As organizations worldwide grapple with the complexities of business transformation, it's clear that the challenges they face are not uniform. A recent study in partnership with Oxford Economics – “The Estimation Game: What do business transformations really cost?” – has shed light on the geographical and industry-specific nuances that shape transformation efforts, as well as the diverse priorities of different business functions.
Geographical divides
Asia’s struggle with alignment
Organizations in Asia lag other regions in business transformation clarity. Only just over half (55%) have a clear definition of business transformation, compared to slightly more than four-fifths in Europe and Oceania and three-quarters in the Americas. With just over a third considering “business transformation” a common term and only 45% sharing a unified view of what transformation looks like, this misalignment could explain the region’s slower progress in innovation and process efficiency – falling significantly behind its rest-of-world peers.
Americas must bridge the employee gap
In the Americas, 52% of transforming organizations struggle with workforce retraining and 73% with employee adoption of new ways of working.
In the Americas, there’s strong recognition that employee buy-in is crucial to successful transformation, yet a majority of organizations find that retraining the workforce (52%) and getting them to adopt new ways of working (73%) are key impediments; the other regions were less likely to report these as difficulties. Organizations in the Americas rank enhanced employee satisfaction among the lowest-priority goals of business transformation – this lack of emphasis on the people element may be a contributory factor to transformation programs not achieving their intended outcomes.
Oceania’s data analysis challenges
Oceania appears to trail the rest of the world in data management and strategy. The region struggles the most to provide timely data to senior leadership, with only 56% reporting success in this area, compared to 74% in the Americas, 72% in Asia and 68% in Europe. Additionally, being able to access sufficient data is more limited in Oceania (64%) than elsewhere, as is the ability to leverage it, with only 58% of organizations collecting enough data to drive value and operate effectively, compared to 69% in the Americas and Asia, and 68% in Europe.
Industry variations
While organizations’ overall struggles with business transformation are widespread, the research reveals certain sectors appear to be more adept at navigating the transformation journey.
Utilities are leading the charge in accelerated innovation, with 33% expressing high confidence – well above the 23% cross-industry average.
Utilities’ confidence surpasses investment quality
The utilities sector is the most bullish about its ability to achieve accelerated innovation through business transformation, with one-third of organizations expressing high confidence compared to a 23% cross-industry average. This confidence is supported by strong returns over the past three years, with utilities reporting the highest ROI from transformation efforts at 30%, surpassing the 26% cross-industry average.
Yet high confidence and returns don’t always signify sound investment: only 44% of utilities executives believe their companies invest in the right technologies at the right time. And just 44% feel their sustainability and CSR KPIs are adequately tracked – well below the 54% cross-industry average.
A defined strategy is key to driving outcomes
The study reveals industries like oil and gas (6%) and chemicals (9%) are far less likely to claim their business transformation plans are flawlessly defined and well-communicated to the workforce, compared to 18% across all sectors, suggesting a lack of clarity may be contributing to their woes.
Chemical sector respondents more often grapple with challenges in resource allocation (70% compared to 60% in other sectors). Meanwhile oil and gas companies face distinct hurdles: 81% struggle with employee adoption of new ways of working compared with the 65% average across all sectors, and 77% find it difficult to measure transformation success versus 65% overall.
By contrast, sectors that are more likely than others to report flawlessly defined and well-communicated transformation strategies, such as retail (29%) and consumer products (25%) are navigating these challenges more effectively.
Functional disparities
Business transformation is not just an organizational challenge – there are also differences in perspectives and priorities across various business functions. While the analysis points to a generalized trend towards increased transformation spending, it reveals notable differences in priorities and leadership roles among these functions.
Corporate lags IT & R&D in both current spend and projected growth, pointing to a shift towards innovation- and tech-driven transformations.
Transformation spending patterns
R&D/Innovation leads in average annual spend on business transformation at slightly over $9 million, closely followed by IT ($8.7m), with Corporate Strategy lagging the pack ($7.9m). As well as having the lowest current spend, Corporate Strategy projects the lowest increase in spending over the next three years at 38%, compared to IT (47%) and R&D/Innovation (45%). This trend suggests that companies are prioritizing innovation and technology-driven transformations over strategic organizational changes.
Top transformation priorities
IT’s involvement in business transformation efforts tends to focus on adopting an overarching security framework, highlighting the increasing importance of cybersecurity in digital transformations. The R&D/Innovation function is highly focused on creating entirely new products or services, emphasizing the drive for market differentiation. Topping the transformation agenda for Corporate Strategy is migrating data storage off-premises, suggesting a shift towards cloud-based operations. The most significant transformations are happening right now: IT leads with 63% of respondents reporting their landmark project is a work in progress, followed by R&D/Innovation (61%) and Corporate Strategy (53%).
Who’s driving the transformation bus?
The research also reveals distinct leadership profiles for transformation initiatives by function. Survey respondents from the IT function who are leading business transformation initiatives tend to be C-suite technology executives (CTO, CIO, CISO), while those from the R&D/Innovation are typically Chief Data Officers (CDO), indicating a focus on digital-first innovation. Respondents from the Corporate Strategy function who are spearheading transformation programs tend to be Chief Transformation Officers; this dedicated focus on strategic change points to the increasing frequency and complexity of business transformations, whereas these responsibilities might previously have been shared across multiple C-level executives.
The need for more tailored, nuanced business transformation strategies
The geographical, industry, and functional differences highlighted in the research underscore that a one-size-fits-all strategy may not deliver the full potential of transformation programs. Instead, organizations should carefully navigate the unique challenges and opportunities presented by their specific context. For global enterprises, this may mean deploying localized transformation programs that account for regional variations in mindsets and capabilities.
Successful transformation requires close collaboration and cross-functional alignment. By fostering a shared understanding of transformation objectives and the role each team plays, organizations can harness the diverse perspectives and expertise within their ranks to drive more effective outcomes.
The ability to adapt and transform is a competitive advantage for organizations of all stripes, everywhere. By understanding the multifaceted nature of this challenge, leaders can develop more targeted and impactful strategies to future-proof their businesses.
To explore more business transformation insights uncovered through the study in partnership with Oxford Economics, we invite you to download the report: “The Estimation Game: What do business transformations really cost?”.