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Digital transformation has been crucial to ensuring business success in recent years. According to recent research by Zippia, 56% of CEOs said that their digital improvements have already enhanced profits. Thus, it's no surprise that 70% of organizations either have a digital transformation strategy or are working on one. Global spending on digital transformation is expected to reach $6.8 trillion by 2023.
With ambitious goals and successful digital transformation examples, together with the changing needs of consumers, businesses are highly motivated to embark on their transformation projects. Still, from technology to the people and management aspects, there are prominent difficulties that can hinder the transformation process that companies need to consider.
In this article, let's examine some of the common challenges related to digital transformation and how to overcome them to exploit the digitalization benefits for your business fully.
Why is Digital Transformation challenging?
Digital transformation involves more than just adopting new software, technologies and automated processes than traditional business practices. It requires a complete and innovative approach to core business activities.
Organizations must consider various factors when undertaking a digital transformation initiative, including how employees and customers will perceive the change, its cost, how it aligns with business objectives, and other relevant factors.
Hence, despite being a popular up-and-coming business strategy, the success rate of digital transformation is less than 30%. This is mostly due to employee resistance and lack of support from management.
Key Digital Transformation Challenges
1. Severe IT Skills Shortage
Building a skilled and high-performing IT team is imperative for the success of digital transformation efforts. However, putting together this team is getting harder, considering the current tech worker shortage.
According to KPMG's report, many organizations revealed talent gaps as a hindrance to pursuing their transformation objectives. Around 44% of survey respondents reported that experts shortage was impeding their progress, while 32% cited the high cost of adding new talent and systems as a constraint.
Some of the specialized expertise lacking include:
- Cloud computing
- Cybersecurity
- Data & analytics
- DevOps
- AI & ML
- Blockchain
Tips to alleviate the challenge:
- Organize regular workshops, online courses, or mentorship programs to help your employees gain the necessary knowledge and expertise to perform new roles and stay up-to-date with the latest technologies.
- Implement apprenticeship programs, where employees can gain on-the-job training and experience under the guidance of more experienced colleagues
- Leverage the off-shore IT team to take on your projects or work alongside your in-house team. Having a technology partner can help companies quickly fill the technical skills gaps and provide additional technical recommendations based on previous experience working on similar projects.
2. Lack of Change Management Strategy
According to Prosci, companies with a comprehensive change management strategy have six times higher chances of meeting or exceeding their digital transformation goals. Vice versa, without a well-crafted change strategy, such initiatives will likely face difficulties and may not deliver the intended outcomes.
To develop an effective change management strategy, it's essential to identify the underlying causes of the issues and establish positive relationships with stakeholders and employees.
Tips to alleviate the challenge:
- Carefully analyze existing processes and establish priorities aligning with the organization's vision and objectives. Define clear digital transformation goals and document a detailed plan that outlines the changes, resources, and phases involved, as well as who will be responsible for each aspect.
- The company's leaders are responsible for communicating the proposed changes to all employees. They should provide clear explanations for why the changes are happening and address any concerns raised by staff. Additionally, the top management should actively encourage and accept feedback.
- Develop a roadmap highlighting the firm's journey to help employees understand where the enterprise has been and where it is headed. A comprehensive roadmap should include a timeline for each transformation stage.
- Continuously monitor and measure key performance metrics to ensure that the desired goals are being achieved.
3. Budget Constraint
Implementing digital transformation can be costly, particularly for organizations without a well-defined strategy. As you respond to evolving customer needs and customization requests, it's easy to experience scope creep, which can gradually delay your project and add new work, ultimately driving up costs. Moreover, additional consultation fees or IT errors can further contribute to the rising cost of digital transformation.
Furthermore, there is a common misconception that technology spending is only considered an operational expense. This narrow view fails to recognize the long-term strategic benefits of digital transformation. Consequently, some businesses don't allocate sufficient budgets, leading to suboptimal implementation and hindering future agility and adaptability.
Tips to alleviate the challenge:
- Emphasize the importance of perceiving digital transformation as a long-term strategic vision that will ultimately lead to increased revenue.
- Divide the vision into attainable goals and implement the transformation in smaller, measurable stages. Assign priority to resource allocation and budgeting for each phase, and demonstrate the outcomes of these phases to secure additional funding.
- Develop a feasible plan that involves projected qualitative and quantitative returns for the digital transformation initiatives.
4. Risk-averse company culture
An organization that resists change hinder progress and innovation. Yet, we observe this old-school mentality in many businesses in the context of digital transformation. Whether it's top-level executives or employees, some might be reluctant to embrace new technologies.
Some leaders see no compelling reason to change their current practices, particularly if they're attaining positive results. Meanwhile, employees might feel apprehensive about new roles and responsibilities that come with digital transformation. Failing to address these concerns can result in missed opportunities for growth.
Tips to alleviate the challenge:
- Build a change leadership team with innovative, reliable and influential individuals. This approach enables companies to adopt a proactive stance toward digital transformation endeavours that prioritize the human element of change.
- Ensure that you clearly communicate your employees' expectations, roles, and responsibilities concerning the overall transformation vision. It's also important to consistently get updates and align your team towards achieving your digital transformation program goals.
- Mitigate employees' concerns about being replaced by new technologies. Give your staff reassurance that their positions will remain relevant and offer new opportunities for growth and development as the company undergoes digital adoption.
5. Legacy systems
Stepping out of your comfort zone can be challenging, even in business. Despite the emergence of more agile and robust digital solutions, some organizations continue to deploy legacy systems. After all, these businesses have already invested significant capital in these infrastructures and are still benefiting from them.
Nevertheless, relying on obsolete software and outdated technologies can significantly hinder digital transformation. Legacy systems are often slow and inflexible, making adapting to changes and integrating with other technologies complicated. Their susceptibility to security vulnerabilities is an even more urgent issue.
Tips to alleviate the challenge:
- The leadership team should take the lead in moving away from legacy models, prioritizing customer-centricity and aligning their teams to be more agile.
- Begin with pilot projects such as small-scale workflow automation or introducing new collaboration tools for one department to demonstrate the success of new digital solutions before proceeding with an elaborate plan for a broad digital embrace.
- Encourage employees to take on innovative projects and explore new technologies that can contribute to revenue growth.
6. Cybersecurity concerns
Data security and privacy concerns loom as companies pursue digital transformation initiatives, especially with enterprises in data-sensitive industries. Their fears are valid, given the high costs businesses incur due to cybercrime.
A surge in cyber threats is also observed with the growing migration from on-premise solutions to cloud-based platforms, as well as the consolidation of an organization's data into a centralized system.
Tips to alleviate the challenge:
- Regularly train employees on recognizing and preventing cyber threats and their responsibility in maintaining security.
- Conduct frequent risk assessments and review security incident response plans to ensure effectiveness.
- Follow security standards and best practices when transitioning to cloud computing and responsibly handle customer data.
Successful Digital Transformation
In today's fiercely competitive business landscape, digitalization has become a crucial element for survival rather than an option. However, digital transformation is far from an easy task as technology continues to grow increasingly complex. Mere implementation of the latest, cutting-edge systems and tools does not guarantee success. Companies must prepare themselves to face various internal and external challenges along the way to conquer digital transformation.
It's essential to note that the more prepared a firm is, the better positioned it will be to reap the benefits of available digital opportunities. Our team of experts is here to help at every step of this transformation journey. With over 12 years of experience in the industry, KMS Solutions has successfully delivered digital transformation projects to multiple leading enterprises like ACB, Prudential, Maxis, Tricentis and more.
Contact us today and take your first step toward your digital transformation.
