Most businesses are considering some form of digital transformation. Gartner found that 91% of companies are already engaged in digital initiatives, and 87% of senior business leaders say digitisation is a priority.
Digital transformation is using digital technologies to improve how your business operates, including:
-
Processes
-
Culture
-
Services
-
Customers experiences
Common goals include improving efficiencies, driving growth and increasing profitability.
There are also digital transformation trends you can tap into to enhance your business. Yet, around 70% of digital transformation projects fail, while 73% don’t deliver top and bottom-line growth.
Why?
Common reasons for failure are exceeding budget, failing to meet basic goals, or overrunning deadlines. Legacy systems are another factor in why digital transformation projects fail. Harvard Business Review found 52% of companies it interviewed cited legacy systems as a substantial obstacle to their ability to use digital technologies effectively.
Knowing the challenges means you can swing the pendulum from failure to success.
Is it worth the risk? Absolutely. Research by Valoir revealed that companies with a higher digital transformation score (8 or higher) had around twice the revenue growth of companies with a score of three or lower. Not doing so sets you up to fail. A study by Harvard Business Review found that 47% of companies believe the problem with digital transformation is a risk-averse culture.
Biggest challenges of digital transformation
While there is consensus on why digital transformation projects fail, understanding and preparing for digital transformation obstacles can help mitigate risks to project success.
Identifying the biggest challenges and laying the groundwork for overcoming them is an early investment tactic that can pay dividends as a project progresses.
1. Legacy systems as an obstacle to digital transformation
Legacy applications are one of the biggest obstacles to digital transformation.
Maintaining legacy systems can be expensive, complex, and not usually designed to work with newer components in your digital transformation roadmap. You may also experience resistance from employees wedded to legacy processes.
To overcome legacy challenges:
Start with a strategy – know what you’re trying to achieve and evaluate what does and doesn’t work.
Take a phased approach – identify a specific pain point with legacy technology. Do you need to layer new technology over it, or can you change the process?
Involve people – involve people using existing systems in the digital transformation process.
Audit your existing systems – make sure you know what legacy systems you’re running and what they do. It will help you identify and evaluate new tools to build your digital transformation.
Take time to migrate – build new core systems and phase your switchover.
Find out more about how to create a digital transformation strategy.
2. Lack of expertise
A lack of expertise is a threat to digital transformation.
KPMG reports talent gap issues, including:
-
44% said a shortage of experts hindered the process.
-
32% said adding new talent and systems is costly.
-
29% said a lack of skills delayed progress.
Some in-demand skills include Artificial Intelligence (AI), Blockchain, cloud computing, Cybersecurity, Mobile App development and User Experience (UX).
Portevo helps you find expertise for projects and challenges in any business. The platform helps you write a brief for your digital transformation requirements, matching it with expert digital transformation consultants in our marketplace.
3. Silos and internal resistance
People are as important as technology for a successful digital transformation.
Silos and internal resistance create obstacles to digital transformation. Silos can create a disconnect between teams and departments. Individuals may focus on their goals rather than taking a holistic view of transformative change.
Change is uncomfortable and disruptive. Humans naturally cling to what we know, which is why employees may resist change. You may need to make organisational change management part of your digital transformation strategy – and have a plan for internal communications.
Hiring an external, independent consultant will offer perspective and help you to bridge internal silos and keep staff informed.
Check out these signs your organisation should hire a consultant.
4. Leadership and structure
You need to consider changes in structure, which a consultant can help identify.
A survey by McKinsey reports that nearly 70 per cent of all respondents say their organisations’ top teams changed during the transformation. Most commonly, teams changed when new leaders familiar with digital technologies joined the management team. However, you may lack internal skills and need a consultant to help drive digital transformation.
Companies with an engaged Chief Digital Officer were 1.6 times more likely to report a successful digital transformation.
You may also need to redefine individuals’ roles and responsibilities so that they align with a digital transformation.
McKinsey found that companies were 1.5 times more likely to report a successful digital transformation when companies redefined functions and roles. Consider engaging people as integrators and technology innovation managers to bridge gaps between parts of the business. Digital transformation consultants fit these roles well.
Read our guide to employee engagement in change management.
5. Security Concerns
Covid-19 and the shift to remote working have driven a workplace revolution.
Hybrid and remote working mean employees are working from home. Plus, the transition to remote working has increased the focus on systems encouraging openness, sharing and collaboration.
But that raises the stakes in terms of security. How do you ensure that employees securely access shared data remotely?
Fears around security can be a barrier to digital transformation. Companies fear that opening systems will create security risks. An IBM study, for example, found that 43% of UK IT professionals and decision-makers in highly regulated industries such as financial services view data security concerns as a barrier to digital transformation.
However, security concerns can also drive digital transformation and plug potential holes in legacy systems. Some 87% of IT professionals have invested, or plan to invest, in the latest enterprise-grade cloud security and encryption technology, such as confidential computing.
Specialist security skills may be hard to find. According to Atos, there is a worldwide cybersecurity skills shortage. Security functions can be siloed in an organisation. If you don’t have security expertise in-house, you may wish to hire a specialist cybersecurity expert to help with your digital transformation.
6. Lack of budget
Budget constraints are the top barrier to successful digital transformation cited by half (49%) of IT decision-makers. The survey found that 88% of IT decision-makers are facing costly project delays – with the average digitalisation delay lasting five months at the cost of up to £20,200 a day.
Budgets for digital transformation need to be allocated carefully, and to compare the costs to have an estimated return on investment in terms of efficiencies and the business benefits of the digital transformation.
You will need to create a financial roadmap and a timeline for the digital transformation, estimate resources, design a strategy, and prioritise and allocate resources.
7. Lack of strategy or plan
Where do you start with digital transformation?
It is a tricky question, and surveys reveal one of the most significant barriers to digital transformation. A Wipro Digital survey found that 35% of digital transformation efforts fail because of a lack of a clearly-defined strategy. Figures from Celonis found executives struggle to know where to start with digital transformation. At least 45% don’t know where to begin.
Digital transformation doesn’t mean a complete overhaul of business strategy and processes, but you need a clearly-defined plan with distinct goals and outcomes.
