Modern-day businesses are leaving no stone unturned to increase their efficiency and maximize profits. So, confronting digital transformation challenges and winning over them isn’t just a choice but a necessity for budding entrepreneurs, CEOs, and CXOs.
Though most decision-makers of 21st-century recognize the need for digital transformation to improve their business processes, many equate the process of doing so with the chaotic deployment of complex technologies.
Moreover, according to McKinsey, just 16% of executives from different companies claim that their digital transformation efforts are succeeding. So, where are 86% of businesses lacking?
This blog will find what’s not letting these businesses succeed in this must-take route to grow and scale and what’s the solution to kick-it off like a pro.
So, let’s dig in deeper to the five biggest digital transformation challenges that businesses confront and find their solutions:
Top 5 Digital Transformation Challenges Impacting Businesses
The sure shot way to meet success in your organization’s digital transformation journey lies in thoroughly understanding and preparing for the digital transformation challenges that come en-route, and some of these are:
1. Organizational Culture
Shortcomings in the organization’s culture is one of the biggest business transformation challenges. The most common misconception that business owners have is that digital transformation is done if a company upgrades its tools and technologies.
However, the reality is that digital transformation is not just about technologies. It is also about your organization’s ability to adapt to these changes. Even if you develop a robust digital transformation strategy, governing organization-wide change can be one of the most prominent digital transformation problems.
Failing to communicate the importance of digital transformation across the enterprise might lead to resistance amongst the employees to change. Employees usually resist any change until they are made aware of the real impact the change will bring in their work life.
Let’s see how you can solve this problem:
Company culture and good communication is the key to tackle digital transformation challenges. Therefore, it is essential to encourage employees and other stakeholders to get accustomed to the digital culture, tools, technology, and solutions. It will help your business to persuade the workforce during the transformation phase.
To stay in-line with the digital transformation initiatives you take, every employee of your organization should be agile and adaptable. To find whether your company has a digital culture on not, analyze how your employees talk and what’s their mindset:
|We believe in research. We never interact with our customers.||Customers are at the heart of what we do. We know them well.|
|We don’t communicate with each other much.||We rely on brainstorming and cross-team communication to make sure everyone is on the same page.|
|We follow research papers.||We make real-time decisions based on customer’s feedback.|
|We know what is best.||Our customers tell us what they want.|
Also, be involved in the ‘Active Communication’ of the vision: why the digital transformation is necessary and how it will affect the organization. You must intertwine your digital strategy into the business strategy. One of the key challenges of digital transformation is that its process needs the whole organization to be involved in making it work. Thus, approach this program as a product and brand it.
2. Lack of IT Resources and Management
Poor resource management planning and lack of IT resources are some of the critical challenges with digital transformation. In terms of IT resources, lack of manpower and talent war are two aspects that act as a hurdle to a successful digital transformation.
77% of companies consider missing digital skills as the key hurdle to their digital transformation. Capgemini
There is a clear shortage of digital workforce and without them, you can never succeed in overcoming digital transformation challenges. Thus, it is important to take this challenge seriously and get rid of it prior to embarking upon a digital transformation journey.
Digital transformation requires a careful approach and having an inefficient team and a weak strategic plan can make the job difficult during the transition phase. Thus, invest in digital talent and build a pool of talents with strong prowess on technology and solutions.
Make sure, your HR department is equipped and skilled to bring innovative solutions to bridge the digital skills gap. But, do not rely on HRs only to bring in the talent in your team. Here is how you can do the needful on your own:
a) Assess current resources:
- Take a look at your team and see the tasks assigned to every member.
- Find ways to automate these tasks if you can.
- Avoid micro-management and delegate tasks as per the expertise and skills available.
b) Outsource to bridge skill gaps:
If you want to overcome all digital transformation challenges, you will have to skip the boundaries. Look for the talent outside and find what you need. Outsourcing is a highly utilized, economical, and efficient approach to bridge the skill gap.
c) Use tools like CRM:
To tackle digital transformation challenges, you will have to find tools that reduce time-taken in back-office and administrative tasks. For example, you can use CRM to centralize the data you and your team require.
Thus, have a clear plan for the resources available and the need for further digital talent to take the digital transformation forward.
3. Lack of Clarity on the Digital Transformation Budget
A capital plan for the digital transformation process is one of the biggest hurdles that could hamper the entire project. Setting up a limited budget for building digital solutions and transformation process can be bewildering for most business heads.
To drive digital transformation, an organization needs to make an investment in acquiring the right technology and the right digital experience team to execute it. European insurer Axa, for example, invested €950 million over just two years.
Thus, the whole process requires a good amount of capital, which may initially lead to lower profits, but in the long run, this investment will become one of the primary reasons for your business success.
This lack of clarity on budget affects the decision making and forces the leaders to step back when it comes to digital transformation funding.
Have a strategy in place for the long-term with a budget in mind. Organizations that are firm on its foundation and have a good capital plan on its table, are ready to embark upon their digital transformation journey.
Remember, budgeting in digital transformation requires careful planning as any element missed out can result in a budget crisis or huge loss later on.
Here are a few tips for you to achieve digital transformation on your budget effectively:
- Involve more and more departments or their representatives and follow a collaborative approach while planning on the budget.
- Try setting a flexible budgeting model. Many digital transformation challenges may come your way, and you need to accommodate all. So a fixed budget won’t help.
- It is essential to train your staff for a successful digital transformation of your company. So, do not forget to allocate a separate budget for training programs.
Raising a company’s Digital Quotient, or DQ, requires the targeted allocation of both capital and operating expenditures. McKinsey&Company
One of the key components of a good capital plan includes the CEO’s allocation process in the digital transformation journey and the tempo at which it should operate.
4. Digital Security
Data security is a concern for most visionaries as cybersecurity is complex, dynamic, and fast-changing. The latest reports from industry research experts like Forrester and Gartner are pointing towards the same concerns.
Net Solutions’ digital transformation report for 2020 states that a company’s success in digital transformation journey relies on its ability to secure its digital operations.
Thus, successful integration of digital technologies requires a transformation of security as well, which is a top-most challenge faced by a number of organizations when embarked upon a digital transformation journey.
55% of companies said that security was the number-one challenge they face when implementing digital enablement technologies. SoftServe
Follow a security-first approach. Security must be embedded into all applications as the first line of defense. Start to deploy security controls across many different internal, public, and cloud environments. A good ‘organization security’ strategy as mentioned in one of our previous blogs should include the following features:
The organization’s employees are getting the tools more connected, engaged, and mobile.
Nonstop connectivity, rich collaboration to support deeper engagement, and security everywhere.
Deploying an end-to-end, policy-driven security approach to better secure every aspect of our value chain.
Even CEOs rate security as the top-most characteristic that enables the organization to become a digitally transformed organization.
CXOs should spread security responsibility to different departments by shifting from the DevOps model to the DevSecOps model to tackle the security challenge. This step would enable businesses to turn security into an enable of digital transformation rather than a hurdle.
5. The Agility Challenge
Agile Transformation is at the heart of Digital and scaling is important for any successful digital transformation in large enterprises. Even a study reveals that 68% of companies identified agility as one of their most important initiatives of digital transformation.
However, becoming agile prior to embarking upon a successful digital transformation journey is a challenge and many organizations fail in their agile transformation process.
The parameters that play an indispensable role in laying the foundation for scaling agile capabilities and approach at the enterprise level are Agile teams, flexible architecture, and efficient release management.
a) Flexible Architecture is aligned to create releases. Micro-services and open APIs create a flexible, extensible architecture that can manage diverse technologies while reducing costs at the same time.
b) Agile Teams (both onshore and offshore) are utilized to support these efforts. By establishing offshore-capable development and test environments, firms can leverage different time zones to accelerate development cycles.
c) A dedicated release management function facilitates ongoing management, verification, and communication about the scope of releases in multiple iterations. Application release automation tools should be applied to support continuous delivery.
Digital transformation challenges are complex to handle. Therefore, it is vital for organizations to create a substantial ecosystem to seamlessly drive change. Prior to embarking upon a digital transformation journey, build a strategy that will eliminate the roadblocks to DX, thereby ensuring a digital success.
Note, investing in emerging digital technologies won’t equate to complete successful digital transformation. People, Process, and Technology move hand-in-hand to form the foundational elements while strategizing DX efforts. Make informed technology investments, it will deliver real value both to the organization and your customers.