What is Digital Transformation (DX)? Pros and Cons and Challenges and How to face them?

Digital transformation (DX) is the reworking of the products, processes and strategies within an organization by leveraging current technologies.

As such, digital transformation requires an examination and reinvention of most, if not all areas within an organization, from its supply chain and workflow, to its employee skill sets and board-level discussions, to its customer interactions and its value to stakeholders.

Digital transformation helps an organization to keep pace with emerging customer demands now and, if sustained, in the future. Digital transformation enables an organization to better compete in an economic landscape that's constantly changing as technology evolves. To that end, transformation is necessary for any business, nonprofit or institution that seeks to survive into the future.

Key technologies

Technology drives the need for digital transformation and supports the digitization of an organization. Moreover, there is no single application or technology that enables digital transformation.

There are multiple key processes an organization generally must have to transform. Cloud computing, for example, grants an organization quicker access to its needed software, new functionalities and updates, along with data storage, and enables it to be nimble enough to transform.

Commoditized information technology enables an organization to focus its investments of talent and research and development dollars on customized solutions that support its unique requirements and the processes that differentiate it in the marketplace.

Meanwhile, mobile platforms enable work to happen wherever and whenever. And robust data programs that fuel machine learning and artificial intelligence technologies provide organizations with insights to drive more accurate decisions around sales, marketing, product development and other strategic areas.

Other technologies that drive business transformation include blockchain, augmented reality and virtual reality, social media, and the internet of things (IoT).

Digital transformation examples

Many industries and individual organizations are either in the midst of transformation projects, are plotting digital transformation strategies or are struggling with the concept.

Some have already undergone digitization and business transformation. Some experts point to General Electric as an example. GE expanded from its manufacturing roots to services such as its IoT platform, which enables continuous monitoring and the optimization of machines.

Challenges of digital transformation

Many organizations still struggle with older, so-called legacy technologies that cannot easily be replaced. Many organizations are unable, or unwilling, to allocate the money to replace old technologies. Many also have a hard time finding qualified leadership at the executive and board level to guide such initiatives; many cannot find digital and IT staffers with the right combination of industry knowledge and the ability to execute on transformational building-block projects.

Even organizations with the right resources face challenges in transforming to new processes and products.They must change multiple discreet pieces of their organizations, projects that require adequate funding and management oversight to ensure success. For example, an organization might need to implement modern supply chain management technologies at the same time it needs to adopt sensors, machine learning and other internet of things capabilities to derive the required insight into how customers use its products. Leaders need to create an organizational culture where continual improvements happen and where stakeholders are open to ongoing transformation. Everyone must be willing to identify and abandon dated and ineffective processes and replace them with something better.

Without such attention to these sweeping requirements, an organization could end up with modern technologies that enable more efficient or effective processes or procedures (such as ordering raw materials, taking inventories or handling payments) without truly transforming how the organization operates, what it has to offer its stakeholders and what value it produces for all involved.

The top five challenges they listed were:

• Employee Pushback
• Lack of Expertise to Lead Digitization Initiatives
• Organizational Structure
• Lack of Overall Digitization Strategy
• Limited Budget

The most common issues faced were due to internal factors.

The challenges depend on the company’s underlying culture, primary customer challenges, existing digital presence, and the willingness of senior leadership to make significant long term strategic investments in the business to position it for future competitiveness. In many traditional healthcare companies, for example, there is much resistance to change partially due to patient demographics and reliance on the lagging institutional channel. Some further challenges are as follows:

Lack of strategic leaders who can create a clear mission and vision for the digital transformation effort. They can accomplish some near term objectives, but the medium and long term objectives are obscure due to lack of vision. If the goal cannot be articulated, you will never get there by chance. It has to be deliberate.

In the overall strategy, there is not a proper “call to action” so to speak, meaning that leadership does not fully grasp the importance of the digital transformation effort.

Lack of understanding or unwillingness to accept growing customer preferences for digital. This is related to my healthcare comment above, but can apply in many other scenarios.

Staff and talent gaps to execute against the digital strategy. If there is the correct vision, this will fail in execution unless there is the proper staffing in place to support it.

Technology architecture unable to support digital goals and/or lack of funding to transform current systems and processes to be well positioned for the future. This can be related to leadership, but can also be related to the current financial position of the organization in question.

The challenges of achieving digital transformation are typically the most painful or spread in large corporations, with a large customer base, and a large chunk of employees who work behind screens. Digital transformation challenges typically scale upwards as these characteristics grow.

Having a vision of the future is often lacking, and can prevent digital transformation entirely. The goal/idea of transforming business processes end-to-end is not sustainable as our world rapidly becomes more and more digital. Today’s digital world demands that business leaders shift their focus to projects that help deliver convenient, engaging customer experiences across digital channels, as well as being able to transform internal systems and processes to become automated, mobile, and modern.

Adapting to the fragmentation of business is critical in today’s environment. Being overwhelmed with multiple departments/outlets of a company, and their systems they use, especially as they age, is becoming an increasing problem. Companies have many different softwares/processes for these individual fragments, such as: dealing with clients, attempting to make sales, marketing, managing HR, etc. The IT and software systems of the past have aged poorly, and being able to automate time-wasting tasks such as approving purchase orders, putting a customer’s contact information into a database, or even trying to contact an IT employee about a lost password. Imagine it like having a ton of different remotes on your coffee table that have different functionalities, which are all confusing, versus having one, centralized, universal remote that controls all systems. This problem compounds as the endpoints of business increase, people are doing more and more work from tablets, phones, etc.

Cost/Time/Effort. The concept of transforming the entire functionality of one’s company, especially is the company is big, old, rooted in its culture (as mentioned above) is far too overwhelming for many executives to even think about. Changing a company and its processes to be as slick and new-age as a Google, or other cutting edge software companies is ideal in vision, but arduous to accomplish in practice. Replacing the central IT systems of a company is expensive, time consuming, and slows down business in the mean time.

This second and third obstacles, having fragmented systems that are painful to replace, are the two major problems of Digital Transformation are what needs to be addressed.

DX is the need of the hour and every organization is moving speedily towards it to embrace it and move ahead in the technology.

Before moving ahead in any technology, both its, pros as well as cons need to be understood minutely. This has proved to a big change in the digital era and is still making remarkable change in every industry.

Some of the biggest challenges or one can say why some digital transformation initiatives fail are due to some reasons which may be like:

-Process fragmentation

-Lack of Vision

-Asking wrong questions

-Using Redundant technologies

-Lack of Skilled professionals

One must get an answer to the following questions before moving towards digital transformation:

-What business are we in today?

-What new opportunities are on offer by digital disruption?

-What capabilities do you need to realize the new opportunities?

If you get an answer to these questions, you are on right track and the above mentioned could be some of the challenges while moving into Digital Transformation.

1. Complexity

Most organizations have adopted the necessary technology at each new wave of tech improvements. You have laptops, ERP, CRM, and much more. Each department may use a different system for analytics, project management, prototyping, as well as other industry-specific digital tools.

But this causes complexity. Multiple systems have been layered on top of each other inadvertently reducing productivity. Keeping track of and logging into a different system for each and every business function overwhelms employees.

To overcome this digital transformation challenge, find ways to simplify and streamline your digital systems. This doesn’t necessarily mean getting rid of existing systems, but it definitely means gluing your systems together.

2. Digital Adoption

Bringing on new tools means onboarding your employees. The digital transformation challenge here is emphasizing the second part of this equation: the employee. Successful digital transformation effort puts the human experience in the center of all processes.

Experience successful digital transformation.

The decision to invest in a new tool is not one that was made by accident. You analyzed the data and decided that this was the best move for your business — to increase employee productivity or drive customer retention. Without true adoption or employee proficiency, you are failing to maximize the potential of your digital assets.

Digital tools tend to vary by interface, functions, features, and usage. It can not be assumed that employees will pick up the necessary skills based on experience with similar platforms. Training is a critical part of digital migration or implementation, as is ongoing support. Build Digital Adoption Platform (DAP) and use to accelerate onboarding and provide ongoing, contextual guidance directly on the application.  

3. Cultural changes

Digital transformation is more than just digitizing documents. This digital transformation challenge is about transforming the way you work and live to be digital first. Employees that used to spend a lot of time with customers, may now spend a lot of time with computers, and other ways digital transformation changes the culture of a workplace: collaborative working, self-service, transparency, etc. The natural human resistance to change is a challenge.

Culturally, employees must rethink their role. Someone who once input data, might now be more valuable as a data analyst.

4. Pace

Another digital transformation challenge is keeping up with latest technologies, and on the other side of the coin, keeping up the number of transformations occurring internally. Today’s new challenges are in AI, ML, and IoT: how do we leverage those? The solution is staying one step ahead.

Anticipate automation by creating new roles where technology complements human work rather than simply replacing it. Rather than displace jobs, these new tools should pioneer a way to engage individuals and push collaboration with technology further.

Dream big. Create portfolios of potential ideas for the future state of your customer journey. This should allow your company to create and evaluate business hypotheses for new technologies and test them via customer research.

5. Competing priorities

When it comes to taking digital transformation steps, every department could benefit. You can only pursue so many initiatives at once without spreading your resources and focus too thin. The challenge is choosing which ones to bring to life. Remember, digital transformation is a marathon, not a sprint.

A good place to start is by studying the market to understand your customers’ unmet needs and where your competitors are failing to satisfy. This space is an opportunity to innovate and improve the customer experience through new technology.  

Staying on top of technological trends will also help you to gauge which ones are going to bring value to your business. This includes staying up to date on emerging technology as well as the relevant shifts in consumer behavior as it pertains to technology.

6. Security

Successful digital transformation requires a transformation of security as well. Some of the largest companies in the world have fell victim to cyber attacks. IP, personal information, and finances are at risk. In the digital world, contained enterprise networks of the past no longer exist. Security must be embedded directly into all applications.

Much like putting off an overdue doctor’s appointment, many companies choose to delay strengthening their security systems until it is too late. According to Gartner, through 2020, 99% of vulnerabilities exploited will continue to be ones known by security and IT professionals for at least one year. That means companies should first and foremost fix the vulnerabilities they know exist.

7. Defining Success

The productivity paradox, first articulated in the 1970’s, describes the phenomenon that despite the influx of computer technology, actual productivity was stagnant. If technology is supposed to make us more productive, why don’t we see gains in productivity? What studies have shown is that the way we measure productivity may be the problem.

Before setting out on your digital transformation journey, sit down and define precisely what you wish to see by way of transformative efforts.

Organizations must define what success is in digital transformation, but that alone is a huge challenge.

What exactly are the success metrics for digital transformation? How does a business know when they have reached digital maturity?