Before starting your digital transformation journey, do you know the main challenges of Digital Transformation

Before starting your digital transformation journey, do you know the main challenges of Digital Transformation

? To achieve a successful digital transformation, firms must mitigate and overcome a number of challenges (Albukhitan, 2020). Traditional processes, manual and time-consuming processes, may become obstacles once the firm adopts digital technologies. Employees with a strong relation to traditional processes may present a certain resistance to change. Change can challenge employees’ roles, job security, and more generally bring them out of their comfort zone. Companies may also feel too comfortable in their legacy business model and therefore feel no motivation to change. In that regard, firms producing with a limited amount of automation, and with a focus on repetitive manual tasks, may have seen more hurdles to their digital transformation. Parviainen (2017) shared a related point, arguing that digital transformation may create priority re-alignments within firms, with new priorities conflicting directly with legacy priorities. Parviainen et al. (2017) investigated some case studies where firms adopted digital technology and observed some bottlenecks.

? Many companies have failed to implement new IT systems because of previous generations’ knowledge management systems. They have failed because they didn’t manage to get the organization over the previous systems used. Firms failed because they failed to change mindsets and processes oriented towards the digital or build culture fostering change in the firm. Firms failed also because they didn’t have an overall digital strategy and didn’t have a long-term plan for their digital technology implementation.

? Digital transformation may also be challenged by inflexible company structures, as the process requires changes from technologies to business models. Strong hierarchical structures will obstruct the changes related to digital transformation, as these may challenge those structures and the inherent power dynamics (Albukhitan, 2020). These barriers were well described by Hunter et al. (2020) when investigating digital transformation within the construction industry. The authors observed a firm at the early stages of a large digital transformation project. The firm was setting out to implement several digital marketing-related investments, restructure its organization, and develop a vision and mission statement around its digital transformation. The authors observed some barriers and hurdles to digital transformation, including skepticism, a perceived lack of control, and perceived increased risk around the use of digital communication tools. They also observed a lack of mobilization of internal competencies for the implementation of digital transformation projects, misalignment of formal roles and competencies, friction in bureaucratic administrative structures of the firm causing inefficiencies, and friction caused by information gatekeeping by individuals leading to inefficiencies.

? Large investments may be necessary to a digital transformation, and therefore limited budgets may obstruct the transformation. Introducing technology alone is not sufficient to lead a digital transformation, and a lack of appropriate knowledge and competencies for integrating the technology can challenge the success of the transformation (Albukhitan, 2020). Firms will need to hire new competencies to manage digital technologies and change (Matthyssens, 2019; Roblek et al., 2016). In their article, Roblek et al. (2016) explain that there could be resistance to changes in individuals’ mindsets and ways of working. They suggest that firms will need to increase the knowledge around the use of

digital technologies and adopt a “digital thinking” to manage the digitalization process. Digital transformations taking place in industries are expected to put pressure on the overall job landscape (Roblek et al., 2016). They will demand a certain restructuring of jobs within industries, creating more qualified positions while making the less qualified roles disappear. Digital transformation in the long term is expected to decrease the number of jobs, according to several authors (Hungerland et al., 2015; Ungerman et al., 2018).

? Digital transformations are forcing firms to break from their industries' traditional business models (Matthyssens, 2019). The digital mindset is different and requires a new way of understanding innovation and the acquisition of new capabilities. Digital innovation is not so much about the technological aspects, as it is about re-defining an industry, business models, and creating new customer outcomes. Matthyssens (2019) identified several challenges regarding achieving such digital innovation. First, the potential lack of an inquiring and non-traditional mindset and the difficulty of unlearning and sensemaking echo the suggestion made by Roblek (2016) that firms should develop new ways of working and a new mindset around digitalization. Additionally, companies’ inertia, caused by established strategic frames and routines, and learning myopia can also be challenging to a digital transition. To address these challenges, Matthyssens (2019) proposed that firms should adopt what he describes as the “IoT mindset” (Internet of Things mindset). This is achieved by addressing real-time and future needs in a perspective manner, doing continuous refreshing of products by updates using IoT-generated information, enabling recurring revenue (subscription model), providing personalized and context-driven customization of offerings, and coupling and leveraging other ecosystem partners for mutual benefit.

? According to Ghobakhloo (2018), another challenge for companies, beyond challenges regarding their capacity to innovate, is that Industry 4.0 will require new strategies, organizational models, and organization-wide changes in physical infrastructure, manufacturing operations and technologies, human resources, and management practices. According to the author, manufacturing firms might simply avoid undertaking a digital transformation out of fear of not owning all single technological resources and design principles of Industry 4.0. Therefore, companies need to draw an individual strategic roadmap before undertaking a digital transformation of their businesses, to better allocate

time and investments (Ghobakhloo, 2018). Industry 4.0 will also require the removal of functional silos, willingness to change, a supportive culture, and data transparency across entire value chains. However, according to Ghobakhloo (2018), this might be very difficult to implement in the short term for typical manufacturing industry networks given the required amount and depth of changes.

? Lastly, digital transformation brings new concerns and challenges related to cybersecurity, as the new technologies often connected to the internet can expose firms to new risks (Albukhitan, 2020). Many authors and studies bring out the same concern for cybersecurity-related risks as a hindrance to digital transformation or the use of digital technologies (Albukhitan, 2020; Kane et al., 2015; Strange and Zucchella, 2017). As an example, big data and data analytics may help firms to be more productive and to deliver better offerings to their customers, but they might also pose a risk for privacy, as data, including private data, becomes exchanged as a commodity (Strange and Zucchella, 2017).

? In summary, firms undergoing a digital transformation have to deal with multiple and varied challenges. These may come from the legacy structures of organizations in the industrial network, from individuals’ skepticism towards change or from inflexible organizational structures. The cost of entry stemming from initial investments for acquiring the resources may also act as a barrier. Digital transformation appears to also raise new concerns related to new risks or vulnerabilities that digital technologies are creating. These challenges seem to be found in many observations; however, they also seem to stem mostly from issues internal to the firm, not from their interactions and dealings with other firms in their industrial network. The literature has been less focused on the inter-organizational aspects of digital transformation and the challenges that may emerge from the interaction with other firms or other actors in the industrial network. It appears that by not investigating the phenomenon in the context of the industrial network, the literature may have developed a blind spot for other sources of challenges to organizations undertaking changes to create value from digital transformation.

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