4 Reasons Why 70% of Business Transformation Fail to Cross the Chasm
9 min read
Innovation is the main strength of 81% of market leaders that have transformed with digital. (MIT Sloan Management Review and Deloitte)
But with 40% of business leaders fear of failing and reject disruptive innovation and business transformation (PA Consulting) combined with 57% of corporate innovators struggling to foster a culture of innovation (ONS), the odds are stacked against you.
Corporate innovators have a critical role to transform companies by innovating across product, process and business model.
There are 4 gaps that corporate innovators need to bridge before crossing the chasm and transform the companies successfully.
1. Execution gap: Lacking innovation execution of innovation.
60% of companies take more than 1 year to go from idea to market. Only 9% of companies could launch quickly within 6 months. (CB Insights)
However 95% of product innovation fails (Harvard Business Review) because of the product has no market need with a flawed business model, got outcompeted, and ran out of money before solving market fit. (CB Insights)
Therefore time-to-market ≠ market-fit.
Faster time-to-market does not indicate that a company will be more successful. But faster time-to-market-fit will.
Getting time-to-market fit requires team to execute an end-to-end innovation process from insights to market.
Innovation is also about process.
57% of executives do not follow formal innovation processes. (CB Insights)
Executing on innovation remains mostly ad hoc and unstructured, where the majority don’t have processes for idea generation and design / development phases.
Innovation inevitably impacts business model.
Over 80% of executives are witnessing their business model at risk to be disrupted, and consider their future to be dependent on innovation and made it into a strategic priority.
However only 6% of executives are satisfied with their innovation performance. (McKinsey)
Companies are struggling to execute innovation with teams.
More than half (54%) of companies struggle to bridge the gap between business strategy and innovation strategy. (PwC)
On top of it 82% of companies innovate the same way as they operate. As a result, 72% missed crucial growth opportunities and 60% struggling to learn from past mistakes and the market. (Accenture)
Companies only have 5% success rate to execute their innovation initiatives if teams fail to bridge the gap between strategy and innovation and execution.
Bridging the innovation execution gap cannot happen without bridging the alignment gap - whether your teams are going to the same direction at the same speed of execution.
2. Alignment gap: Team misalignments across functions, units and levels.
For every $10 spent on innovation execution, $1 is wasted on misalignment. (PMI)
Poorly aligned companies have 50% less ROI and 18% less profitability. (McKinsey)
Highly aligned companies grow revenue 58% faster and are 72% more profitable. (LSA Global)
That means innovation initiatives become a win-big (+50% ROI) or lose-big (-50% ROI) scenario that is directly dependent on how aligned are the teams across functions, units and levels.
What does misalignment look like?
Silos are formed around individuals, teams and functions where communication hardly circulate beyond the silos.
Nearly half (43%) of employees’ time is wasted on unproductive communication issues that costs companies $26K per employee every year on top of their salaries. (Grossman Group)
This creates an information gap company-wide.
Poor collaboration is a commonplace that employees are working with outdated data 28% of the time leading to more rework, delays, and errors. (Solidworks)
In turn, you end up in excessive and unproductive meetings, where nobody agrees on priorities while decisions take a long time to make and tend to be political.
As a result, employees morale tanks and people leave the company along with the information that did not get passed on.
Corporate innovators struggle to execute innovation and reach the business transformation goals.
Bridging alignment gap is a waste without bridging the skills gap - aligned teams without the skills cannot execute innovation.
3. Skills gap: Lacking capabilities to innovate
55% of companies are worried that business transformation and innovation are hampered by a lack of workforce skills.
87% of employees also see evident skills gaps at their company forcing other employees to step in and take extra work (McKinsey)
To close the gap, 3/4 (79%) of companies are pursuing workforce development programs despite tightening IT labor market. (CIO Dive)
Companies are spending more than $350 billion globally on training (HBR), with an average spending of $1,111 per employee (Training Magazine 2020 Training Industry Report).
But they are losing $13,500 per employee from ineffective training (Grovo).
For every $1 spent on corporate training, companies lose $13.
Why is this happening?
First, business leaders are not clear what skills are needed to execute innovation.
As a result 95% of employees find that training programs provided by L&D are irrelevant for their jobs and the new skills required. (51 Elements of Learning)
Even if it’s relevant, employees forget 90% of information within a week from the day of training. (Forgetting Curve)
This leads to just 12% of employees apply new skills learned in L&D programs to their jobs (ShiftLearning) and 70% of employees still don’t have mastery of the skills needed to do their jobs despite the trainings given. (Gartner)
Bridging the skills gap to transform the business will be a waste without bridging the culture gap - the systematic difference between two cultures between business-as-usual and the new business brought by the transformation.
4. Culture gap: Team resistance to change transitions.
On average, companies today have gone through 5 major changes in the past 3 years, and nearly 75% expect to increase the types of major change initiatives they will undertake in the next 3 years. (Gartner, 2020)
These changes are driven by external forces.
Technology advancement doubles every 2 years. (Moore’s Law)
There are 10x more natural disasters are happening today than 60 years ago. (2020 Ecological Threat Register Report).
It is easier to start a business and compete today than in the last 15 years. The time it takes to incorporate has more than halved; while the cost has gone down by 79%. (Doing Business)
Covid forced companies globally to accelerate digital transformation progress 7 years ahead into a matter of months. (McKinsey)
Since change is constant and grows exponentially, companies need to continuously innovate and transform the business in order to stay relevant.
Half of the S&P 500 forecasted to be replaced in the next 10 years (Innosight) and it better not be yours.
The only way to win is to change yourself and transform than being changed for the worse.
62% of employees don’t like leaving their comfort zone. (Forbes)
Therefore those who resist change from business transformation will inevitably be left behind.
But those who adapt to change and transition their career along with change brought by business transformation are the ones who will thrive.
Companies with aligned business and innovation strategies, and innovation culture, have 30% higher growth on their enterprise's value and are ready to lead with the next big thing.