For most businesses, digital transformation has gone from optional to critical over the space of just a few years. Increasing efficiency, streamlining operations, automating manual processes and reducing costs through digital innovation has become crucial for businesses to remain relevant and competitive in a rapidly evolving market.
Digital transformation has become a top priority for many, but the challenges that accompany its implementation are significant and many organisations are struggling to bring their digital dreams to fruition. 71% of business decision makers report that their company failed to deliver on the promises outlined in the original project brief – and 69% felt overwhelmed by the volume of new technology solutions being introduced.
While the barriers to digital transformation are daunting, the opportunities it presents are immense and learning how to overcome the hurdles is the only way forward for companies who need to survive in an ever-changing market.
What are the biggest digital transformation challenges?
The first step to successfully integrate new technologies into your business is to understand where the challenges lie. The fact is that digital transformation doesn’t just mean adopting some new technologies – it’s also about adopting a new business model and, more dauntingly, creating a new company culture.
These are the top 5 hurdles you’re likely to face:
1. Employee resistance
One of the biggest problems accompanying any digital transformation process isn’t a technology challenge, it’s a people challenge. Many employees will, quite naturally, find themselves feeling resistant to change in their working practices. They’re accustomed to – and comfortable with – manual processes, outdated systems and data silos which make them hesitant to move to automation and slow to adopt the new technology. They might feel worried about losing their job or fearful of skills obsolescence as well as feeling daunted about learning to use the new technology.
Integrating digital transformation can often lead to a disruption in workflows whilst the new system ‘beds-in’ and this instability often leads to stress, anxiety or frustration for people trying to do their job. A perceived lack of support or training can further exacerbate the problem. If your company culture favours tradition over innovation, this can also lead to further resistance.
While it’s tempting to assume that everybody in the company will be excited and motivated about the transformation, you risk setting yourself up for failure by not anticipating employee resistance.
2. Integration issues
Seamless integration of new technology is rarely achievable without legacy systems and current infrastructure presenting challenges. Older systems will probably struggle to work alongside new digital technologies and this can hinder the smooth flow of data and processes across the organisation.
You’ll probably find that you have data stored in disparate systems or departments, creating data silos. Integration difficulties can arise when attempting to break down these silos and create a unified and accessible data environment.
For true digital transformation, different systems and applications need to work seamlessly together but incompatibility between technologies can lead to data transfer issues, functionality gaps and inefficient processes.
The inherent inflexibility of an older system often makes it hard to upgrade or update it to meet the requirements of the newer technology you’re trying to implement.
3. Cyber security concerns
The more aspects of your business that are digitised, the higher your risk of cyber threats. Increased reliance on digital technologies, interconnected systems, and the expansion of online activities all contribute to heightened cybersecurity risks during digital transformation.
Increasing your use of technology, increases your ‘attack surface.’ Every added component creates a potential entry point for a cyber attack. It’s also inevitable that managing and securing complex, interconnected systems becomes more challenging which then allows more room for vulnerabilities.
If you’re integrating newer systems whilst also relying on legacy systems, you’ll potentially find that older systems lack the robust security that you need to withstand contemporary cyber attacks.
The migration to cloud-based services is a common aspect of digital transformation and introduces new security considerations. Ensuring the security of data stored in the cloud and maintaining compliance with relevant regulations becomes a daunting challenge.
4. Skills gaps
Many businesses find they have a shortage of skilled professionals who can navigate and implement the new digital technologies. Lack of capable talent slows down digital transformation and can even stall it altogether.
Employees who find they struggle with the new technology may become resistant to the changes. This can lead to a much slower adoption rate across your company, slow learning curves and delays in achieving your digital outcomes – which can then have a knock-on-effect on your KPIs.
Digital transformation relies heavily on data-driven decision-making. If your employees lack the skills to analyse and derive insights from data, you might find you miss out on opportunities for optimisation and strategic decision-making.
Additionally, a skills gap in creative thinking, problem-solving, and innovative practices can hinder your organisation’s ability to explore and implement novel digital solutions that drive competitive advantage.
5. Cost constraints
The fact is, digital transformation projects are expensive. Overhauling and modernising your organisation’s technological infrastructure and processes is no small task. Simply purchasing the technologies and tools you need is expensive – AI, cloud computing, data analytics platforms – and implementing these technologies often requires new hardware, software licences, and ongoing subscription fees.
You’ll need to invest significantly in employee training and upskilling to ensure the workforce can effectively use and manage the new digital tools, so you’ll need to pay for things like courses and workshops and also budget for the potential productivity losses during the learning curve.
Companies also need to cover the costs associated with system integration, data migration, and customisation. As well as cybersecurity investments like building robust security measures, conducting regular audits, and implementing necessary safeguards. Understandably, the overall expense of digital transformation can be overwhelming.
How to overcome digital transformation challenges
Understanding the barriers you’re likely to face when digitally transforming your business is the first step to knowing how to tackle them. And while the list of challenges may seem extreme, one fundamental change in mindset can mean the difference between success and failure in this arena.
Too often businesses think of digital transformation simply in terms of shifting technology but actually it’s far more than that – digital transformation requires a fundamental cultural shift in order to sustain such a dramatic change. Appreciating that transformation will come from the bottom up – with the acceptance of the new technology across the company as a whole – is the key to making it work.
Here’s what you can do to take control:
1. Establish clear leadership
Strong leadership is essential in guiding the digital transformation. Those leading the project should be able to effectively communicate their vision in order to encourage innovation and drive cultural change. A shared outlook across the organisation as a whole is essential in breaking down silos and encouraging shared motivation. Leaders need to be able to inspire alignment around a single view of where the industry is going, what role the business is going to play in that market and how they’ll pull together to achieve their shared outcome.
Successful transformation project leaders are able to bring to life a shared vision unique to their business and communicate that effectively to every employee, investor and stakeholder.
2. Create a comprehensive strategy
Digital transformation causes significant changes in your organisation and it’s essential to have a comprehensive plan to handle it.
To measure success you need to know the impact that you want to have on your customer and be able to quantify how you believe this will generate a return, for example by reducing operating costs or by making it easier for new products to reach the market. Once you know what you’re trying to achieve, you can pick KPIs that allow you to see the impact your transformation project is having on both the customers and the business.
Focusing on a few key strategic priorities and not getting swayed by fads is important so as not to make the process more complex than it needs to be. It’s important to remember that this isn’t purely about technology – it’s about people.
3. Empower your employees
Successful digital transformation needs a significant cultural shift within your organisation and this can often be met with resistance if employees don’t feel empowered and involved.To overcome the challenges of employee resistance, it’s important to connect with employees in the transformation process, empowering them to understand where the company is going, how the landscape of their industry is changing and how they can contribute to that transformation on an individual level.
Focusing on how the technology will change the lives of customers can be motivational for employees, alongside an explanation of how the digital transformation is going to generate financial returns for the company and staff. In addition to encouraging faster adoption, engaging with employees and key stakeholders from the start can provide invaluable insights and ensure that the digital initiatives meet their needs.
The accelerated adoption of new technologies, spurred on by events like the 2019 pandemic, isn’t anticipated to slow down any time soon. The shift to digital technologies makes sense for both businesses and customers – it enhances operational efficiency, accelerates innovation, and improves customer experience – and, despite the challenges, it’s imperative for future growth and sustainability.
Integrating digital technologies into many of your company’s processes can fundamentally change how the company operates and how it delivers value to your customers, employees and other stakeholders. The right digital technology can enable your business to respond more quickly to market conditions. It can also help you understand more fully what your customers want and need, and deliver this more efficiently.
Embracing digital technology can only truly happen when we understand the potential risks and challenges we’re likely to encounter along the way, and equip ourselves with both practical and inspirational solutions to ensure a successful digital transformation.