In the first half of this series, Major Roadblocks to Digital Transformation: Part 1, we outlined three major inhibitors that companies might come across on their journey towards digital transformation. We now explore the next set of barriers that can obstruct transformation as organizations must understand the roadblocks that lie ahead and then develop strategies to address them.
Top Roadblocks to Digital Transformation, continued
4. Resistance to Change
People are one of the six core business enablers, therefore companies cannot attain digital maturity without building and retaining a digitally-enabled, data-driven, collaborative, innovative and customer-centric workforce. This encapsulates one of the top challenges that undermines digitalization initiatives according to 1 in 4 business leaders1; company culture that resists digitally induced change.
1. The 2020 State of Digital Transformation (Altimeter)
As per McKinsey, one major reason programs fail to achieve their goals is due to employee resistance and lack of management support. Digital transformation requires an overall change to people’s jobs, their objectives, their strategies, their supervisors and their roles. Imposing these changes can be difficult and is a reason why companies put off digital transformation. Sometimes if the digital transformation initiative starts at the C-level, stakeholders might not be aware of the full scope of the new technology and are reluctant to implement it. A failure to convince stakeholders to make digital transformation a topmost priority will hold back even the best-laid digital transformation plans.
Visual: Culture Enhancement Initiatives currently in place
Only 23% of early-stage transformation companies have initiatives in place to bolster risk-taking, agility and collaboration, which are three foundational attributes of a digital culture (along with customer centricity and data-driven decision making). When it comes to initiatives to develop digital acumen, the number drops to 14%. The competitive advantage of companies providing strong educational development is significant. A study by the National Center on the Educational Quality of the Workforce (EQW) found that a 10% increase in educational development produced an 8.6% gain in productivity.
It will be intensely difficult to successfully continue on your journey towards digital business transformation without putting in place a strong foundation for culture and aligning employees to your digital vision. However, creating a digital culture is not easy. It is certainly a prolonged endeavor that requires perseverance and constant vigilance.
The front-runners of digital transformation of an organization must clearly articulate the digital vision to their employees and make them understand how the company is going to operate differently in the future where the previous assumptions may no longer be valid. The strategy should be to engage, empower and inspire employees top-down to drive a digital-first culture. In fact, leaders will have to live the values that they wish to inculcate in their organizations. Efforts should be made to increase transparency and improve collaboration across hierarchies.
Companies must invest in the right digital skills for the employees and should also design new digital performance systems which enable them to reward positive digital-first behaviors.
5. Lack of State-of-the-Art Infrastructure
Research indicates that outdated legacy systems (and processes) is the most significant barrier to digital transformation. Although 9 out of 10 senior members of IT Ops and DevOps teams believe that IT infrastructure is critical to achieving digital transformation, nearly 60% of companies have not yet completely modernized their IT core in order to make the transition and stay competitive. 18% of companies are currently operating based on outdated systems and applications while another 18% are trapped under hybrid infrastructures, alongside the risks these generate for the entire business.
Visual: IT Modernization Maturity
The truth is, over the past two decades, companies have been building applications with longevity being the primary goal. But the approach of collecting an exhaustive list of business and functional requirements in order to architect and code once and for all is over. In fact, this 20-year old habit has now made a complete circle and come back to haunt those who underestimated the pace of innovation. In today’s flourishing, platform-based digital economy, legacy architectures’ inability to ‘platform out’ can perpetually trap companies in a struggle against their very own self.
The overcome this digital transformation challenge, businesses should try to understand what IT assets are already in use and what value they deliver. Instead of attempting to automate everything and completely overhauling the legacy systems (as a few of them are mission-critical and much required to ensure business continuity), businesses should work out the best approach for operating today and optimizing for tomorrow. Automating the infrastructure is a journey which should be undertaken while keeping the business objectives and the current digital maturity level in mind. Businesses should work in partnership with experts in digital transformation to deploy agile delivery techniques and spend the IT budget intelligently, on technology that delivers speed-to-value while making the best of existing assets. They must set up modernized backend structure and be prepared for any disasters that may happen with the new system. This will surely help companies to keep pace with customer expectations and drive operational efficiency.
6. Ineffective Use of Data
Successful digital transformation relies on efficient handling of the data available. Organizations these days keep track of every action, event, or transaction along with other important attributes describing who did what, where they did it, and several other pieces of information. However, these workflows are scattered across different systems that do not all link together perfectly, thus creating silos of information and an incomplete picture of the business’ operations. The amount of data to be collected and analyzed is enormous and misuse would result in failure of the process. Therefore, it is critical to ensure that data is accurate, and is available in the right format.
7. Lack of Digital Skills
The labor market is currently facing a significant shortage of digital skills, which directly impacts the advancement of digitalization efforts, according to 6 out of 10 business leaders. The skills shortage has become evident in both the strategic and the executional capacities of digital transformations. In terms of strategic capacity, 58% of business leaders claim that their IT executives possess the business-related knowledge and skills required to plan for and oversee digitalization initiatives. Unfortunately, only 27% of IT executives agree that their business executives possess the technology knowledge and skills required to lead digital transformations.
Visual: IT and Business Views on Skills Gap
In terms of executional capacity, companies face a significant gap in specialized skill domains. Only 17% of business leaders are confident their workforce is equipped with the required skills to successfully carry out digital transformations. In high-demand digital domains such as big data analytics, mobile technologies and Internet of Things (IoT), the shortages approach 60%.
The key to conquering skills shortage lies in upskilling staff where possible and investing in the correct resources with experience in digital technologies, customer experience, big data and analytics. Instead of replacing all the current IT employees, companies should aim at developing in-house competence by training employees. A comprehensive plan including both equipping current employees with modern skills, coupled with a strong hiring strategy for recruiting new talent is the need of the hour.
Are People a Major Challenge towards Digital Transformation?
It seems easy to replicate the technology, organizational structure and workflow of an ideal digital organization on paper. It can look as simple as updating a software version, however it is not. The technology seems be straightforward, but people are not. Any transformation that creates new opportunity for employees, or threatens them with losing their jobs, power, etc. will certainly face some resistance. Careful planning and ensuring that stakeholders in all parts of an organization are working towards common goals.
Part of any change management exercise is empowerment: training people and making sure they see and understand the benefits properly.