No organization invests in a digital strategy and new technology expecting to fail, but the sobering truth is that 70% of digital transformations fall short of their goals. That’s according to data from Boston Consulting Group, a firm that works with companies around the world on their digital transformations.
Knowing the digital transformation challenges that you may face on your journey can help you prepare for obstacles and create a plan to overcome them. Equipped with this kind of knowledge, you’ll increase the chances of your company’s success. So if you’re curious about why digital transformation fails, read on.
7 Digital Transformation Challenges Every Company Needs to Be Prepared for
Neglecting to reskill or upskill employees
Once an organization has implemented a major technological change, the challenge becomes maintaining and optimizing it. This requires reskilling or upskilling your employees. Take cloud computing, for example. For the 2021 Open Source Jobs Report, cloud and container technologies came out on top as the hottest skillset of the year, with 46% of hiring managers and developers selecting it. It surpassed Linux development and administration for the first time since the Jobs Report began.
Why the sudden spike in cloud technology skills? Because there’s been a recent surge in cloud adoption, companies now need technologists who can optimize that infrastructure. Cloud Academy surveyed 100 technology leaders between April and May 2021, and 95% said they plan to invest more in the cloud this year compared to the last, and 81% will be investing more in developing tech skills. Upskilling existing employees is the most commonly chosen resource, with 75% of IT leaders saying it will be key to achieving their tech goals this year.
Teaching employees new skills is an investment, but the payoff can be worth it. According to the 2020 Future of Jobs report, 66% of employers expect an ROI on upskilling and reskilling within one year. It’s also worth looking into free online education. Amazon, for example, offers free online courses, pledging to train 29 million people on cloud computing by 2025.
Comparatively, upskilling or reskilling is less expensive than hiring. But that’s not to say that new hires don’t have an important role to play in a company’s digital transformation, as we’ll see in the next section.
Failing to hire top talent
In a McKinsey survey, about 80% of tech leaders reported “finding the right talent is the greatest challenge they face in their transformations.” And 51% of IT leaders from the Cloud Academy survey said they’ll need to hire new talent to achieve their tech goals.
In the age of The Great Resignation, hiring top talent becomes even more of a challenge than before. Candidates now have more options than ever and are in high demand, which means they have the luxury of being selective. Companies would do well to rethink their employer branding and create a strategy for attracting and hiring top technologists that will help lead them to a successful digital transformation.
Data security concerns
With new technology comes new data security concerns, especially when plans are rushed. One mistake some companies make is that they adopt a new tech tool first and then worry about cybersecurity later—often after a breach has happened.
CyberGRX and Ponemon surveyed 883 IT security professionals and C-suite executives and found that 82% believe their organizations had at least one data breach because of digital transformation.
What’s driving the vulnerabilities?
- Haste. The IT professionals surveyed by Ponemon think it’s the rush to produce apps and the increased use of Shadow IT.
- Cloud migration. Meanwhile, the C-Suite executives in the Ponemon survey think it’s the increased cloud migration that’s led to data breaches. It’s no coincidence that as cloud adoption increases, so too do data security concerns. Cloud computing has long been criticized for its higher cybersecurity risks compared to on-premise options.
- Remote work. Working from home (or anywhere except for the office) has many advantages, but it also draws more security risks. For one, company-issued equipment taken off-premises can be more vulnerable. Also, it’s tougher to ensure a secure internet connection at each employee’s home (or coffee shop, coworking space, etc.). There tends to be less oversight overall, lending itself to more potential vulnerabilities.
Here’s a bonus tip: For employees working remotely, have them install the Krisp noise-cancellation app. With Krisp, they can ensure that all of their online meetings are free of distracting sounds and maintain personal privacy wherever they’re working from. On top of that, all audio is processed and stored on the individual’s device, not in the cloud, so you can ensure privacy.
Lack of clearly defined goals and a digital strategy
It happens time and again: Your company adopts the latest technology—a new applicant tracking system (ATS) or promising cloud platform—but once the initial excitement wanes, it doesn’t get fully integrated into your workflows, hardly anyone uses it (or knows how to), and ultimately, it fails to transform your business in the way you’d hoped.
One of the main reasons why digital transformation fails is that the organization lacks clearly defined goals (the outcomes the transformation will bring) and a detailed digital strategy (the roadmap to get to those outcomes). Without both of these, no amount of money invested in tech tools can save an organization. At best, there will be only minimal adoption. And at worst, the tools will gather dust, and the money will have been wasted.
Lack of employee buy-in
Along your journey to leveraging technology to improve business processes, you might meet pushback from leadership and employees. Lack of employee buy-in can kill a digital transformation.
What can you do to garner excitement and support for your digital strategy?
- Show how it makes their jobs easier. When a new tool is thrust upon the workforce without much explanation of the value it could add, it ends up feeling like a burden. Instead, spend time preparing your employees by showing them how this new technology will lighten their workload and make processes more efficient.
- Show how it helps the business. Additionally, communicate how the technology ties into your business mission and values.
- Train them on how to use the new tech tools. Most importantly, once you begin integrating the tech tool, be sure to provide sufficient training to your employees to ensure wholehearted adoption.
- Listen to their feedback. And lastly, once you’ve trained your employees on the technology, keep surveying them regularly to get their feedback. Nothing is set in stone. If you find that the tool isn’t serving its purpose, it’s worth listening to your employees on how you can make tweaks so that your digital transformation is a success.
Related to a lack of employee buy-in is misaligned leadership. When employees see that their leadership is scattered when it comes to the digital transformation efforts, they’ll likely lose faith in the whole idea altogether. Another reason why digital transformations fail is that the leadership team hasn’t gotten on the same page about strategy and goals.
As Rodney Zemmel, global leader of McKinsey Digital, says on “The McKinsey Podcast”: “A common failure mode … is a chief executive saying, ‘We’re going to go digital,’ and then making public statements about digital strategy. Then every person on their leadership team creates their own digital road map. What you end up with, six months or a year later, are many digital pilot projects across the organization.”
Instead, Zemmel says, the CEO should work on getting the entire leadership team to communicate with each other and ensure they have the same priorities. “And then focus on having a talent and capability road map that is as detailed as their technology road map,” he says.
Moving too slowly/being too rigid
Agile methodology is highly praised and commonly used in engineering teams worldwide. But the agile mindset is something that every organization undergoing digital transformation would benefit from adopting.Technology changes fast, as does the market. Your organization might have clearly defined goals, a solid digital strategy, and the resources to carry it out—but if you move too slowly and fail to adapt to changes, your digital transformation efforts will wither on the vine.
McKinsey research found that companies that moved the fastest on digital had nearly twice the revenue growth as those that played it safe “with average reactions to digital competition.”
The McKinsey authors give the example of Tesla, stating that in 2014, competitors could have bought the electric vehicle maker for $4 billion. But because they didn’t, by 2018, competing automakers had spent more than $20 billion on sensor technologies and research and development just trying to keep up with Tesla.
Working on the culture and processes within your organization that can help it become more flexible and nimble will better prepare you for digital transformation success.
Is Your Organization Prepared to Overcome These Common Digital Transformation Challenges?
Now that you know why digital transformation fails for some companies, you’re better prepared to meet with your technologists and leadership team to create a plan for addressing these potential challenges. It is this kind of knowledge and preparation that will hopefully push you into the 30% that succeed at digital transformation.