What are the Main Barriers to Digital Transformation?

DXDirections

Many companies embrace the concept of digital transformation, but committing to a strategy and seeing it through is another story.

The fact is, most digital transformations fail. The companies that succeed have a few things in common, including a careful preliminary analysis of the risks, challenges and barriers to digital transformation.

In this post, we’ll look at some of the main barriers we’ve uncovered and talk about ways to overcome them.

Table of Contents

What is Digital Transformation?

Digital Transformation, sometimes called “digitization” or “digital adoption”, refers to the effort of an organization to utilize technology for the purpose of promoting innovation, creating value, and elevating business efficiency. It can deliver much better business models and business culture.

These improvements all look great on paper, and most people can easily see the benefits at first glance, but the truth is that implementing digital transformation can prove difficult.

The Point: If it were easy, everyone would do it. But not everyone does, and there is a reason for that.

Barriers to Implementing Digital Transformation

If the overall outcome of instituting digital transformation is to improve the overall performance across a business, why isn’t it sweeping over all organizational operations? What are the challenges that businesses face when they adopt the goal of digitizing?

A 2017 study found that only about 60% of industries were initiating digital transformation. By 2020, about 27% of US companies had still not launched digitization.

But even so, at least half of American businesses reported that they see the implementation of digital tech in their future. But that’s the future – what about today?

Here are some of the main barriers when it comes to moving forward with a plan focused on digitization.

1. Lack of Understanding

There are differing understandings of what “digital transformation” means. Some people confuse the term with other technology sectors or initiatives.

If you believe that “transformation” means something to do with updated software or different ways of storing information (think “in the cloud” or in an app on a phone) – then you are wrong.  

While using cloud technology may be a big part of the equation, real transformation has to do with using technology to reconstruct and reimagine legacy business models.

Think “Artificial Intelligence” (AI) and “Internet of Things” (IoT). Think “Robots,” or more accurately when it comes to digitization, “Robotic Process Automation” (RPA). AI, IoT, data analytics, and RPA are fundamental concepts in digital transformation.

The idea is to create unique digital channels and innovative business tools (such as ERP), to make processes and systems automatic. The purpose can also be to access new income/revenue streams.

Digital transformation is not one-size fits all. It can look different depending on the industry it is in. Governments, commerce, and manufacturing are all going to have nuances in the kinds of digital strategies that would work.

THE POINT: Digital Transformation is truly a transformation in the fundamental ways that something is achieved; it’s not just new apps or software.

If organizational leadership is operating from a place where there is confusion around the very definition of the change, it’s hard to implement that change. Then – the change doesn’t happen.

2. Absence of Resources Strategy

Digital Transformation takes real resources to prepare and implement. Serious resources.

The people in the organization who both want to establish digitization are often the same ones who can’t move the needle to get the changes made.

These are the people who want to see less resources being spent – they recognize that digital transformation will save money (or make more money via profit).

But, at the same time, we are talking about a concept that is very expensive to create or implement. And so, businesses put off making the transformative change and keep things status quo.

To work, digital transformation has to be embraced as a business decision with long-range gain. Those with an eye toward the organization’s financial bottom line are not usually the ones who have the technological expertise to kick off such a large-scale change.

TIP: It can be useful for organizations to identify and hire partners from the outside. These are the people who have the experience and expertise to be able to deliver a plan, and implement it on behalf of the organization.

3. Lack of Change Management (when it comes to the people)

Even when everyone agrees on the definition of digital transformation, and even when the right resources have been allocated to it, it can be difficult to see the changes all the way through.

This is because of that old truth that people do not like change. And, digital transformation is a big change.

In an organization, the biggest changes are made by the biggest players in the business: the bosses.

But the people who have to work day-in and day-out with the selected changes are the rank and file employees. These are the worker bees. Leadership has to work hard to effectively communicate the whys of the change – why it benefits the organization and helps the team overall.

Workers will have to learn new processes, new ways of working, and shift their work lives when an organization launches a strategic digital transformation.

A smart, clear campaign for the change is needed to deliver the messaging necessary to persuade the workforce to embrace the proposed changes – or at least to calm fears. Read on for the specific fear many experience when considering digital transformation.

THE POINT: And, it has to be said: sometimes people fear digital transformation because they fear it will lead to downsizing. If a robot can do a job, who is the person who may lose that job?

Change management is done right by taking the time to really listen to their employees, evaluate their concerns, and address them truthfully.

4. Lack of Change Management (when it comes to the work)

As exciting as digital transformation can be, and how modern it feels to embrace something that once seemed futuristic, sometimes it’s scary. Is the company really ready to trust its day-to-day work, processes, and even actual decisions to Artificial Intelligence? To robots?

Thoughtful business analysis has to be done to figure out the benefits, the challenges, and the risks of digital transformation.

THE POINT: While digitizing can feel innovative, it can also feel overwhelming. Managing the changes that the process brings is critical.

5. Lack of Digestible Steps

Some businesses excitedly commit whole-heartedly to digital transformation. They do so with such gusto that they quickly realize they have bit off more than they can chew.

Thoughtful initiation and utilization of digitization is an expensive effort. Done right, it’s also a time-consuming effort.

But, by taking it step-by-step, risks are minimized and the company has a better shot at success. Testing the transformation as they go allows companies the opportunity to circle back and correct any failures or disappointments, and incrementally improve on it.

6. Shortage of IT Skills within the Org

Some businesses, especially small ones, that have reached a level of success where digital transformation tools might make sense sometimes simply don’t have the in-house Information Technology talent to address it.

This could be because the budget simply doesn’t allow it, or it could stem from a lack of talent due to a labor deficit.

As more industries embrace technologies in general, the tech labor force is being tapped, and there are less workers available to smaller businesses.

This hinders digital transformation because skilled IT workers are a critical component. They may not be actually responsible for the transformation itself, but they are at least involved in basic troubleshooting, setting up systems, hooking up tech, and more.

TIP: In the same way that businesses can harness outside help to identify and implement digitization options, companies can utilize an outside IT firm or on-call IT workers for when support is needed.

7. Over-commitment to Current Cultural Practices (Read: Cultural Rigidity)

Rigid approaches to the “way we have always done things” can and does impede progress to the implementation of digital transformation.

While we experience big changes in the world, these changes may not translate into actual change in the workplace.

It’s necessary for both employers and employees to accept an open posture to workplace practice changes (much like what we’ve seen with the broader acceptance of telework) in order to establish the new tools that are part of digitizing.

THE POINT: Businesses unable to “loosen up” and think in new ways are unlikely to be able to pivot.

8. Not Knowing Your Customers’ Expectations

Over time, as technology infiltrates every part of our lives, we begin to expect that things will continually improve, then improve again, perhaps forever.

But, the truth is that expectations for improvement vary. For example, one person may not care if their mobile phone ever has more capacity, is upgraded, or has more advanced features, but still care very much about continual improvement of their car.

Instead of progressing forward automatically, businesses should take the time to engage with their customers to see if there is a true desire for something new.

Engagement like this for the purpose of digital transformation informs a company of what direction to proceed in and has the added bonus of potentially producing information about what the competition is developing.

9. Failure to Manage Data

Businesses gather data – a lot of data. And, this is a priceless piece of the digital transformation puzzle.

Customer data provides the nuanced and invaluable information related to what customers desire, what they want to do and how they want to do it, what they want to see in the future, and so much more.

Attention to data management can improve the implementation and success of digitization. It’s a difficult road to (and through) implementation if data cannot be efficiently sorted, consolidated, captured, retrieved, deleted.

Setting yourself up for success early by developing strong data management processes is key.

10. Presence of Financial Constraints

Budgets are an absolute must for any digital transformation initiative. Developing a budget is one thing, and sticking to it is another.

Strategize on the budget, and think ahead on a host of challenges that may arise both in the short and in the long-term.

Know where the pain points are for increases that would make or break the work: labor cost increases, tech component increases, etc.

Determine before beginning how much budget expansion is acceptable, and how much would mean abandoning or postponing your efforts.

TIP: Expect the possibility that an initiative could go over-budget. Know before you begin if you are committed to implementation even if the work goes over the budget line.

The Bottom Line on Barriers to Digital Transformation

We know there are barriers to digital transformation – real ones. Considering these barriers before beginning, planning carefully, and figuring out work-arounds are all going to be part of creating a workable strategy toward digitization.

Barriers can be managed by taking the time to:

  • Research the realistic benefits of digitizing
  • Consider the true restraints you may come up against
  • Put processes in place to manage implementation
  • Learn as much as you can about what your customers want
  • Make certain everyone on your team agrees on the meaning of digital transformation
  • Think through resources—do you have the right people, the right budget, the right space to transform digitally?
  • Determine if you and those around you are willing to change your culture. Are you open to both the new, exciting changes and to the sometimes-daunting challenges that will arise?

FINAL WORD: There are true barriers to digital transformation. They can strike down the best of intentions and halt progress. Those who take the time to do the above are those who have the best shot of winning the benefits of digital transformation.