02 May 2018 / Business Trends
5 Obstacles Standing in the Way of Digital Transformation
In 2000, then General Electric CEO Jack Welch said: “If the rate of change on the outside exceeds the rate of change on the inside, the end is near.” His words have become an ominous warning for all companies withstanding modernization and, in recent years, they have come to be frequently associated with digital transformation.
Innosight strategy research firm estimated that the average lifespan of a typical company in the US has decreased from 61 years in 1958 to just 18 years at present. At the current churn rate, 75% of the current S&P 500 companies will be replaced by 2027.
The primary factor behind this trend is disruption: new technologies driving innovative business models have led to the rise of category disruptors such as Uber, Netflix and Amazon which have taken over considerable market shares and driven out old category leaders.
Digital transformation is seen as a way for long standing companies to reinvent themselves and, by bringing their business processes up to present day standards, be able to cope with new waves of disruption and young agile competitors born in the digital age.
While the push towards digitalization has seen a massive growth on a global scale in recent years, with $1.1 trillion spent in 2017 alone and IDC forecasting it will reach $2.1 trillion by 2021, companies are frequently faced with obstacles in the implementation of their digital transformation agendas. Here are the most frequent of these:
Lack of clarity
It’s no big secret that we’re now living in the age of the customer. Big Data and AI are making services ever more closely tailored to individual profiles which leads to customers expecting the same level of service from all the products they purchase.
For companies to succeed in providing this degree of service they first have to understand their clients’ digital needs, set objectives based on them and then execute them. When organizations fail to do this, it is often because they lacked a clear vision of what they want to be when they achieve their digitalization goals.
This lack of clarity has proven to be one of the main challenges digital transformation faces. Companies that have fully embraced digitalization can often be plagued by initiatives that, while following the trend and showing enthusiasm, lack measurable outcomes. It is essential therefore that businesses don’t think of digital transformation as a panacea for all organizational woes and instead build strategies and initiatives that offer practical solutions and tangible results.
When a company has been running in a certain way in the last twenty or a hundred years, digitalization efforts inevitably come up against the specter of legacy systems. This can refer to the IT infrastructure of a company which has become outdated, but also to the core values of an organization. Building digital transformation on top of previously existent premises, after all, is likely to lead to failure.
Old IT infrastructure often does not have the capacity to adapt to new technologies such as Internet of Things (IoT) or AI, which is why companies need to first modernize legacy systems and build a solid foundation for a digital platform that will then be capable of incorporating these new elements.
Organizational resistance to change
Going hand in hand with legacy systems, an overall fear of change and the desire to maintain the status quo can make the journey to digital transformation a strenuous one. Employees are reluctant to adopt new technologies or implement new ways of doing things because they worry they will not be up to the task, that things were done just fine the old way and that, inevitably, they will be put in a precarious situation where both their job and their financial security will be at risk if they cannot adapt to the new system.
Employees have to understand the urgent need for digital transformation which addresses very present market demands and whose success or failure can ultimately mean the survival or the downfall of a company. The choice is a simple one: do you want to continue working in the same way for the next two years and be out of job in three or face the challenges of modernization now and secure your jobs for the next decade?
In a report published by technology solutions company SoftServe, 55% of the organizations surveyed stated security was the most difficult hurdle to overcome when implementing digitalization. The cause for this is easy to guess: with cyberattacks becoming ever more frequent and new disastrous breaches making headlines every day, organizations venturing out into the field of cybersecurity for the first time may feel that the stakes are high.
If new business processes fail to produce desired outcomes, they can simply be restructured or replaced, but in the case of security measures they can have fatal results from ransomware attacks and massive data leaks to noncompliance with data protection regulations and the steep fines associated with it.
Siloed organizational structures
When it comes to digital transformation cross-departmental and multi-functional cooperation are crucial to meeting goals. Organizational silos which encourage compartmentalization and limit information sharing, therefore hinder digitalization efforts.
Through its very nature, digital transformation impacts every aspect of a business, both at company and department level. It also implies a close collaboration between IT personnel and business professionals of various specializations that, through their combined efforts, can find the suitable solutions that will efficiently digitize business processes.