“We've invested millions in digital transformation, but where are the returns?”
This question regularly echoes through boardrooms these days, as organizations have been pouring record amounts into digital capabilities. According to a BCG study, more than 80% of executives have accelerated their digital plans—yet most struggle to capture value from these investments.
The research cuts to the heart of the problem: The main barriers to successful transformation aren't about money anymore. Much rather do they seem to be about organizational (meta) capabilities—about the collective ability to execute and deliver value across departments.
Companies have been building expensive tech (delivery) units and digital factories without developing the organizational muscles to leverage them effectively.
This capability gap explains why so many transformation initiatives, despite substantial funding, fail to deliver the expected outcomes.
The solution lies in developing essential organizational capabilities that enable effective delivery and adaptive strategy execution.
The Capability Gap
When we describe these organizational capabilities, we do not refer to individual people skills or business capabilities in the broader sense (of BCM). Rather can the discussed gap be found on a meta level of universal and interdisciplinary capabilities to plan, collaborate, adapt, execute, and deliver value consistently. Think of them as your organization's muscles—muscles you must develop to make your investments actually work productively.
An executive from a major automotive company recently used this same metaphor, saying: “We've got the new gym and new clothes, but our way of training hasn't fundamentally changed.”
To stay in that picture: drinking protein shakes (e.g. as in just hiring more “digital talent”) and buying premium sportswear (e.g. as in new titles and names for your teams) alone does not make you a competitive athlete. Stop trying to hire your way to transformation. Stop restructuring and rebranding your way to new capabilities. While new talent and reorganizations play an important role, they won't solve the fundamental challenge: building your organization's execution and adaptability muscles.
For many leaders, Microsoft's transformation under Satya Nadella stands as a gold standard of successful capability building. Starting in 2014, Microsoft didn't just invest in cloud technology—they systematically developed new organizational capabilities around customer centricity, cross-functional collaboration, and continuous learning. Many describe this, rightfully so, as a cultural (and some even say, a philosophical) transformation. A much more tangible, measurable approach with a clear direction and an aspired operating mode made all the difference. The results speak for themselves: Microsoft's market capitalization grew from $300 billion in 2014 to over $3 trillion in 2024, the perception of the brand and its products have changed profoundly.
The most successful companies—what BCG refer to as “future-built companies” in their research—demonstrate that investing in organizational capabilities pays off. More than 80% of companies with superior EBIT growth and shareholder returns have adopted new organizational capabilities, compared to their industry peers.
In our extensive research and work with leading organizations, three capabilities consistently emerge as essential for continuous improvement and excellence in both operative business steering and strategy execution:
1. Clarity of Direction: Creating Unbroken Chains to Impact
The first challenge is stark: Most employees (usually north of 65% looking at our data) cannot even explain their organization's strategy or its strategic priorities. Even worse, they struggle to connect their work to any of the strategic objectives.
Creating clarity of direction means establishing clear chains of goals and decisions, from resource input and work output to outcomes and business impact throughout the organization. This isn't just about better communication—it's about creating a coherent story from strategy to execution.
Hence, this is also not just about having clarity within each of these four (isolated) dimensions, but about clarity and continuous feedback loops regarding the interdependencies and feedback between them.
Leading organizations achieve this by:
- Defining clear (value oriented) outcomes at every organizational level, from strategic business targets to team goals
- Ensuring goals are measurable with specific metrics
- Making customer value and business impact explicit
- Creating vertical and horizontal alignment across teams and goals along this impact chain
Research shows that organizations implementing these practices see a 15-20% improvement in goal achievement. The key is moving beyond traditional output-focused planning to outcome-oriented objectives that clearly connect to business impact.
2. Frequency and Quality of Decision-Making: Accelerating the Organization's Pulse
“If you want to run faster, your pulse needs to go up”, said the COO of one of our retail customers, describing their organization’s pulse as “the frequency of intentional communication and decision-making”.
While clarity of direction sets the foundation, speed and quality of decision-making determine how quickly organizations can adapt. As we have explored in a previous article, annual planning cycles are increasingly inadequate. Organizations need to establish rhythms that allow for faster learning and course-corrects.
This capability manifests in:
- Outcome-driven planning that focuses on value creation—leaving more flexibility on how to achieve these outcomes
- Automated and connected systems with accessible data sources for continuous measurement and real-time insights
- Quarterly Business Reviews (QBRs) and Monthly Business Reviews (MBRs) that both evaluate progress on outcomes and enable adequate course-corrects
- Clear decision-making frameworks and guard railed autonomy at all levels
Companies that have adopted these practices report significant increases in adaptability to market changes and faster execution of strategic initiatives.
3. Flexibility of Funding
Traditional resource allocation—with rigid annual budgets and centralized decision-making—increasingly becomes the main bottleneck for adaptability and root cause for budget wastes. Future-proof companies have implemented dynamic funding models that tie allocation directly to measurable outcomes.
I recently explored this challenge with Jan Wulff, Partner at BCG:
The most effective companies are moving toward:
- Transparent outcome-based funding models with clear guardrails instead of bureaucratic portfolio processes
- High quality standards for measurable commitments rather than output plans and politics
- Decentralized decision-making with strong corresponding accountability
- Resource allocation tied to measurable outcomes that are monitored regularly
- Smaller, more frequent funding decisions (including redistribution)
This shift in particular requires strong executive buy-in and new capabilities in finance teams as well as leadership, but the payoff is substantial: organizations driving that change consistently report better resource utilization and faster time-to-market for strategic initiatives.
Getting Started: A Practical Implementation Roadmap
Our experience with large-scale transformations reveals a clear path forward: build these capabilities iteratively, not through a big bang transformation. The path can be split into three distinct phases:
1. Begin with Outcome-Based Planning
The foundation begins with introducing outcome-based planning within your existing organizational structure. Rather than overhauling everything and implementing radical changes, start where you already have momentum—typically with existing value stream teams. The key is establishing clear and well-connected chains of business impact —from top-level KPIs to unit goals to initiatives and resources—before making further process and structural changes. This approach allows organizations to build confidence, to iterate along the way, and to demonstrate value while minimizing disruption.
2. Establish a Dual Operating System
As these initial efforts gain traction, the next phase involves establishing a “dual operating system”. This operating mode enables employees to contribute meaningfully in both their functional roles and in cross-functional teams. For that, it is recommended to implement a quarterly planning and review cycle in selected areas, and by doing so, establish transparency and encourage interdisciplinary collaboration on hypotheses- and outcome-based goals. The dual structure helps organizations maintain stability and execution while building new capabilities (and allows for experimentation on the operating model itself).
3. Monitor and Optimize
Approaching these first steps with an iterative mindset and a model that focuses on continuous monitoring and improvements is critical for success. Organizations should track resource allocation, progress on outcome-centric goals as well as cross-team dependencies over times. However, this isn't just about measurement—it is about creating short, effective feedback loops that drive ongoing improvements in your organization’s delivery and capability development.
Throughout this journey, organizations must remain vigilant about common pitfalls. These include:
- focusing solely on restructuring without persistently building new ways of working,
- implementing new processes without ensuring quality of planning and automated monitoring, and
- expecting immediate results and not managing expectations realistically.
Remember that Microsoft's transformation took years to fully materialize. And perhaps most importantly, don’t limit transformation to your digital and tech units while excluding other functions. There is massive potential in all parts of your organization, particularly when corporate functions, as well as business and delivery units can collaborate cross-functionally because they have been in sync on developing mature organizational capabilities. In fact, the units that initially might have been the focus of your transformation can soon be slowed down, if corporate functions or other business units they need to collaborate with do not develop the required capabilities at all.
Conclusion: Make Past And Future Investments Pay Off by Developing Critical Organizational Capabilities
The paradox of executives feeling they are paying too much for digital tech and delivery units is not about the size of investments. It is about the organizational capabilities required to make those investments pay off. Building these capabilities is largely about your management’s clarity and buy-in, a company-wide target operating model, ongoing communications and expectation management, as well as persistence.
Building clarity of direction, establishing robust decision-making rhythms, and creating funding flexibility are no quick fixes. But as other future-built companies demonstrate, developing these capabilities is essential for realizing the aspired returns.
For transformation leaders, the message is clear: Before committing to further investments, assess and develop these three essential capabilities. Start by evaluating your organization's current capability maturity in these three areas. Your existing investments might deliver more value than you think—if supported by the right organizational muscles.
1 Boston Consulting Group. (2020, October). Flipping the odds of digital transformation success. https://www.bcg.com/publications/2020/increasing-odds-of-success-in-digital-transformation
