Many businesses are turning towards digital transformation to remain relevant, stay ahead of the competition, and keep up with the latest trends. Digitalization can transform businesses to an entirely new level if done right. Successful transition to new business models requires persistence, hard work, and strategic planning. This guide will help you uncover the 9 most significant digital transformation challenges every company faces and how to overcome these obstacles.
There are several factors that businesses need to consider when going digital. These factors may include organizational culture, customer needs, technology infrastructure, and employees’ abilities. A successful transformation to a new business model is easier than it seems. But lack of strategic planning and knowledge can result in missed opportunities and costly errors.
If you’re considering going digital, you must learn valuable information about the challenges you might face during your ambitious initiatives.
Why Is Digital Transformation Challenging?
Businesses have to combat many digital transformation challenges to stay in the competitive business market. With the improvements in Artificial Intelligence, the potential to develop effective digital adoption strategies has become unlimited. Yet, many businesses still need help finding the right path.
Surveys reveal that only 16% of C-level executives from different companies say that their digital transformation efforts are bringing positive results. So, where are the rest of the 80% of companies lacking in digitization efforts?
Successful digital transformation is not only about enhancing or tinkering with traditional business operations. But it requires the right expertise, deep knowledge, and proper guidance to drive the intended results. Companies that respond differently to digital transition needs may fail miserably, resulting in a loss of time, resources, and money. Transitioning to a whole new business model may sound simple and easy, but the execution of the plan is quite challenging.
Below we’ve given some data-driven information to help you better understand the complexity of digital transformation;
- A report by Forrester highlighted that above 50% of digital transformation efforts fizzled entirely in 2018.
- A survey by McKinsey revealed that 70% of digital transformation efforts fail due to change resistance from employees.
- Another report by McKinsey showed that only 16% of the executives claimed that their company’s digital transformation efforts are sustainable and effective in the long run.
The above stats lead us to a question, what makes the digital transformation so challenging? Lack of dedicated IT skills, inefficient data management, evolving customer needs, and lack of strategic business planning make digital transformation challenging for some businesses.
The world’s obsession with advanced technology has made the competition more robust in digital transformation than ever. Transitioning to a new business environment puts pressure on the overall functioning of traditional businesses, be it with stakeholders, customers, or organizational culture.
Handling this pressure without strategic planning and cooperation can make organizations fumble when going digital. Taking your current business processes and focusing on digital challenges becomes difficult.
9 Digital Transformation Challenges Every Company is Facing
The success of digital transformation lies in thoroughly understanding the challenges that businesses may face during this significant journey. When shifting to an interconnected world, digital transformation challenges can be essential to your trip. Lack of understanding of the digital processes, lack of financial and technological resources, and inefficiency in data management are the common obstacles to a digital transformation.
Digital transformation is a constant change involving how companies perform their intended operations and what approaches they use to provide customers with a seamless experience. Companies can reap numerous rewards if the challenges of transitioning to the digital world are correctly managed. Overcoming digital transformation challenges is critical to reap the exclusive benefits of this transition and increase your success rate in the long run.
The key challenges of digital transformation every company is facing include;
1. Lack of Sufficient IT Skills
The lack of proper IT skills is the primary digital transformation challenge every business faces. The shortage of abilities and industry knowledge can result in siloed decision-making and disconnected priorities.
It can also affect how companies invest their money and time in transitioning to a new business model. A recent survey highlighted that more than 28% of businesses claim that lack of proper IT resources and skills is the greatest hindrance in reaping the intended benefits from their digital transformation efforts.
Educating your employees about how to utilize the new technologies is essential, but it takes a lot of time, effort, and preparation to prepare them for this complicated business setting. The skills gap and lack of proper understanding can result in limited access to opportunities for expansion and lost revenues.
Acquiring top talent for a digital transformation project is a significant challenge most organizations are experiencing worldwide. A report by Human Resource Management highlights that about 83% of companies struggle to find employees with the right skill sets.
Tips to Address the Lack of Sufficient IT Skills
IT difficulties are undoubtedly the popular digital transformation issues. But the following ways can help you combat this challenge;
- Train your existing employees to tailor them to fill the current skills gap
- Invest in workshops, webinars, and online training programs to help employees enhance their abilities and polish their skills
- Arrange business conferences or invite keynote speakers to help your employees and teams better understand what technologies are at their proposal and how they can get the best from them.
Skills gap and insufficient IT skills can put your digital transformation efforts at the edge of destruction. That’s why CEOs need to make a concentrated effort to combat this challenge.
2. Lack of Defined Strategies
Most companies embark on digital transformation without any clear and defined business strategy. Despite all the talks about digital transformation, there remains to be clarity about what digitalization entails.
More than implementing new technology to your workforce is required for a successful digital transition. Business leaders must go beyond and above to get the best from their digitalization efforts. To truly make a successful transition, businesses need to rethink and reshape their industrial operations from top to bottom. C-level executives must ensure strategic planning and a clear understanding of what they want to achieve from their digitalization efforts.
When companies embark on digital transformation with a clear vision and objective, it can result in potential success. Poorly defined goals and unrealistic expectations are the leading causes of why many digital changes fail to live up to their potential.
Tips for Defining a Clear Business Strategy
A strong and realistic business strategy is essential to strengthening the core of your digital transformation efforts. It gives business leaders a long-term image of their objectives and goals. The following tips can help you develop an impactful strategy for your digital transformation;
- Identify the areas where your business needs improvements
- Take a good hard look at your company’s preferences and objectives
- Ensure open and transparent communication with your teams and employees to help them understand what you want to achieve from your efforts
Business leaders are responsible for developing a clear and defined strategy for their digital transformation to minimize the continued problems and alleviate complexities.
3. Ineffective Data Management
With digital transformation, companies must deal with a continuous flow of data and information. Ineffective data management is the most significant digital transformation challenge that can weaken the core of your business. It can result in a lack of productivity at workplaces, loss of potential buyers, and wrong business decisions.
The constant flow of customer data is one of the essential pillars of digital transformation, but it can also be a significant challenge for some companies. A company’s decisions heavily rely on data collected from different resources. Ineffective data management can negatively impact a company’s decisions and insights.
Businesses can get valuable customer insights by collecting data on their behaviors and preferences. More than collecting customer data is required for a successful digital transformation; this data must be organized, stored, and displayed correctly in the backends.
It becomes challenging to consolidate and use the collected data effectively when businesses use siloed systems. Similarly, if you’re storing all of your customer data in a single physical location, you can’t manage and organize it effectively.
Tips for Effective Data Management
An effective data management strategy will improve your data quality and help you retrieve maximum values from it. Companies must follow the following practices to better analytics and effective data management;
- Unify your data across several platforms to get a complete data view and necessary insights to optimize your processes.
- Provide better data access for making quick and informed business decisions
- Maintain data quality to give valuable insights into your business
- Develop a data governance framework to ensure your critical data is effectively protected and managed
- Prioritize data security to avoid data breaches
- Develop a strategic data recovery plan
Companies can also rely on cloud-based solutions to ensure that customer data is organized, safe, and easily accessible.
4. Evolution of Customer Needs
The continuous evolution of customer needs is another significant digital transformation challenge companies are experiencing worldwide. With technological advancements, customers have realized how much they can get things done from their smartphones and laptops. They have become more demanding than ever before.
Customers want businesses to provide them with a seamless and reliable online experience. For example, touchless checkouts have become expectations instead of nice-to-have options. Companies must improve their customer support services and give buyers a convenient and safe online experience to get the most tailored results from their digital transformation.
You must prioritize your customers’ preferences and needs when developing new technologies. After all, they are your customers using your newly introduced product or technology.
Tips to Meet Your Customer Needs
Prioritizing your customers’ expectations and needs should be at the forefront of any business decisions. The following tips will help you keep up with the continuous evolution of customer needs;
- Listen to your customer feedback and implement strategies accordingly
- Build a customer-oriented business strategy instead of a product-oriented
- Interact with your customers to better understand their needs and preferences
By surveying potential customers, companies can make more informed decisions about which technologies they should bring to market.
5. Budget Constraints
With digital transformation, it becomes difficult for companies to control their budget. Most business leaders make decisions about transitioning to new technology without considering their income and expenses. This approach can result in a loss of both time and resources.
In addition, when C-level executives don’t develop a clear and defined business strategy, it is easier to succumb to scope creep. Without a clear business strategy, businesses leader can’t make informed decisions, resulting in unnecessary expenses. It can quickly strain your budget and make it difficult for you to stick to your timeline.
Tips to Overcome Budget Constraints
- Develop a clear-cut and defined strategy to keep your finances in order
- If things don’t get straight, you can request your family or friend to invest in your digital transformation projects
A defined business strategy is vital to avoid costly mistakes during digital transformation.
6. Security Concerns
Undoubtedly, inter-connected devices can make business operations more efficient and accurate, but they are also vulnerable to security issues. Many companies are struggling to cope with vulnerabilities and security concerns associated with digital transformation.
Data leakage or breaches can have disastrous effects on both company’s bottom line and reputation. Organizations with sensitive data have been hesitant to adopt digital transformation. Integrating your company data and relying on cloud-based services can make your data more vulnerable to data leakages and breaches.
Tips to Combat Security Concerns
To combat security concerns, business leaders must consider the right combination of processes and technology.
- Partner with a cloud provider that can give more reliable and safe security compliances
- Put robust internal security protocols and controls
- Integrate your IT security with operational technology security
- Educate your teams and employees about the potential effects of data breaches
Ensuring the best security practices is vital to reap the benefits of digital transformation without being worried about data breaches and other cyber security risks.
7. The Agility Challenges
Agility is the heart of any successful digital transformation. Studies highlight that more than 68% of the companies identified business agility as their first and foremost initiative for a successful digital transformation. Becoming agile in your digitalization journey is a significant challenge nowadays companies face. Businesses fail in their agile processes even at the initial stages.
Tips to Overcome Agility Challenges
The following considerations can help businesses become more agile in their digital transformations;
- Empower your employees and encourage them to think like an entrepreneur
- Work closely together and foster clusters for small teams
- Avoid becoming too accustomed to anything in your business
8. Legacy System
Most companies still use the legacy system despite the availability of advanced solutions. Legacy systems are the top bottlenecks in every business’s digital transformation with outdated technologies and obsolete software. The inflexible and slow systems make it harder for companies to integrate with technologies and adapt to the new transition.
Tips to Overcome the Challenges of Legacy System
- Invest in resources that can integrate data from multiple resources
- Take a strategic and structured approach to change management
- Have an involved and structured digital adoption program in your company to simplify software training and onboarding
9. Ineffective Communication
The gap in communication between different departments imposes another significant challenge for companies during digitalization. A successful digital transformation requires a seamless flow of communication among all departments.
Even a slight dip in the process can threaten the smooth flow into digitalization. Business experts say inadequate communication and collaboration between lines of business and the IT department is one of the top 10 barriers to digital transformation.
Tips to Ensure a Smooth Flow of Communication
- Arrange monthly staff meetings to discuss your overall company goals
- Use the latest technologies to communicate with different departments of the company
- Encourage one-to-one communication to help your teams better understand what you want to achieve from digitalization
The Bottom Line
Digital transformation challenges are not easy to handle, but they are a vital part of your digitalization journey. Companies need to develop a robust ecosystem to drive new changes seamlessly. Build a defined strategy, empower your employees, and ensure robust internal security protocols to eliminate the roadblocks to digital transformation.