In brief

In brief

  • How can companies continue to digitize in times of sluggish demand and shaky supply chains? By focusing on cross-function collaboration.
  • Even in “normal” times, a lack of collaboration on complex challenges like digital transformation can cost organizations ROI and future revenue growth. In the time of COVID-19 and economic downturn, the age-old siloes problem could be disastrous.
  • We have uncovered a group of companies that have solved the collaboration conundrum—that work across functional lines to innovate, stay relevant, and drive profitable growth.


Getting to the Core of Cross-Function Collaboration

Global crises like the current pandemic are so complex that they can only be tackled when teams across disciplinary and organizational boundaries work together. Break down silos at all costs. Doctors working with government leaders, nurses working with supply-chain managers, infectious-disease experts working with CEOs of just about every industry.

For their part, global businesses at the front line of the crisis have been able to collaborate well outside their organization, harnessing their ideas, people, and resources for the greater good of humanity. But what about inside the organization? Are business functions collaborating with one another to address the most complex issues facing the company, irrespective of COVID-19, such as new competitive threats and digital transformation? Are they leveraging key technologies like cloud, data analytics, and data sharing to drive value?

Accenture’s Industry X.0 Research study shows that many established companies still struggle with cross-function collaboration. In a survey of more than 1,500 global senior and C-level executives of industrial companies conducted prior to the COVID-19 pandemic, 75 percent say different business functions (e.g., R&D, engineering, production, marketing, operations, and sales) are competing against each other instead of collaborating on digitization efforts.

The silos problem continues to rear its head—but this time amid companies’ digital transformations. And it’s impacting both the bottom line and topline. Consider these findings from our study.

  • Cross-function competition is causing redundant investments in digital projects—with executives expecting a 6.3 percent increase in costs as a result. Reported numbers for the same 2017-to-2019 period were close—with actual costs growing by nearly 6 percent during the same period.
  • Digital investments made by functional leaders were expected to help grow company revenue by 11.3 percent each year from 2017 to 2019. The actual reported numbers for this period? Just above 6 percent revenue growth a year on average—almost half of what was expected.
  • Two of three (64 percent) companies aren’t seeing digital investments boosting their revenue growth at all.

Even in “normal” times, the lack of cross-function collaboration costs organizations ROI and revenue growth. In the time of economic downturn, cross-function competition—especially on matters concerning digital transformation—could be disastrous.

So, for executives, the question becomes: how do you walk the line? How do you allow for enough experimentation, fragmentation, and cross-function competition to reap the benefits of iterative innovation and experimentation? And how do you reign it all back in and ensure the right amount of alignment, collaboration, and harmonization? When and where do you step in, course-correct, and realign?


Nigel Stacey

Industry X.0 Global Lead


Raghav Narsalay

Managing Director, Global Research lead, Industry X.0


Aarohi Sen

Principal, Thought Leadership, Industry X.0

Benefits of
Cross-Function
Collaboration



Armed with the finding that cross-function competition is hurting future growth and broader digital-transformation goals, we sought to identify the companies that have managed to crack this code. Our aim was to understand who they are and how they break down functional silos to foster greater collaboration and innovation. We started by looking at companies that outperformed their industry peers at driving revenues with their digital investments and achieved above-industry average revenue growth over the last three years.

A small group of manufacturing and industrial companies emerged. Representing 22 percent of our sample, these Champions invested 1.5 times more (39 percent of their total revenue) than the rest in digitally transforming their functions. But they enjoyed revenue gains that were over four times higher—27 percent compared with 6.6 percent. (See Figure 1)


Figure 1: Digital Transformation Investments

Average digital transformation investments made across functions as a % of revenue (2017-2019)




Average % gains in revenue as a result of digital transformation investments made across functions (2017-2019)



But with the Champions investing over a third of their revenues into digital projects, was their higher revenue growth profitable? We examined actual EBIT (earnings before interest and tax) numbers and found that Champions enjoyed 27 percent EBIT growth during the 2017-19 period, while the rest only achieved a 2.1 percent growth. (See Figure 2)



Figure 2: Profitable Growth with Digital

Average % gains in revenue as a result of digital transformation investments made across functions (2017-2019)


Figure 3: Markets Bet on the Champions

Average daily share price index (base date January 1, 2020)



Clearly, the Champions were better off at driving profitable revenue with their digital investments. But that was before COVID-19. Would they be able to ride out the storm? We studied share-price movements for the companies in our survey and found that the markets are expecting the Champions to perform better during the crisis. (See Figure 3)




Above all else, these companies have figured out how to break down silos by leveraging the power of cloud-based platforms and sharing data, getting results in the process.

The secret of
Champions


We’ve also identified five key behaviors which set them apart from other companies. These Champions are more likely to:

  1. Clarity and a common goal. They clarify “what” digital transformation means for the organization and why everyone should collaborate under a joint mission.
  2. Executive accountability. They hold executives accountable for tight collaboration between business functions.
  3. Choosing the right bets. Champions prioritize projects that require or stimulate close collaboration between functions.
  4. Platform interoperability. They invest in and scale collaborative platforms while avoiding the build-up of “siloed” solutions.
  5. IT-OT convergence. They establish rules for their Information and Operating Technology, and how the two work together.


A Cross-Team
Collaboration Roadmap


For digital transformation, one key is ensuring that what’s won in one function isn’t squandered in other functions as a result of disparate definitions of value. Champions make sure that each function builds in concert with, and on top of, the value created in other functions.

To overcome common collaboration challenges and to harmonize digitization efforts across functions, companies should focus on these five key actions that our Champions take.


01. Plan the work and work the plan (establish clarity and a common goal).

Be specific, prescriptive, and clear about the vision and mission for your digital transformation.

It’s not enough to craft an overarching business strategy and list out desired outcomes. It’s crucial to plan a specific, multi-phase digital transformation strategy—and disseminate widely to anyone and everyone involved. It’s also imperative to develop an execution plan for seeing through every step of the transformation.

Assign ownership and responsibility around cross-function collaboration.

82 percent of Champions have one C-suite executive who drives digital transformation and is responsible for its success in each function. If there is one leader in charge of digitizing operations, then that person should also be given the responsibility to affect the organizational changes required to get the most out of the company’s digital investments. Having the same person increases the chances of success.

Prioritize digital projects that stimulate cross-function collaboration.

Champions know where and how to allocate capital. They do it by prioritizing projects that require cross-function collaboration, which then get funded and executed across the organization.

Ensure that all your digital solutions and platforms are interoperable.

Champions know how to harmonize different tech platforms in the cloud, ensuring that they work together seamlessly toward mutual outcomes. Champions are more likely to have their digital platforms work and communicate well together.

Build smart IT-OT governance policies from the get-go.

Cross-function collaboration works best when teams are equipped with the technology and expertise to gather, deliver and analyze data in ways that unlock the best insights.

Conclusion:
If you want to go fast,
go alone. If you want
to go farther, go together


Cross-function collaboration is not an end state, or even a means to an end. It must be a central organizational imperative for companies in a post-COVID-19, never-normal world, and a strategic focus for executives tasked with sustaining digital transformation efforts. When executed effectively, greater collaboration across functional boundaries can not only reduce waste and costs, but also earn measurable financial returns.

As companies continue grappling with the adoption and implementation of digital technologies, or with hastening their digital transformations, they may easily lose sight of cross-function collaboration. But, the Champions recognize it as fundamental to their business. Like efficiency and productivity, it is becoming an increasingly important barometer for success in difficult times.

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About the Research


In the months of January and February 2020, we surveyed 1,550 senior executives from companies spanning 14 different industries and spread across 11 countries with annual sales exceeding $1 billion.

In the survey, we asked executives to report their company names and the investments they had made towards digitally transforming key business functions. We also collected data on the impact these investments had on both costs and revenues. We compared survey data on digital investment and its impact, with publicly reported financial information to ascertain loss of value due to interfunctional competition. We identified Champions as companies which satisfied two separate criteria:

  1. They outperformed industry average in terms of cross-functional impact of digital transformation investments on revenue, for the period between 2017 and 2019, and
  2. their overall revenue growth for the three-year period was higher than their industry peers.
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