If your organization’s digital business transformation seems to be stalling, you’re not alone. In a 2022 survey of business leaders by the MIT Center for Information Systems Research, organizations rated their transformation efforts as just 55% complete.
Organizational inertia is a primary culprit, according to a new research briefing by CISR researchers Ina M. Sebastian; Thomas Haskamp, who is also a researcher at Hasso Plattner Institute; and Nils O. Fonstad. This inertia sets in when organizations focus on incremental changes to successful existing business practices and resist exploring new ways to add value through the adoption of new digital technologies.
The researchers identified three primary sources of organizational inertia and how to overcome them to generate or regain digital transformation momentum.
Obstacle 1: Preconceived notions about the value of digital technologies
The challenge: IT leaders often see their role as helping business units do their jobs better. Organizational inertia can set in when IT leaders set a course for digital transformation while business leaders want to focus on improving what’s already in place but are not willing to invest in new, transformative initiatives with uncertain outcomes.
The opportunity: Reframe expectations by communicating opportunities in new ways, tying digital initiatives to specific business problems, and creating value quickly with a few pilots. Identify the right transformation opportunities — for example, by collaborating with stakeholder groups in the organization that have a richer understanding of the business, recognize how digital can address business needs, and appreciate iterative learning.
Obstacle 2: Embedded organizational structures and practices
The challenge: Organizations have existing applications, information workflows, business practices, reporting structures, and product development pipelines that support how they realize value from digital technologies. Presumably, these systems have served the companies well and have worked in predictable ways. Digital initiatives threaten to disrupt this scenario.
The opportunity: Practice collaboration and new ways of working that change siloed practices. Have people from different units co-lead digital initiatives. Ensure that everyone agrees on key performance indicators, and be sure to document and communicate them. Provide opportunities for employees to refine their job skills and responsibilities in support of new digital workflows.
Obstacle 3: Investment hesitation
The challenge: It’s usually prudent for business leaders to question investing in unproven initiatives. After all, it makes sense to ensure that resources are allocated to their organization’s core goals and priorities. But this approach hampers digital initiatives, given that few begin with a concrete return on investment or a timeline for achieving it.
The opportunity: Prove value by linking digital initiatives to specific needs that business leaders themselves have identified. To minimize the budgetary impact, draw funding from digital teams — not business units — until a minimally viable product is in place. Allocate funding on an ongoing basis, not on an annual cycle, to encourage a more continuous approach to innovation.
Focusing the first digital initiatives on the most pressing business needs increases the odds of business leader buy-in and initiatives realizing value. This has a snowball effect: Successful pilots are more likely to scale, and employees with ideas for new innovations will likely have to jump through fewer hoops to get pilots off the ground.