Digital transformation is a complex process and with it come many challenges. And yet, the benefits always outweigh the disadvantages.
It takes a lot of effort and resources to successfully implement a digital transformation strategy. To ensure your process of digitally transforming your company ends up in success, we’ll clarify the 7 most critical challenges of digital transformation and provide you with professional advice.
Let’s jump right in.
What is digital transformation?
Before we go deeper into the challenges of digital transformation, let’s touch on the basics.
There is no universal definition of digital transformation that can apply to every single process of digital transformation. The process looks different in every company, but there are some common aspects of digital transformation that we need to take into account.
In short, digital transformation refers to the integration of digital technologies into every single area of a business, which results in fundamental changes to how that business is operating and how it’s producing and delivering value.
But digital transformation is much more than simply the integration of digital technologies. It represents a cultural change that requires the adaptation of a completely new mindset on a company-wide scale. This change will require experimenting, challenging the status quo, and getting comfortable with failure.
Naturally, the role of digital transformation in business growth is huge. From increased operational efficiency, to direct increase in profits, and increased employee retention – digital transformation brings a lot to the table.
In the video above, you’ll find some useful visuals to complete your understanding of digital transformation. Check it out!
Now, let’s see why there are so many challenges to digital transformation!
Why is digital transformation difficult?
The main reason why digital transformation is difficult is that it refers to a change to something that’s core to your business. It’s not only using new technologies and optimizing processes, it encompasses all aspects of a business.
So, before you even take on digital transformation in your company, you must consider everything, ranging from how your employees will react to changes to how this will impact your customers.
Let’s take a quick look at some of the statistics:
- Around 70% of digital transformations fail, most often due to resistance from employees (McKinsey report)
- More than 50% of digital transformation efforts failed completely in 2018 (Forrester report)
- Around 16% of employees say that their companies have improved performance and are sustainable in the long term thanks to digital transformation (McKinsey report)
After reading these statistics, we must ask ourselves – why is digital transformation so hard to implement successfully?
New and modern agile-oriented companies are increasingly entering and changing markets. They are implementing the latest technologies and delivering their products and services in incredibly short timeframes. Everyday life has taken a sharp turn towards digital, thus changing the way we communicate, shop, travel, and so on.
This proves that traditional companies now have fierce competition that’s even pushing them to go digital. And attempting to digitally transform a company without a future-proof strategy often ends up in failure.
Trying to manage all of the aspects of digital transformation without a strong plan, without buy-in from all the stakeholders, and with the lack of flexibility may stop your business from reaching the end goal of digital transformation.
It’s no small task to implement changes in the company while at the same time focusing on handling all of the current business processes and stakeholders.
To ensure that your business can undergo a digital transformation that will end up in a success, you’ll most likely want to connect with the best digital transformation consulting company that will guide you all the way through.
Let’s go through all of the challenges of digital transformation we’ve cited earlier.
1) Complex software and new technologies are a barrier to digital transformation
If your company is not in the IT sector, there’s a chance that implementing new technologies and using complex software will be a troublesome task for your employees.
Usually, this represents a large challenge for companies from several perspectives, from an implementation, data integration, and end-user experience perspectives. To ensure the severity of these challenges is mitigated as much as possible, you should consider seeking out the most intuitive, integrated systems.
Your employees should receive proper training on using such software and any new technology you implement. So, before choosing software that will help you go completely digital, think about employee training, how you’re going to implement it, and how you’re going to import data to that software.
Even though technologies are enablers of digital transformation, misuse of any new software could prove to be harmful to your digital transformation efforts.
2) Adopting new tools and processes may prove to be challenging
When implementing new processes and technologies, you’ll often encounter challenges in the form of resistance to change. Your employees may not like such changes, they will feel that there is nothing wrong with the current processes and the way you’re simply working.
To ensure these new tools and processes are successfully adopted, your company will need to:
- Provide your employees with in-depth training
- Offer them continuous support during the transition to new tools and processes
- Ensure that they understand the business value of these new tools and processes
There are tons of new tools you can integrate into your everyday business routine when looking to go digital. In the video below, you can see several examples of tools and platforms you can use.
3) Lack of a firm digital transformation strategy can be harmful
One of the most important questions to answer before deciding to undergo digital transformation is – why?
Strategizing your digital transformation journey is crucial. There is no universal roadmap to digital transformation, meaning that you’ll have to create your own roadmap. But before you do, there are several questions that require answers.
Here’s a list of questions that will help you craft a digital transformation strategy.
What do we want to achieve with digital transformation?
- What is the long-term objective we want to achieve?
- What are the intermediate objectives we’ll need to achieve?
- What requires our attention first?
- What kind of knowledge and skills do we have now?
- What kind of knowledge and skills do we need?
- What and who needs to be connected in order for this to work?
Why do we need digital transformation?
- Why did we see a need for this change?
- Who can validate our need for digital transformation?
- Who do we need to involve in digital transformation?
- What kind of capabilities do our employees have?
- Who can connect what?
Who can help us with the “what”?
- Who can help us with gathering all the necessary insights?
- How do we connect all the people involved?
- How can we involve the customer?
- Who is going to do what? How can we delegate responsibilities?
- How are we going to include external stakeholders?
- Who will help us overcome the challenges of digital transformation?
- Who signs off the strategy, means, and KPIs?
At first, these questions may seem really hard to answer, and indeed they are. You’ll need to put in a lot of time and effort to provide accurate answers, so it’s not a surprise that digital transformation can last for years.
4) Employees are lacking proper IT skills
For your digital transformation efforts to be successful, you’ll need to be able to rely on a high-performance IT team. And if your company isn’t doing business in the IT sector, this may pose an issue.
According to a study by KPMG, more than 50% of organizations say that they aren’t capable of reaching their digital transformation goals because they’re lacking employees with adequate IT skills.
Areas of competence like cybersecurity, application architecture, software integrations, and data analytics are crucial to overcoming the challenges of digital transformation.
If you’re in shortage of employees who are specialized in such areas, you’ll most likely want to look for help from digital transformation experts and consultants to help you solve all your challenges.
5) Digital transformation requires an appropriate budget
To be clear right from the start – digital transformation is not a cheap process.
Without an ironclad digital transformation strategy, you may notice that your deadlines are being pushed back and that new work is being constantly added. And after you count in all of the outsourcing expenses, the overall cost of your digital transformation will go beyond the initial estimate.
Before your company undergoes a digital transformation, you’ll need to get a firm grasp on your long-term goals. Also, it’s essential to think about what ROI you’re expecting from this entire journey.
Once you fully understand where you are now, where you’re heading, and how you’re going to achieve your goals – budget planning will become a bit easier. You’ll understand clearly what kind of budget is too much and can you increase your budget if the need arises.
6) A mindset shift is needed
A kind of old-school mentality is creeping over a huge number of organizations. Such a mentality embraces manual processes and often looks down upon automation.
To ensure your digital transformation journey ends up successfully, a mindset shift needs to happen. From new employees to C-level executives, everyone needs to be on the same page.
People are at the center of digital transformation. The human element is crucial to the success of this entire journey. Before you dive straight into planning and executing your digital transformation, you’ll need to prepare the grounds
This is indeed a critical challenge, as not all stakeholders may not be prepared for such changes. And most likely, there will never be a situation where all employees and managers are completely ready for such a mindset shift.
In this transitional period where you’re introducing new tools, processes, and technologies, you could experience a potential drop in performance and employee efficiency.
Now, starting slow is the key to successful digital transformation. You’ll need to take your time, explain the transformation process to all the stakeholders, and allow them to get a better grasp on all new tools, technologies, and processes.
7) Security is a top priority and needs to be treated as such
Larger companies in data-sensitive industries have a pushback here in the form of privacy and cybersecurity concerns. These concerns are valid as digital transformation encompasses moving from on-premise solutions to the cloud.
Also, most likely, all of the data will be integrated into a centralized system, creating a single source of truth. As a benefit, this will enable all the employees to effortlessly obtain any kind of needed data.
Data security is recognized as one of the top concerns for companies undergoing digital transformation. Interestingly, reports from world-renowned research companies such as Forrester and Gartner are reinforcing this motion.
But not only cybersecurity has been making its advance in the past years. As the amount of data worldwide continues to grow, the threat of cyberattacks becomes more serious as time passes. Targeting system vulnerabilities, poor setups, and unsuspecting users are only a few of the common areas of attack.
Now, this calls for a defensive stance and a security-first approach. All of the applications must be fully secured, as they’re on the first line of defense. Also, there are security controls that need to be deployed across various internal, public, and cloud environments.
Be sure that you have a plan long before you first come across a cyberattack. One of the possible solutions here is to hire a cybersecurity expert to help you identify the weaknesses in your defense and reinforce all of the weak areas.
What should you do next?
Now when you’ve got a bit more acquainted with the challenges of digital transformation, it’s time to take the first steps.
The best approach would be to consult with a digital transformation expert. There is simply too much to be done and rebuilt, and tasking your tenured employees and managers with planning and executing digital transformation may be counterproductive.
For this entire process to finish successfully, you need to have a fresh pair of eyes on your platforms, tools, data, processes, and technologies you’re using. Be sure to keep an open mind, as there will almost always be a need for some kind of critical change.
Finally, if you need a helping hand with digitally transforming your company, look no more. Lumen Spei has a track record of successful digitalization projects, and we’re looking to help more companies reach all their business goals! Feel free to contact us!