Digital transformation has become a top priority for businesses that are keen to ramp up their efficiency and streamline their bottom lines. At the same time, stakeholders encounter multiple challenges that threaten to hinder the ultimate success of their transformation efforts. Luckily, there is a way out.
Forward-looking business leaders across the globe are striving to boost their competitive edge, win customer loyalty, drive bigger revenue, and get various mundane tasks handled on autopilot. Undeniably, these ambitious goals will be impossible to achieve without disruptive technology, including but not limited to blockchain, artificial intelligence, data analytics, the Internet of Things, and cloud.
Digital transformation has indeed taken center stage, and it is expected that global digital transformation spending will hit $3.4 trillion in 2026.
However, even the most ambitious and tech-savvy stakeholders make mistakes and face numerous obstacles on their way to successful digital transformation.
But there is no need to panic. We have you covered.
In this article, we will look into the 7 most common digital transformation challenges and give you pro tips on how to avoid them to ensure that your business will thrive.
7 biggest digital transformation challenges in 2023
During every stage of digital transformation, each business will inevitably face up to its own particular hurdles. However, the most widespread challenges so far have been the lack of skilled tech talents, change-resistant personnel, security concerns, heavy reliance on outdated legacy systems, financial constraints, the absence of a digital transformation strategy, and ever-changing customer needs and expectations.
Below, we will explore each digital transformation challenge and provide guidelines on how to overcome it.
1. Lack of skilled technology talents
According to the KPMG global tech report 2022, the lack of capable talent, from data scientists and analysts to AI/ML engineers and other tech specialists, slows down transformation and optimization plans.
There are many reasons for these shortages. The most obvious is the imbalance between, on the one hand, the growing number of firms starting to work with data and adopt new technologies, and on the other one, the insufficient knowledge and professional expertise among graduates, which renders them unable to make the most of new systems.
Pro tip on how to deal with the lack of skilled technology talents
Those business owners that are eager to attract the best talent pool need to position themselves as modern and encouraging employers of tech professionals. They should communicate and, crucially, provide development opportunities for tech specialists to be able to attract and retain them.
As far as graduates are concerned, it will be worthwhile to design outreach programs together with colleges and universities. This will help educate and motivate individuals approaching entry-level jobs and allow them to develop the most essential in-demand skills. Afterwards, business owners can invite these knowledgeable domain experts to work in their companies and continue developing their skills further.
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2. Change-resistant personnel
It is a well-known fact that to stay competitive, organizations need to be quick on the uptake and ready to embrace change.
However, a change-averse culture has been the norm for businesses that are used to executing mundane tasks manually and working with outdated legacy systems and data silos. In these firms, automation is not welcomed and new technologies are hard and slow to implement in workflows.
Pro tip on how to deal with change-resistant personnel
To ensure a successful digital transformation, everyone, from leaders to employees, needs to be on the same page and understand the significance of change.
To achieve this internal understanding, it is of utmost importance to work out a comprehensive change management strategy that will oversee all steps, limitations, tech and business flow, employees’ concerns and opportunities, and other aspects needed to consider when putting your business on digital rails.
It was reported that projects that had a comprehensive change management strategy in their arsenal were six times more likely to achieve their professional goals. So, if you wish to kickstart digital transformation within your organization, you would be well advised to start with mapping out a change management strategy that will harvest benefits for everyone.
3. Security concerns
Some businesses fear that the implementation of new technologies in their operations will expose them to higher levels of cybersecurity risk. Unfortunately, their concerns are well-founded. The thing is that once an organization starts cooperating with numerous SaaS vendors that help it bring about digital transformation, it gets really hard to verify the security level of each individual third-party partner.
The cybersecurity statistics do not look good either. It was reported that 83% of organizations had more than one data breach in 2022, while the number of global cyberattacks increased by 38% in 2022 compared to 2021.
Pro tip on how to deal with security concerns
To mitigate security risks, organizations are strongly advised to carefully think through and introduce strict security measures at the very beginning of their digital transformation journey. This will allow them to improve their cybersecurity position and defend themselves, as well as their customers, against various threats.
It is extremely important to involve CISOs and their cybersecurity teams in tech selection and staff education as early as possible, too. They will do research and provide an overview of how and where the new technologies will be used, and what this means for data security.
Remember that cyber security is a growth enabler and a tool that will empower you to build trust into business models and enrich the customer experience. Therefore you should never neglect it and spare no expense in introducing robust security mechanisms, as doing so will allow you to reap the benefits in the long run.
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Heavy reliance on outdated legacy systems
Some businesses are not ready to part with their “convenient” outdated legacy systems and replace them with more sophisticated solutions. They normally refer to the high costs of novel technologies and believe that it will be more economical to enhance and maintain their existing systems.
But what they fail to realize is that legacy software may bear numerous hidden costs. The older the legacy systems are, the more they are prone to various new hacks and attacks, entailing huge financial losses.
Lengthy data processing times can hamper overall efficiency and prevent businesses from making money. Moreover, as time goes by there will be fewer specialists who will be able to maintain and work with outdated systems. This means that if your system breaks down, there will be no one to repair it, and the sudden transition to new technology will require you to spend a large sum of money.
Pro tip on how to deal with heavy reliance on outdated legacy systems
First, you need to analyze and find out which particular systems require disruption. Clearly, some systems and software are core to your business and you do not need to subject them to any significant changes.
To be able to properly evaluate your legacy applications and identify whether they are in need of modernization, Gartner recommends referring to the following six drivers: business fit, business value, agility, cost, complexity, and risk.
Once you have fathomed out which areas require modernization, you will need to provide all-encompassing onboarding training for your employees, as well as continuous performance support to help them better navigate new tools and systems and understand the value of new processes.
Beyond this, you should also bear in mind the golden “start small” principle. Test the waters before rolling out a massive transformation campaign and kickstart with small-scale workflow automation. After gathering and analyzing statistics on the performance of new digital solutions, you can shift into high gear and move on to transforming the rest of your processes.
5. Financial constraints
There is no doubt that digital transformation does not come cheap, and CXOs, board members, and other stakeholders need to be ready for huge investments. These expenses will include implementing new tools, onboarding and training employees on how to work with new systems, and hiring professional developers as well as business analysts, consultants, and more.
Plus, the transformation process is not always smooth and trouble-free. In fact, it may come with additional errors and inconsistencies that will involve extra expenses. What’s more, one needs to remember that constant post-launch system support and upgrades investments will surely be unavoidable.
Pro tip on how to deal with financial constraints
Budget constraints may become a huge obstacle on the way to digitization, but businesses have to remember that their digital transformation itself is a long-term investment.
So, according to Deloitte’s analysis of financial disclosures from more than 4,000 US and global organizations listed on the New York Stock Exchange as of April 2022, the right combination of digital transformation actions can unlock as much as $1.25 trillion in additional market capitalization (across all Fortune 500 companies).
Easier said than done. The money issue is extremely tricky and the narratives about future financial gains will not gift you the necessary money now. No matter how energetically you will be waving magic wands and rubbing the golden lamp, the finances will not appear out of nowhere (cue the Hide The Pain Harold meme).
And yet there are certain steps you can take to alleviate the financial burden, namely:
- Team up with your financial department to design a comprehensive financial strategy
- Calculate the forecasted revenue on income (ROI) of digitization
- Envision and include additional expenses
- Learn from the experience (and mistakes) of other companies that have already undergone digital transformation and see how much money they have invested in it
- Map out a digital transformation plan and break it down into financially achievable, realistic targets
6. Absence of a digital transformation strategy
Those organizations that fail to prepare a detailed digital transformation strategy before starting the process tend to waste both time and money. They lack consistency and professionalism and do not have an understanding of what exactly they are supposed to do to achieve their goals. The roles and responsibilities are also not distributed, which leaves all participants bewildered and confused and possibly ending up unwilling to embrace change.
Pro tip on how to deal with the absence of a digital transformation strategy
What you need to realize (and accept) is that a well-defined strategy is the cornerstone of successful digital transformation.
Your strategy should cover a wide range of different facets and attend to various minutiae, such as:
- short- and long-term objectives
- strengths and weaknesses of your business
- the state and performance of your current systems
- timelines, budget and resource allocations, roadmaps, milestones
- general overview of your market and niche
- problem statement, customer needs, technology trends, and many more.
A well-defined and unified strategic vision will enable you to drive a sophisticated implementation and enablement of digital transformation across your organization and make it much easier for all stakeholders and personnel to embrace the change.
However, if you struggle to design an effective strategy, it will be a good idea to reach out to professional IT consultants. They will run a complete analysis of your business case and build up a phase-to-phase vision of your digitization campaign, taking into account your industry specifics and market state.
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7. Ever-changing customer needs and expectations
Meeting customer needs and winning their loyalty is definitely one of the principal reasons why businesses decide to embark on their digital transformation journey.
According to Deloitte’s 2022 Global Marketing Trends report, these days executives are focused not only on their own productivity but also on customer engagement. This shows that complying with and catering to customer requirements is essential for businesses to thrive.
However, customers’ needs and preferences are fast changing, which poses certain challenges for businesses’ digital transformation efforts as they do not know where to start and what to upgrade.
Pro tip on how to deal with ever-changing customer needs and expectations
To keep up with customers’ requirements, businesses need to stay up to date on their industry trends and monitor their customer preferences. This will involve organizations taking advantage of data analytics tools that will empower them to gather and analyze data to understand what their customers need before starting to transform their processes. Essentially, your goal is to ensure the optimal protection of customer personal information and to collect and process it in accordance with regulations such as GDPR.
Ideally, businesses should also conduct a survey and address their customers directly to find out how they rate the services and what aspects need to be enhanced.
It is also important to keep a watchful eye on technology trends and to do research into whether they have the potential to serve your customers well. You can find the relevant information in a range of surveys and reports, and extract the insights you need to succeed.
However, take all the information with a pinch of salt and be critical before adopting a certain tech trend in your workflows.
For example, the metaverse is currently trending on the tech horizon as businesses all over the world are rushing to adopt it in their workflows. Yet, the one-size-fits-all approach does not work for all companies, and some of them may end up disappointed with the result. This happens because firms do not execute preliminary research into their capabilities and customer expectations, only finding out later that the metaverse is not the technology to tackle their specific business issues. So take your time to understand the technology better before implementing it in your business.
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How to ensure a smooth digital transformation in your business
Now that you are fully aware of digital transformation challenges, let’s sum up the steps you need to take to ensure a smooth digital transformation:
- Work out a thorough digital transformation strategy and stick to it
- Analyze which particular systems and departments require transformation (in other words, do not indiscriminately transform all processes at once)
- Design a change management strategy for your organization and ensure the smooth onboarding of your personnel
- Educate your staff about how to work with new technologies
- Create a financial strategy, outlining forecasted ROI, expenses, and investments
- Hire experienced engineers and consultants to guarantee the overall success of your transformation efforts
- Introduce robust cybersecurity measures
- Keep abreast of and examine tech trends and analyze your customer needs
Digital transformation has become part and parcel of businesses that are set on finding the winning edge, maximizing their efficiency, and boosting ROI. While it presents certain financial, technological, and organizational challenges, it is entirely possible to overcome them by adopting a pragmatic approach and preparing thoroughly for the transformation process beforehand.
If you are about to kickstart the digital transformation and build up a scalable business, reach out to our experienced PixelPlex software development team for help. With blockchain, AI, IoT, and big data among our signature techs, we will pay careful attention to producing a detailed innovation plan for your company and delivering a powerful solution tailored to your specific requirements.
Contact us now and let’s discover the hidden transformation potential of your organization.