Only 4% to 11% of digital transformations succeed in traditional industries such as engineering and construction. Too much focus is placed on the ‘digital’, whilst the ‘transformation’ is neglected or ignored. To succeed, engineering and construction companies need both psychological and organisational transformation.
Digital transformation is often defined as the integration of digital technology into all areas of a business resulting in fundamental changes to how the business operates and how it delivers value to customers, partners and employees. These digital technologies include Artificial Intelligence (AI), advanced analytics, Internet of Things (IoT), blockchain, robotics, drones, virtual reality, etc.
Over many years, research has consistently shown the success rate for all types of transformational change is low, only around 30% succeed. Research carried out by the consultancy McKinsey & Company (October 2018) found that digital transformations are achieving even lower rates of success with only 16% successfully improving performance. This figure includes digital savvy industries such as high tech, media and telecoms. For more traditional industries, such as engineering and construction, the success rate falls to between 4% and 11%.
So why are traditional industries struggling to succeed with digital transformation?
One of the reasons could be due to a lack of a ‘digital mindset’. This encourages people to look at old problems and process through new eyes and approach them in new ways. When reviewing the digital transformation literature three aspects of a digital mindset consistently emerge:
- Systems Thinking: The ability to appreciate the interconnectedness and interdependency of the whole system, at all levels, and to recognise how changes to parts of the system affect the whole.
- Collaboration: Building commitment through dialogue and consensus, democratic approaches, and a culture and structure that provides peer support, encouragement and working across functional and organisational boundaries.
- Design Thinking: A human centred approach to innovation which draws on the designer’s toolkit to integrate the needs of people, the possibilities of technology and the requirements for business success.
Interestingly, these same three emerge from the literature researching the capabilities required for sustainability leadership. This commonality suggests that digital transformation and sustainability share a common ground. For both to succeed in a time of continual and rapid change, multiple solutions need to be allowed to emerge from anywhere in the organisation. For this to happen, engineering and construction companies need to become less like machines and more like ecosystems.
During the industrial age we valued and admired great machines which substantially increased productivity. Consequently, we designed organisations along the same principles as machines. This is why most companies in traditional industries still to operate like machines. During the industrial age, our society valued control, certainty and progress. To achieve this, we used science to understand the world by breaking it down into fragments which can be viewed as facts and the objective truth. Our machine-like organisations have been designed with the same values in mind.
As we move into the digital age, new companies are increasingly being designed and operated as ecosystems. In the digital age our society values flow, emergence, and continual unfolding of change. To achieve this, we are increasingly learning from nature’s forms, processes and systems to allow us to work with wholeness, connectivity and integration of relative perspectives. Ecosystem-like organisations are now being designed with these values in mind.
Unfortunately, our education system has prepared most of us to work in machine like organisations. We were taught linear cause and effect thinking rather than systems thinking, encouraged to compete rather than collaborate, and rewarded for getting things right rather than for experimenting with something new.
For digital transformation to succeed, engineering and construction companies must focus on the ‘transformation’ as well as the digital. This means psychological transformation. Transforming how people think, feel and behave so they can collaborate in developing innovative solutions which create systemic change. It also means organisational transformation. Transforming how the company releases and enables people to create digital change, so that ideas continually emerge, flow and unfold.
Digital transformation is about creating the right mix of technology and human creativity. Having a collection of people who think innovatively and adapt instantly will give engineering and construction companies a competitive advantage today and in the future.
12th November 2019