix these issues, the company released a series of dashboards — electronic scorecards available to employees in which they could see, for the first time, key performance indicators related to their job. By calling this new approach the “Welsh Water Way of Working,” and rolling it out in a series of three-month waves, the company gave employees a clear signal that new behaviors would be valued and rewarded, and gave them time to adjust.

The new practices also built trust in the community. More than 5,000 customers who had been in arrears are now on a reasonable payment plan, with many more expected to follow, reducing the debt burden on other customers’ bills. Moreover, as employees saw customers’ lives improve (particularly those with little means who needed help), and as their own workday became easier and more rewarding, they gained more pride and confidence in the company.

These precepts can help you get similar results from your own transformation.

Start at the top. Your culture takes its cue from the leadership team. Are they in sync and capable? Or are they visibly uncomfortable with one another and distant from everyone else? If the latter, then you should help that group improve its leadership, perhaps through intensive coaching and conversation.

Redesign your HR motivators. Translate trustworthiness into tangible incentives such as salary, promotion, and perks. Incentives don’t have to be expensive; they could include flextime, educational opportunities, participation in a high-growth part of the enterprise (with the challenges and career prospects that go with that), or access to particular mentors or projects. Find out what different people want from this transformation, and tailor your menu of incentives, structures, relationships, and practices across that range.

Perhaps the most commonly overlooked motivation is autonomy. Set things up so people can control their own budget or part of the system, with clear accountability and open communication about how they might contribute to the new strategic identity. Foster the kind of workplace that encourages what London Business School professor Dan Cable calls the “seeking system”: the part of the brain that craves experimentation and creativity as a way to learn.

Treat resistance with respect. Some visible key people will inevitably remain beyond reach, opposed to your new strategy. There is a reason they object; can you engage with them, find out why, and make a good-faith effort to win them over without compromising your strategy? If you must lay people off, ensure that they are given the support they need to find new roles elsewhere. Even if you need opponents to leave, seeing you treat them fairly will give others more reason to commit to the new enterprise wholeheartedly.

Build trust with customers. Too many companies have undermined their customers’ respect and interest with careless use of data or duplicitous practices. Set an example for competence and genuine commitment to trustworthiness. Embody this in the quality of the online and offline customer experience you design. Devote the resources and attention needed to accomplish this and make it profitable.

Master the Pivot from Sprint to Scale

New ideas need time and space to incubate; in their early stages, they must be protected from the larger system’s interference. But if they remain isolated, they’ll inevitably be marginalized. It takes a great deal of on-the-ground skill to resolve this paradox. Successful transformational leaders build in that resolution from the beginning. By combining the speed and agility of a startup with comprehensive full-scale execution, they acquire, develop, and sustain the capabilities they need to differentiate themselves.

Pernod Ricard, based in Paris, is the world’s second-largest wine and spirits company (after Diageo). Its many well-known brands include Absolut, Beefeater, Glenlivet, Jacob’s Creek, Jameson, Kahlua, and Seagram’s. In 2016, with the goal of becoming world leader, it began to transform its marketing and operations organizations. Among its tools was Briefcase, a distribution app that replaced paper binders and digital spreadsheets. With Briefcase, sales teams can pull up comprehensive sales data on their smartphones, along with sell sheets and cocktail recipes for particular accounts and brands, and connect through social media with their colleagues around the world. Because independent distributors that supply retailers, bars, and restaurants work with Pernod Ricard, they too are part of the Briefcase system.

In years past, it might have taken a long time to develop this app. Instead, Pernod Ricard brought together a dedicated team of internal and external professionals to create it on a cloud platform. They tested it rapidly with a target group of salespeople, implemented their suggestions, and rolled it out in key territories within a few months. Briefcase is credited with a 300 percent increase in account visits, a key sales metric for any customer-oriented consumer products company. “This is a game change,” said Marc Andre, vice president of IT solutions at Pernod Ricard North America. “We now have all the information and tools we need to manage each distribution channel.”

A successful transformation involves a continual series of small innovations, each building on the concepts that worked before. They can include new products or services, entries into new markets, operational improvements, new ways of tracking results, explorations of new business models, or new ways of working that emulate (or improve on) those of upstart technology companies. Typically, you will develop and try out each new approach on an experimental basis, and then syndicate those that prove themselves, implementing them at full scale. As you raise the bar a bit each day, the organization shifts much more easily and effectively than it would if you set up a grand dramatic scheme for demanding behavior change across the enterprise. Some precepts for accomplishing this follow.

Adopt the methods of agile innovation. Small groups can try out multiple new ways of working, and introduce new products and services, using the same development techniques that are common in tech companies and research universities. In a typical sprint-and-scrum process, a small cross-functional group of stakeholders and knowledgeable people is given a period of time, perhaps three to six weeks, to come up with the necessary innovation. The team should be diverse, representing every relevant function and skill — strategists, design thinkers, operational experts, finance professionals, and technologists. They converge on the problem, ignoring their other responsibilities, and develop a first-phase prototype. Then they test it in some real-world setting, perhaps with a few variations.

New Zealand’s ACC, for example, set up “innovation labs” — pockets of activity where people experimented with the use of analytics and new customer services. These served as incubators in the firm’s transformation. Avis is similarly prototyping 33 potential new revenue streams, each as its own mini-enterprise. “We’re making a portfolio of bets,” Ohad Zeira, Avis’s head of fleet ventures, told Wired. “When I came in, there were a ton of ideas. My job was picking the right ones.” In our own firm’s Experience Center design sessions, we bring together experts in business strategy, consumer and employee experience, and technology to work intensively as a team, building and prototyping new ways of solving problems. These prototypes are fast and imperfect by design, the equivalent of alpha releases in software; we then refine them, test them, and rapidly move the better ideas forward.

Plan for scale. Protect new ideas from interference, but only until they prove themselves. Then, replicate them quickly throughout the enterprise, replacing existing operations at every level. You will probably have a small, authoritative senior group set up to pick which ideas get scaled — not all at once, but when each is ready. The senior group may assign new team leaders at that point; the characteristics of experimenters and implementers are very different. Provide enough guidance for teams around the world to implement each new approach wholeheartedly.

Build your personal knowledge of customer needs. In many large, established firms, the innovate-then-scale approach is countercultural. Thus, you often see ideas emerge that should get picked up, but don’t; overly programmatic oversight that stifles the prototypes before they have a chance to take hold; or ideas that turn out to be impractical because operations people haven’t been involved. The best solution for any of these problems is deeper awareness of your customers and their needs, so that you can tailor and develop these ideas with more confidence. The practices of design thinking and in-depth customer research — in which you visit, work with, and develop relationships with representative purchasers of your products and services — are very useful. If you integrate that kind of activity with your own prototyping efforts, it becomes an enormous confidence builder for your teams. Even if you get an individual project wrong, your overall hit rate will increase, as you learn how to learn about your customers more effectively.

Treat Your Legacy as an Asset

Your existing company has a great deal of value; otherwise, it could not have thrived thus far. Now it is moving into a new form. It is time to dispassionately and creatively determine how to make the most of the value you’ve created. Inevitably, some elements of your old organization must be left behind as the company moves on. These services, processes, practices, brands, and even subsidiary enterprises will not fit your new identity and operating model.

The attention you pay to managing your legacy can affect the entire transformation. Moreover, while you shift to a new identity, the old business must stay in motion; the company depends on its revenue and profits. You thus need a clear and effective plan for harvesting the best of your past, while fixing up and divesting anything that will distract your new organization. These precepts can help.

Maximize value throughout the enterprise. This precept includes parts you divest. Some of your businesses and assets may contribute to revenues or market share, but not as well as they would as part of a company with more appropriate capabilities. For instance, in 2011, McGraw-Hill was a broad and scattered media and information services provider under fire from activist investors. The company leaders knew they had to sell off the businesses that didn’t fit, particularly the large education publishing business. But rather than hurriedly dismantling the company, they mapped out a multiyear program in which they restructured costs, put new management in place (even for the businesses that would be divested), and transformed their operating model. The divestitures, when they happened, contributed strongly to the bottom line. The resulting company, focused on financial information and rechristened S&P Global, increased its market value by $23 billion.

Balance nostalgia and foresight. Managing the legacy entails much of the most wrenching work in transformation. Suddenly, people are told that activities in which they have invested years of their lives are being jettisoned. For example, if your company enthusiastically switches to cloud-based interoperability, people who have held the old proprietary IT system together may wonder if they have wasted their time. Communicate your appreciation for the value that they created in the past, and make sure there is a path available for those employees to work productively in the new regime. At the same time, don’t say yes to emotionally driven pleas for the status quo. You may have to stop doing many things that served your company well in the past. Focus on the distinctive value proposition and capabilities that you need to develop now.

Put bold and talented people on the front lines of legacy management. The legacy management aspect of transformation is frequently treated as a backwater. But it is as critical to transformation success as the other three building blocks, and probably only a small group of executives in your company have the critical thinking skills and dispassionate temperament to master it. This can be a plum temporary assignment, in which people learn how to distinguish your company’s strategic capabilities from everyday activities; divest elements that aren’t needed; and integrate the right legacy and future-oriented capabilities together.

The Transformative Way

These four elements are all crucial to your design, no matter what type of company you have. The way you apply them depends on your unique situation; your industry, your company’s geographic footprint, and the circumstances of your company can affect the way you sequence these elements.

The first step is akin to the due diligence you would do on another company while considering an acquisition, but is performed on your own company. Ask yourself questions like these:

Creating a strategic identity:

  • What is the enterprise we most want to create?
  • What value would this new identity offer customers and the world at large?
  • What are the critical few elements — attributes, behaviors, and key people — we could draw on to move forward?
  • Why do we care about the enterprise we’re building?
  • Why should our constituents care?

Designing for trust:

  • How do our employees and customers see us, and what has led them to see us this way?
  • How can this transformation help us tap into the full potential of our people?
  • How can this transformation help us deliver more consistent and reliable value to customers?
  • How should we communicate the transformation to resolve the gaps in employee and customer trust?

Mastering the pivot from sprint to scale:

  • What are the most promising things our company can do to deliver value — including products, services, practices, experiences, and capabilities — that it isn’t doing now?
  • How can we best prototype those new ideas? Where? And with whom?
  • How do we select the best ideas to nurture and scale, and then redistribute resources in the enterprise to support them?
  • Are we prepared to learn from our experience as we go along? What practices for observation and feedback do we need to put in place?

Treating your legacy as an asset:

  • If we were designing our enterprise from scratch, which of our current activities would we still choose to undertake?
  • How well do our legacy activities fit with our future strategic identity?
  • Where is the latent value in our legacy activities?
  • What would we have to do to realize that latent value, either by integrating those activities into our core business or by divesting them?

These questions deserve deep reflection, because the answers can allow your company to fulfill its short-term and long-term objectives. The better you understand your strategic identity and the priorities it demands, the more certain you can be about the changes you need to make — and thus the more confidently you can double down on them. That’s why in a successful transformation effort, fear is not your ideal motivator. Fear leads you to hedge your bets, and that makes your change less effective. Vow to set up your transformation initiative to emphasize aspiration, not fear. Every day, employees and other stakeholders are asking you how they can help build the company you wish to lead. If you remain resolute in your answers, one day not too long from now, you will discover you are already leading that company.

For more insights, visit pwc.com/transformation.

Author Profiles:

  • Al Kent is a principal with PwC US and an advisor to executives for Strategy&, PwC’s strategy consulting business. Based in Florham Park, N.J., he focuses on major transformations in the oil and gas and industrials sectors. He is a leader in PwC’s engineering and construction advisory practice.
  • David Lancefield is a partner with PwC UK and a thought leader for Strategy&. Based in London, he advises senior executives of media, entertainment, and technology companies on transformational change. He writes regularly on strategy, innovation, leadership, and culture.
  • Kevin Reilly is a partner with PwC Australia, based in Sydney. He is a global leader in PwC’s transformation domain, and has helped shape some of the largest public- and private-sector transformations in Asia-Pacific.
  • Also contributing to this article were PwC global advisory markets leader Randy Browning; PwC US principal DeAnne Aguirre (US Strategy& leader); PwC US partner Paul Gaynor; PwC global markets director Daniel B. Garcia; PwC campaign leaders Jennifer Bhagwanjee and Virginia Colamarino; and s+b contributing editor Theodore Kinni.


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HR/People/Workforce Analytics
15 HR Analytics Case Studies with Business Impact

 It is time that HR analytics starts to show the value it delivers to the business. This is hard to do as people analytics is still an emerging field. For this article, I have collected 15 of the best HR analytics case studies I’ve come across in the past two years. Each of these case studies are connected with a concrete business impact.

For each case study, I will refer to their original publication. Quite a few case studies have come from the excellent Strategic Workforce Analytics report by Corporate Research Forum. This is one of the few papers that has collected case studies with business impact. Some of the others have been published on this medium before, and some others in newspapers. As I already said, I have only included case studies that showed tangible organizational benefits.

15 HR Analytics Case Studies

1. Saving money by predicting who will quit

On March 13 2015, the Wall Street Journal published an article titled: “The Algorithm That Tells the Boss Who Might Quit”. The article explored how Credit Suisse was able to predict who might quit the company. It was one of the first examples of the now very popular employee churn analytics.

Not only were the analysts at Credit Suisse able to predict who might quit, but they also could identify why these people might quit. This information was provided anonymously to managers so they could reduce turnover risk factors and retain their people better.

In addition, special managers were trained to retain the high performing employees who had a high flight risk. In total, this program saved Credit Suisse approximately $ 70,000,000 a year. The full article can be found here.

2. Relating engagement with store income

Another great HR analytics case study of people analytics at work was published in the Harvard Business Review. In an article titled Competing on Talent Analytics, the authors describe their research in multiple large companies in the US.

They specifically researched the relationship between engagement and financial performance. Engagement is often seen as the holy grail of HR – but its impact is hard to measure.

The authors describe that some organizations “can precisely identify the value of a 0.1% increase in engagement among employees in a particular store.” They take the example of Best Buy, where a 0.1% increase in engagement results in over $ 100,000 in annual operating income per store.

The significance of this relationship motivated Best Buy to make employee engagement surveys quarterly rather than annually. The full article can be found here.

3. Turnover at Experian

A people analytics case study at ExperianEmployee attrition at Experian was a problem. The company was facing levels of turnover that were 3-4% higher than they wanted it to be.

By building a predictive model that included 200 attributes, including team size and structure, supervisor performance, and length of commute, they were able to predict flight risk.

An example risk factor was teams of more than 10 to 12 people. The analytics team also identified flight risk triggers: when someone moved further away from the office, this would increase immediate flight risk.

The model was rolled out in multiple regions – with slight differences to the predictive algorithm. These insights, combined with good management practices, reportedly resulted in a drop in attrition of 2-3% over the past 18 months with an estimated saving of $8,000,000 to $10,000,000.

4. Flight risk at IBM

A similar analysis was done at IBM, where turnover was high for certain business-critical roles. Using IBM’s Watson machine learning capabilities, the workforce analytics team build an algorithm that included sources like recruitment data, tenure, promotion history, performance, role, salary, location, job role, and more.

The company also included employee sentiment, measured through their Social Pulse. The hypothesis here was that engagement with social media might fall when employees are thinking about leaving.

The investment yielded $ 300,000,000 over four years and turnover for critical roles has fallen by 25%. According to the report, productivity has also improved while recruitment cost have fallen.

5. Keeping key talent at Nielsen

Nielsen created a similar predictive model back in 2015. The first predictive model only included 20 variables, including age, gender, tenure, and manager rating. Over time, more variables were added.

This exercise provided multiple insights, including that the first year mattered the most. First-year employees where checked whether they’ve had their critical contact points. For example, the first check-in with their manager had to happen within a certain time span after hiring, otherwise, it would trigger a notification. This was a proven, important condition for first-year retention.

Although getting promoted pushed people to stay, lateral moves were also a strong motivator for people to stay.

A significant outcome was that the people with the highest flight risk in the next six months were approached and the company was able to move 40% to a new role. Making these lateral moves increased an associate’s chance of staying with the company by 48%.

6. Reducing road traffic accidents

A fantastic study on the impact of good hiring assessments took place in Zimbabwe. A local transport business wanted to reduce the cost of road traffic accidents (RTA) of their drivers. This not posed a danger to the people involved but these accidents also delayed the transport and were very costly because of material damages.

A local consultancy researched if psychometric tests could predict if some people had a higher likelihood to be involved in a traffic accident than other. If these factors could be identified, they could be used as selection criteria for new hires.

They discovered a number of very useful insights. First of all, it turned out that a popular Defensive Driving Certificate (DDC) that drivers had to get, had no impact on their likelihood to be involved in an accident.

Reducing Road traffic accidents - people analytics case study

Measured levels of concentration and Reactive Stress Tolerance (RST) were related to accident proneness, as well as the number of years a driver had their driver’s license. Assessing a driver’s baseline concentration and RST before hiring them made sense. So did hiring older drivers as they were more experienced.

The full details of this HR analytics case study and the statistical tests can be found here.

7. Achieving an optimum staffing level

Another interesting HR analytics case study was about reaching optimum staffing levels. A large mining company in Zimbabwe was concerned about losing money because of over or understaffed departments.

The experts took an interesting approach in analyzing under and overstaffing. They took the number of employees of a business unit and compared this to the business activity of this same business unit, measured over 17 quarters.

The relationship between the number of employees and business activity was strong with an R squared of 70.34%. This means that 70.34% of the business activity could be explained by the number of employees. By plotting these two dimensions, the team was able to identify the departments that were overstaffed and understaffed.

Achieving optimum staffing levels - HR analytics case study

Excess employees were retrenched. It turned out that the breakeven point of retrenchment costs was only two months – in month three, the company was already saving money. Retrenched employees could also be relocated to similar roles in understaffed departments.

Click the link for the full people analytics case study.

8. Training workers and dancing in the rain

A brief case studie is presented in an article written by Tony Brugman and Rob van Dijk from their own consulting work.

The company was a large Dutch FMCG retailer that used people analytics to analyze the effects of training. The analysts found that training shop personnel had a positive impact on the shop’s financial performance. This was measured through A/B testing. In the first year alone, the ROI of their training program was 400%

9. Sick days at E.ON

People analytics also helped E.ON tackle employee absence. Absenteeism in this German 43,000 + people energy company has risen above benchmark.

The analytics team formulated 55 hypotheses, tested 21 of them and validated 11.

One of the examples written in the report was that selling back untaken holiday did not increase absenteeism. What did increase absence was a lack of a long holiday somewhere during the year, or not taking a day or two once in a while during the year. This insight was communicated to managers to improve holiday approval policies.

10. Engagement at Clarks

Shoe retailer Clarks looked into the relationship between engagement and financial performance. The first question they asked was: is there a connection at all?

Because the company already reported higher-than-average levels of engagement, it looked into the returns of engagement and whether the returns of engagement would diminish with higher levels.

The team worked with statisticians who ran the retailer’s distribution planning system. In total, 450 business performance data points were included in the analysis.

According to the report, the results showed that there was indeed a connection. Engagement leads to higher business performance. In Clarks’ case, every 1% (percentage point) improvement in engagement, lead to an improvement of 0.4% (percentage point) in business performance.

To learn from this and to make it more actionable, the team also analyzed the characteristics of the 100 best performing stores, both quantitatively and qualitatively. They found that there was an optimum team size in the store and that the length of tenure of a store manager was a significant predictor of performance. This meant that switching store managers frequently lead to lower performance.

With these insights, the team was able to create a blueprint for high-performing stores. In addition, they created an engagement toolkit that managers can use to improve performance.

According to the company’s Chief People Officer, the results speak for themselves. “the UK retail business has systematically out-performed internal targets and external benchmarks, year on year. We’ve grown market share too.”

11. Engagement at Shell

similar result was found at Shell, where engagement was linked to superior business performance, through improved safety practices.

A 1% increase in employee engagement resulted in a 4% drop of ‘recordable case frequency’, a key industry safety standard. Safety performance was in turn directly related to business performance.

12. HR driving store performance

Another great people analytics case study took place in a large restaurant chain that was in a downward spiral. The management team didn’t understand why. They had pieces of information but struggled to implement effective policies.

A team of consultants was asked to investigate and provide insight through data.

Because there was a lack of good data, the team decided to measure it themselves using a survey. What was interesting in this case study, was that they didn’t use a normal engagement survey. They instead first looked at the relevant business outcomes. The three key outcomes they identified were:

  • Customer count
  • Customer satisfaction
  • Employee retention

Business performance would increase if these three metrics would go up.

The company then deployed a business-focused engagement survey where they:

  • Linked employee outcomes to their real business outcomes
  • Prioritize on the factors that had the largest impact on business outcomes
  • Show the business impact of improvements of these factors
  • Focus front-line managers on the factors that showed the largest impact

By mapping these factors on their own scores and the impact they have on the business outcomes, the team could easily visualize which drivers contributed most to business performance – and which drivers front-line managers should focus on.

This HR analytics case study shows which people factors to focus on to create more business impact

The six factors that would receive the most attention are in the blue square. By focusing on these 6 factors, line-managers would create the largest return.

Restaurant managers who had an average score of 4 or higher on the six key survey drivers were likely to see

  • a 16 % increase in customer satisfaction,
  • 18,000 more customers a year
  • 10% less staff turnover

The full report can be found here: How HR made customers happy

13. Compensation and benefits at Clarks

In a second people analytics case study, Clarks applied compensation and benefits analysis to optimize rewards packages for employees.

According to the report, “by asking which benefits employees might be prepared to trade off, it built a much more granular view of what people truly valued, and [we] adjusted the package accordingly.”

Satisfaction could be improved by up to 15 percentage points by giving people a small amount of money to invest in their own development. Employees also wanted to be able to sell their holiday days – which actually saved the company money.

14. Opening a new office by Cisco

A lot of these HR analytics case studies have focused on leveraging internal data. In the same report, we can find an analysis in which external data plays a big role.

Cisco has used demographic data to identify where they can best open up new offices. By combining various data, including current usage rates of office space, cost and availability of key talent, and availability of graduates from universities allowed them to expand in areas where there were fewer larger players competing for the same talent.

In addition, when selecting a new office, Cisco made use of this same data to find locations where employees with relevant qualifications were available and abundant.

15. Unilever: automated listening during a hostile takeover

When Kraft Heinz launched a hostile takeover bid in early 2017, Unilever’s workforce analytics team showed that analytics could also be deployed in times of crisis.

The team analyzed networks in the organization, and create models to come up with potential cost reductions.

In addition, the team was able to track the employees’ moods and attitudes. This enabled them to see how employees were reacting to Unilever’s defence strategies. These insights directly helped decision making during the crisis.

According to Clement, vice-president of HR, “the information we provided helped both in putting together cost reduction plans and providing information to back up the feasibility of our growth plans, so we could show that we were better placed to leverage the strengths of our business than Kraft Heinz.”

 

In this article, we’ve discussed 15 HR analytics case studies. I’m sure there are more people analytics case studies out there. If you know of a good one, please leave a comment about the study with a reference to the source and I will be happy to include it in this list.


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Organizational Development, Design and Learning
Turning Strategy Into Results

How can leaders translate the complexity of strategy into guidelines that are simple and flexible enough to execute? Rather than trying to boil the strategy down to a pithy statement, it’s better to develop a small set of priorities that everyone gets behind to produce results.

Strategy, at its heart, is about choice. Few companies succeed by making a single big bet. Most winning strategies are based on a bundle of choices about, among other things, the customers to serve, the scope of the business, product offerings, and capabilities that interact with one another to help a company make money.1 Consider Trader Joe’s Co., the U.S. grocery retailer based in Monrovia, California. It focuses on educated, health-conscious customers, which influences where it locates its stores, which products it stocks, and the type of employees it hires. The company’s choices reinforce one another to increase customers’ willingness to pay, reduce costs, and thereby drive profitability. The dense interdependencies among the choices prevent rivals from imitating Trader Joe’s winning strategy. Piecemeal imitation of a few elements — for example, the store format or the focus on private labels — wouldn’t work. Instead, a rival would need to replicate the full set of interconnected choices.

Strategy is inherently complex. We see this in the thick reports and complex frameworks that companies use to describe their strategic choices and how they connect with one another. Describing a strategy favors complexity, but executing it requires simplicity. To influence day-to-day activities, strategies need to be simple enough for leaders at every level of the organization to understand, communicate, and remember — a strategy that gathers dust on a shelf is nothing more than an expensive bookend. A strategy for execution must provide concrete guidance while leaving managers with enough flexibility to seize novel opportunities, mitigate unexpected risks, and adapt to local conditions. The act of codifying past choices into an explicit strategy, moreover, reinforces historical commitments and locks a company into inertia.2 Complex strategies, particularly those that include detailed plans, tend to be long on guidance but short on flexibility.

Strategy Made Simple

How can leaders translate the complexity of strategy into something simple and flexible enough to execute? Your first instinct might be to boil a complex set of choices down to a handful that matter the most. Indeed, a series of strategy experts have argued that managers should do just that by distilling their strategy to a concise statement (less than 35 words) summarizing a few core choices.3 The strategy distillation approach hinges on a few fundamental strategic categories — such as the choice of target customer or core competencies — that can summarize the heart of any company’s strategy. The authors illustrate this approach with strategies they have inferred from observing what has worked in the past at successful companies such as Southwest Airlines Co. or Ikea.

We have learned, however, that this approach works best with companies that have relatively straightforward strategies to begin with. Part of our research on strategy execution included a four-year action research project in which we worked with top management teams of eight to 12 companies per year in formulating strategies for execution.4 The teams used a framework that boiled down their company’s strategy to three elements: target customers (who), the value proposition (what), and how the company would deliver, sell, and distribute products or services (how).5 The approach worked well for a subset of the companies, including a low-cost regional airline, a single-format retailer, a restaurant chain, and a producer of steel girders. Although operating in different industries, the companies shared three characteristics: They focused on a single business, offered a standard value proposition to a clearly identified customer segment, and their strategy was stable over time.

Executives in companies that didn’t fit this mold, by contrast, struggled to boil their strategy down to a few key choices. An online job site in Eastern Europe, for example, could not identify a single customer because it served job seekers, employers, advertisers, and partners that listed jobs in multiple countries. Leaders also found it difficult to combine corporate and business unit strategies into a single formula. One company ran an online high school and a separate division that developed digital content, which it sold to other educational institutions (including other high schools). The two divisions were deeply interwoven, but the leadership team never managed to articulate a single strategy that worked for both parts of the business.

Strategies in transition posed another challenge. Combining choices that drove historical success with those required to win in the future resulted in convoluted statements that left employees baffled as to where they should focus. Simple strategies, we found, don’t work for companies that compete in multiple businesses, serve multiple customers, or are in the midst of a strategic transition.

Distilling a strategy into a few core choices sounds great in theory, but often derails in practice. You might think the issue was the specific framework we chose, but the roots of the problem go much deeper. To differentiate a company from rivals, the strategy should be specific to the company’s history and context, which implies the list of potentially strategic choices is long. Any short list of essential factors is likely to exclude choices that are critical to some companies.6 To be clear, this critique is not meant to devalue the work of the strategy scholars who created these frameworks, but rather to underscore the difficulty of reducing the inherent complexity of strategy into simple statements. Many companies simply cannot cram 10 pounds of strategic complexity into a three-pound bag.

If boiling down a complex bundle of choices to a few key elements doesn’t create a strategy for execution, what does?

Strategic Priorities

Instead of trying to summarize their strategy in a pithy statement, managers should translate it into a handful of actions the company must take to execute that strategy over the medium term. Strategic priorities should be forward-looking and action-oriented and should focus attention on the handful of choices that matter most to the organization’s success over the next few years.

Many complex organizations that compete across multiple industries, product lines, and customer segments rely on strategic priorities to advance strategy. More than two-thirds of S&P 500 companies, for example, published explicit mid-term objectives intended to help implement their strategy. (“How to Recognize a Strategic Priority When You See One” describes our research and summarizes key findings.)

What companies call their corporate objectives doesn’t matter; S&P 500 companies use a variety of labels, ranging from the mundane (strategic priorities, areas of focus, strategic objectives) to the exotic (Microsoft Corp. referred to “interconnected ambitions” and retailer Kohl’s Corp. talked about “greatness agenda pillars”). (See “Common Names for Strategic Priorities Among S&P 500 Companies.”)

Whatever terminology companies use, their objectives share a few common characteristics. They typically extend three to five years — shorter than that is too tactical, longer too visionary. They are limited to a handful — of S&P 500 companies publicizing their objectives, 78% listed between three to five in total. (See “Strategic Priorities Among S&P 500 Companies.”) And they are strategic, in the sense that they describe specific actions that will help the company to execute its strategy, as opposed to financial targets or corporate values.

Many executives tell us that they use strategic priorities but report that the approach isn’t working as well as they had hoped. To set the strategic agenda and drive implementation effectively, we have found that strategic priorities need to balance guidance with flexibility, counterbalance the inertia of business as usual, and unify disparate parts of the business. Crafting strategic priorities that do all of these things — and do them well — is a tall order. The remainder of this article will describe the seven characteristics of effective strategic priorities, explain why they matter, and suggest practical diagnostics managers can use to assess their company’s strategic priorities. The figure below, “How Effective Are Your Strategic Priorities?”, summarizes the seven factors.

1. Limit the number of priorities to a handful. Restricting the number of strategic priorities to three to five has several advantages. Most obviously, having a small number will be easier to understand, communicate throughout the organization, and remember.7 Rather than overwhelming employees with the full set of all choices and interdependencies that make up a company’s strategy, communicating a few strategic priorities can focus attention, effort, and resources on the things that matter most now. The best priorities serve as strategic guardrails. If they know the parameters they must work within, managers and employees can fill in the blanks based on their local knowledge and circumstances.

Having too many priorities is a mistake, but having too few can be a problem as well. One wholesale energy company we studied declared a single strategic priority: to manage risk and preserve value. This was a worthy goal, to be sure, but one that was far too abstract to provide useful guidance to employees. A single priority in isolation is rarely enough to drive a strategy that requires multiple initiatives to work together.

2. Focus on mid-term objectives. Strategic priorities act as a bridge between long-term aspirations — embodied in a vision or mission — and annual or quarterly objectives. The types of initiatives that have the biggest impact (for example, building data analytics capabilities, integrating online and physical stores, or entering a new market) typically take a few years. Of course, there are exceptions: A financial turnaround, for example, would require an immediate focus on short-term cash generation and debt reduction. But in general, we’ve found a good rule of thumb is “three to five in three to five” — three to five strategic priorities that can be accomplished in three to five years.

Once you’ve set mid-term priorities, it’s important to stick to them. When a team announces five-year priorities and changes them a year later, employees dismiss those objectives (and their successors) as the “flavor of the month” that they can safely ignore. British fashion retailer Burberry Group plc offers a good example of staying the course.8 When Angela Ahrendts joined Burberry as CEO in 2006, she announced five strategic priorities (including intensifying non-apparel sales, accelerating retail-led growth, and investing in underpenetrated markets) and selected quantitative metrics for each. Ahrendts stuck with the priorities for seven years, updating employees and investors regularly on progress against each goal, which reinforced the message and the company’s commitment to achieving those objectives. During this period, Burberry’s share price handily outperformed competitors and the broader market.

3. Pull toward the future. Strategy should guide how a company will create and capture value going forward, rather than codifying how it made money in the past. In dynamic markets, ongoing success typically requires innovation and change. The things that position a company for the future — for example, entering unfamiliar markets, building innovative business models, or developing new capabilities — differ from business as usual. Both are critical, but they often pull in opposite directions.

Maintaining a healthy balance between the status quo and innovation is hard work. Well-oiled capabilities, established resources, organizational structure, metrics, and rewards favor a company’s legacy business, and employees will naturally default to activities that are familiar, straightforward, and produce predictable results.9 Keeping the trains running in the core business is necessary for success, but these routine activities will usually take care of themselves without having to be prioritized at the corporate level.

Innovation and change, by contrast, require ongoing attention. New activities are difficult, frustrating, uncertain, and require sustained effort and monitoring to be successful. This is where strategic prioritization can help. Prioritizing forward-looking initiatives can tip the scales in favor of the activities that can ensure future vitality but are most likely to fail without sustained effort.

Striking the right balance between sustaining a legacy business and building for the future requires judgment — there is no cookie-cutter template for getting it right. To gauge whether things are in balance, we suggest leaders look at the mix of priorities in terms of those that support and refine the current business model (for example, cost reduction, operational excellence, serving current customers, extending existing products) versus the objectives that take the company in a new direction (for example, entering new markets, building digital capability, non-incremental innovation). Leaders can also ask how different the business would look in three to five years if they were to achieve all their objectives. No mix of priorities is right for every company, but we have found that leadership teams that don’t examine their strategic priorities tend to overweigh business as usual.

4. Make the hard calls. Apple Inc. CEO Steve Jobs often stood at a whiteboard during strategy retreats and personally led discussions among the company's top 100 leaders to set strategic priorities.10 The assembled team would generate a long list of possibilities and after much wrangling and discussion, they would whittle them down to a rank-ordered list of 10, at which point Jobs would strike out the bottom seven to ensure the company focused on the most critical priorities.

In organizations of any size, there will be dozens or hundreds of competing and often conflicting priorities. The discipline of honing priorities down to a handful can force a leadership team to surface, discuss, and ultimately make a call on the most consequential trade-offs the company faces in the next few years. When executives make the hard calls and communicate them through the ranks, they provide clear guidance on the contentious issues likely to arise when executing strategy. But making trade-offs among competing priorities is difficult — they are dubbed “tough calls” for a reason. Prioritizing different objectives results in “winners” and “losers” in terms of visibility, resources, and corporate support. Many leadership teams go to great lengths to avoid conflict, and as a result end up producing toothless strategic priorities.

A common way to avoid conflict is to designate everything as “strategic” — one S&P 500 company, for example, listed a dozen strategic objectives. Another way leadership teams resist making difficult calls is by combining multiple objectives into a single strategic priority. A large retailer, for example, listed six key business priorities. So far, so good, but when you dug into the so-called priorities — “focus on the fundamentals of the business,” for example — the apparent discipline proved illusory. “Focus on the fundamentals” included, among other items, inventory management, cost cutting, customers, product categories, in-store experience, execution, speed, agility, lead-time reductions, and developing and retaining staff. If leaders dodge the hard trade-offs, their priorities provide little useful guidance to the troops.

Leadership teams also avoid prioritization by burying their strategic priorities among competing mandates and guidelines. The CEO of a large European bank (not one of the S&P 500), for example, was pleased when his team agreed on four strategic priorities during their strategy retreat. That was the good news. The bad news was that the team tacked them on to what the bank was already attempting to do, using three transformation initiatives, a four-part declaration of principles, four customer service priorities, five core beliefs, eight rules of conduct, nine corporate values, 20 promises to stakeholders, and 120 key performance indicators. Baffled employees ignored the latest directive and carried on with what they were already doing.

5. Address critical vulnerabilities. Even when you recognize the importance of making the hard calls, it’s often difficult to know where to focus. Strategy is inherently complex and the sheer number of possible objectives can overwhelm teams. So how can executives move from a complex strategy to a handful of strategic priorities?

A key insight comes from military strategists, who have long acknowledged the complexity of armed conflict.11 Military planners often visualize the field of operations as a complex system of enemies, allies, infrastructure, popular support, and other features that collectively influence who wins and who loses a war. They then hone in on the so-called “centers of gravity” — the parts of the system that are both critical to the enemy’s success and most vulnerable to attack.12

Business leaders can deploy a similar approach by identifying the “critical vulnerabilities,” the elements of their own strategy that are most important for success and most likely to fail in execution. In for-profit organizations, pinpointing the most important actions means thinking through — and, ideally, quantifying — how the objective would help create and capture economic value. How much would a potential priority increase customers’ willingness to pay? How much would it decrease costs to serve target customers? How much would a priority deter new entrants or competitors by building a moat around the fortress? What new revenue streams would a proposed objective open up?

Some elements of a company’s strategy — for example, a well-known brand or well-honed capabilities — will be critical to success but may not require sustained attention or investment. While important, these may not be priorities. Instead, companies should prioritize initiatives or activities that are at the greatest risk of failure without the sustained focus and investment support that strategic priorities can provide. When identifying critical vulnerabilities, it’s important to look at both the elements of strategy that are at risk due to external factors (such as shifting customer preferences, disruptive technologies, or new entrants) and internal challenges (need for culture change, organizational complexity, or need to build new competencies).

6. Provide concrete guidance. A company’s strategic objectives should be tangible enough that leaders and employees throughout the organization can use them to prioritize their activities and investments (and also to help them decide what to stop doing). Unfortunately, many leadership teams agree on vague abstractions that everyone can get on board with, confident that the resulting platitudes will not constrain their options. One S&P 500 company, for example, listed strategic imperatives including “focus on our customers’ needs and wants,” “be an industry leader,” and “look to the future.” Clearly, a company’s strategic priorities are too vague when you can’t guess the company (or even the industry) by reading them. (“Vague Versus Concrete Strategic Priorities” contrasts the vague strategic priorities of American Airlines with the concrete priorities of Southwest Airlines.)

Many associate concrete guidance with financial targets. Revenue and profitability goals are indeed specific, but they quantify where management wants to end up without providing direction on how the company should get there. Using financial targets as strategic priorities, then, is the business equivalent of a coach telling the team what the final score should be without explaining how to beat their opponents.

Rather than relying solely on financial targets, leaders should start with the key actions required to execute their strategy, and translate these into metrics that provide concrete guidance on what success would look like. By tracking progress against metrics, leaders can maintain a sense of urgency over the months or years required to achieve the goal, identify what’s not working to make midcourse corrections, and communicate progress along the way — even before financial results are in — to keep key stakeholders on board.

Top executives can quickly assess whether their strategic priorities are sufficiently concrete by asking middle managers what they would stop doing based on the priorities. The answers will quickly expose fuzzy objectives. Leaders can also test concreteness by taking each strategic priority, stripping it of flowery prose and buzzwords, and seeing what’s left. For example, once you remove the marketing spin and buzzwords from a statement like “we put muscle behind innovation, making a step change in the pace of commercialization,” there’s not much substance left.

7. Align the top team. Unfortunately, lack of agreement on company objectives is fairly common among top teams. As part of our research on strategy execution, we surveyed more than 10,000 managers across more than 400 organizations. When asked how closely members of their company’s top executive team agreed on key priorities, nearly one-third said senior executives focused on their own agendas or that there were clear factions within the top team.13

The reality is actually worse than the survey results suggest. In addition to asking senior executives if they agree on the company’s priorities, we asked them to list their company’s key priorities over the next few years. In the typical company, barely half of the executives voiced the same company-wide priorities.14 Indeed, in terms of shared strategic priorities, we found that two-thirds of the top executives were on the same page in just 27% of the companies we studied — hardly a recipe for successful execution.

Executing strategy often requires different parts of the company to work together in new ways (such as when a company moves from selling stand-alone products to integrated solutions or when a retailer blends online and retail sales). Strategic priorities should reinforce one another to ensure the different parts of the company are moving in tandem. At a minimum, the priorities shouldn’t conflict with one another or pull the organization in opposing directions. The best strategic priorities hang together and tell a coherent story about how the company as a whole will create value in the future. They should also provide guidance on how to adjudicate the conflicts that will inevitably arise as different parts of the organization try to execute the strategy in the trenches.

Strategic priorities should lay out what matters for the company as a whole to win and should reflect the interdependencies among the choices. If senior executives pursue goals that aren’t aligned with one another, the disagreements will filter down the silos, and the various teams will work at cross-purposes.

Management teams sometimes diverge because each function wants to promote its own pet objective: Human resources might want to say something about “world-class talent,” for example, while finance might want to highlight how the company delivers “industry-leading shareholder returns.” Rarely is anyone considering the trade-offs among these objectives, their interdependencies, or whether meeting unit-level objectives will affect the company’s ability to succeed. These priorities can reinforce, rather than break down, organizational silos.

Executives rightly focus on how to craft a great strategy, but often pay less attention to how their strategy can be implemented throughout a complex organization. To steer activity in the right direction, a strategy should be translated into a handful of guardrails that provide a threshold level of guidance while leaving scope for adaptation as circumstances change. Strategic priorities are a common tool to drive execution, but in many cases these objectives are not as effective as they could be. By following a few guidelines, executives can articulate a strategy that can be communicated, understood, and executed.

An adapted version of this article appears in the Spring 2018 print edition.

REFERENCES (14)

1. M.E. Porter, “What Is Strategy?” Harvard Business Review 74, no. 6 (November–December 1996): 61-78.

2. D. Sull, “Why Good Companies Go Bad and How Great Managers Remake Them,” rev. ed., (Boston: Harvard Business School Press, 2005).

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Digital Content (HR and Business Transformation)
Unlocking success in digital transformations

Digital transformations are even more difficult than traditional change efforts to pull off. But the results from the most effective transformations point to five factors for success.

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 succeed2 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. 

Organizations with successful transformations deploy more technologies than others do.

The keys to success

Having these technologies on hand is only one part of the story. The survey results indicate how, exactly, companies should make the technology-supported changes that differentiate successful digital transformations from the rest (Exhibit 2). 

When key factors are in place, respondents are up to three times more likely to report successful digital transformations.

Our research points to a set of factors that might improve the chances of a transformation succeeding (see sidebar, “Twenty-one keys to success”).3 These factors fall into five categories: 

Having the right, digital-savvy leaders in place

Change takes place at all levels during a digital transformation, especially when it comes to talent and capabilities. Nearly 70 percent of all respondents say their organizations’ top teams changed during the transformation—most commonly when new leaders familiar with digital technologies joined the management team. 

Indeed, adding such a leader is one of the keys to transformation success. So is the engagement of transformation-specific roles—namely, leaders of individual initiatives and leaders of the program-management or transformation office who are dedicated full time to the change effort. Another key to success is leadership commitment. When people in key roles (both the senior leaders of the organization and those in transformation-specific roles) are more involved in a digital transformation than they were in past change efforts, a transformation’s success is more likely. 

Other results indicate that when companies achieve transformation success, they are more likely to have certain digital-savvy leaders in place. Less than one-third of all respondents say their organizations have engaged a chief digital officer(CDO) to support their transformations. But those that do are 1.6 times more likely than others to report a successful digital transformation. 

Building capabilities for the workforce of the future

The survey results confirm that developing talent and skills throughout the organization—a fundamental action for traditional transformations—is one of the most important factors for success in a digital change effort. Of our 21 keys to success, three relate to the workforce’s digital capabilities. First is redefining individuals’ roles and responsibilities so they align with a transformation’s goals, which can help clarify the roles and capabilities the organization needs. Respondents are 1.5 times more likely to report a successful digital transformation when this practice is in place. 

Two other keys relate to engaging the specific roles of integrators and technology-innovation managers, who bridge potential gaps between the traditional and digital parts of the business. People in these roles help foster stronger internal capabilities among colleagues. Integrators are employees who translate and integrate new digital methods and processes into existing ways of working. Because they typically have experience on the business side and also understand the technical aspects and business potential of digital technologies, integrators are well equipped to connect the traditional and digital parts of the business. For their part, technology-innovation managers possess specialized technical skills and lead work on a company’s digital innovations. 

Beyond these three keys for success, we found that companies with winning transformations have a better-funded and more robust approach to talent than others do. Transformation success is more than three times likelier when respondents say their organizations have invested the right amount in digital talent

Success is also more likely when organizations scale up their workforce planning and talent development (Exhibit 3). For example, 27 percent of respondents report successful transformations when their companies set cross-functional or enterprise-wide hiring goals based on specific skill needs—nearly twice the share of respondents whose organizations do not. 

At companies with enterprise-wide workforce-planning and talent-development practices success is more likely.

During recruitment, using a wider range of approaches also supports success. Traditional recruiting tactics, such as public job postings and referrals from current employees, do not have a clear effect on success, but newer or more uncommon methods do. Success is at least twice as likely at organizations that run innovative recruiting campaigns (such as having recruits play games or find hidden messages in source code as part of the recruiting process) or host technology conferences or “hackathons.” 

Empowering people to work in new ways

Digital transformations require cultural and behavioral changes such as calculated risk taking, increased collaboration, and customer centricity, as our previous research has shown. In this survey, the results suggest two primary ways in which companies with successful transformations are empowering employees to embrace these changes. 

The first is reinforcing new behaviors and ways of working through formal mechanisms, long proved as an action that supports organizational change. One related key to transformation success is establishing practices related to working in new ways. Respondents who say their organizations established at least one new way of working, such as continuous learning or open work environments, as part of their change efforts are more likely than others to report successful transformations. Another key is giving employees a say on where digitization could and should be adopted. When employees generate their own ideas about where digitization might support the business, respondents are 1.4 times more likely to report success. 

A second approach to empowering workers is ensuring that people in key roles play parts in reinforcing change. Success depends on both senior leaders and those engaged during the transformation.4 One related factor is encouraging employees to challenge old ways of working. Respondents who say their senior leaders and the people engaged in transformation-specific roles do this are more likely than their peers to report success (1.5 times more for senior leaders and 1.7 times more for those in key transformation roles). Another factor for success relates to risk taking. Success is more likely when senior leaders and leaders who are engaged in the transformation all encourage employees to experiment with new ideas—for example, through rapid prototyping and allowing employees to learn from their failures. A third key to success is people in key roles ensuring that their own units are collaborating with others when working on transformations. When respondents say their senior leaders and those in transformation-related roles have done so, they are 1.6 and 1.8 times, respectively, more likely than others to report success.

Giving day-to-day tools a digital upgrade

For organizations to empower employees to work in new ways, the survey findings show how, and by how much, digitizing tools and processes can support success. We asked respondents about seven structural changes their organizations had made since the transformations began (Exhibit 4). Three of these changes—each of which involves making the use of digital tools a new organizational norm—emerged as keys to success. 

 The elements of a change story that most support success are clear targets for key performance indicators and communication of the transformation's timeline.

The first key is adopting digital tools to make information more accessible across the organization, which more than doubles the likelihood of a successful transformation. The second is implementing digital self-serve technologies for employees, business partners, or both groups to use; transformation success is twice as likely when organizations do so. A third key, focused on technology in company operations, is organizations modifying their standard operating procedures to include new technologies. Beyond these factors, an increase in data-based decision making and in the visible use of interactive tools can also more than double the likelihood of a transformation’s success. 

Communicating frequently via traditional and digital methods

As we have seen in traditional change efforts, clear communication is critical during a digital transformation. More specifically, one key to success is communicating a change story, which helps employees understand where the organization is headed, why it is changing, and why the changes are important. At organizations that follow this practice, a successful transformation is more than three times more likely. A second key is senior leaders fostering a sense of urgency for making the transformation’s changes within their units, a practice where good communication is central. Other results suggest that when communicating change stories, successful organizations tend to relay a richer story than others do. The elements with the greatest influence on success are clear targets for organizations’ key performance indicators and clear communication of the transformation’s timeline (Exhibit 5).

Repondents whose companies have made the use of digital tools a new organizational norm are more likely to report success.

We also found that using remote and digital communications to convey the transformation’s vision does a much better job of supporting success than in-person or traditional channels. When senior managers and initiative leaders use new digital channels to reach employees remotely, the rate of success is three times greater. 

Looking ahead

While respondents say that many digital transformations fall short in improving performance and equipping companies to sustain changes, lessons can be learned from those who report success. The survey results suggest steps companies can take to increase their chances of success during a transformation: