Roadblocks to Digital Transformation and Best Practices to Surmount Them
Digital transformation is a new concept, but it has sent disrupting shockwaves across the globe to validate its existence. Organizations globally are trying to empower themselves using digital technologies such as mobility, analytics, big data, cloud and more. According to a recent Digital Transformation Security Global Survey, executives are heavily investing in digital transformation and business analytics for getting tactical and practical advantages.
Amazon, Uber, Kindle, etc., are some of the digital masters who successfully leapfrogged and left their competitors far behind. Digital experts claim that businesses with advanced technologies are evidently generating 26% more profitability. The growth will be even bigger in the near future. A 2016 report of World Economic Forum (WEF) estimates that there will be 50 billion connected devices by 2020 generating more opportunities for internet of things, omni-channel analytics and big data.
Considering the aforementioned statistics and the digital advances, it is mission critical to use digital technologies and transform the modus operandi. However, brands are battling hard to restructure their processes. Besides a structured and planned approach, there are some critical adoption factors that must be considered for envisioning the transformation.
7 Roadblocks to Digital Transformation (DT)
Digitally modifying the business units and functions comes with challenges. According to Genpact, two third of transformation projects backfire because of poor management and strategic issues. Forbes echoes this survey mentioning that 84% of global companies fail at digital transformation.
Some of the common reasons why digital initiatives fail includes lack of openness, lack of cultural adaptability and love towards legacy systems to name a few.
Outlined below are some of the top challenges that hamper digital transformation:
Love towards legacy systems: It’s usual for people to resist change and when that involves reshaping more than decade old systems, where high investments were backed by strong conviction to make their existence appear as almost permanent. However, legacy systems have their own limitations. Moreover, they are rigid frameworks that make it impossible to leverage the potential of the new technological advancements. Hence, enterprises need to let their love go for the best. Nonetheless, there are many companies who have embraced newer technologies moving away from decades old infrastructure and observed drastic benefits. There is one big challenge here, which is moving confidential data secured in age old servers to cloud or public cloud networks, transforming from Capex to Opex models.
Neglecting the information security: One of the biggest weakness of Digital technologies is its vulnerability to external threats. Cyber incidents like intellectual property theft, eavesdropping are on the rise. It is estimated that banks in the Netherlands alone lose over 90 million Euros per year. Information security is a serious topic in many countries and there are several associated legal overheads (like Gramm-Leach-Bliley Act, HIPAA, etc.). Still, businesses continue to neglect information security as they remain under a misconception that transformation cannot take place along with security.
Poorly defined strategy: Digital business transformation projects require a focussed strategy and vision structured around complex business requirements. A focussed strategy in turn depends on collaborative efforts across levels.
Poor estimates: Transformation projects require a budget that closely supervises their return on investment at every level. However, many organizations fail to define a flexible budget that suits their digital transformation needs. Such budgets are generally kept as closely guarded secrets and hardly discussed with different departments. It is very important for the budgetary cycles to respond as per the critical changes taking place during the project.
Poor internal communication: The success of digital transformation depends heavily on good communication. Sometimes communication gaps become natural due to distributed and remote work environment. Poor communication hinders innovation and creates knowledge gaps between teams. This problem is significantly greater in those organizations where the top leadership is non digital. Good communication allows teams at different functions to collaborate effectively.
Lack of techniques for managing a change: Transformation is fundamentally a phenomenon to manage change and it doesn’t happen overnight just by adopting new age technologies. Understanding this notion is important as it is a permanent shift of moving from one era to another era. Digital masters believe that the biggest barrier to transformation is not technology, but rudimentary organizational values.
Lack of skilled resources: Transformation demands credible leadership and skilled resources. Many a times, top leadership and executives are insufficiently trained to deal with the never ending change management requirements. Also, the talent related to transformation are quite different and very scarce.
Digital Transformation – The Fourth Industrial Revolution
Imagine a smart manufacturing unit where everything from plant, microsystem and building to plug is interconnected - physically and virtually. It feeds upon predictive algorithms to optimize processes, innovate and develop a minimum viable product. Experts view this unprecedented usage of disruptive digital technologies for driving growth and delivering services as the Fourth Industrial Revolution.
Incredible Stories of Success
PriceWaterhouseCoopers (PwC), estimates that even industrial companies are spending over 4% percent of their income on transformative technologies. Experts also reiterate that, nearly 80% of companies will have an automated value chain that will increase their efficiency by 18%.
Certainly, digital transformation is making its way to every industry, but very few names appear before us when we think of this term. These are some masters of the digital world who have thrived in embracing the change:
Amazon: By demonstrating a higher degree of digital competence, Amazon showed us that how a startup can build new industry in just a few years of time. It transformed itself from a bookseller to a retailer of over 100 million different products. Across the globe Amazon generates 426 sales per day, which amounts to $37 million in just one day.
- Better understanding of the changing landscape.
- Robust infrastructure, including well established warehouse with controls.
- Better controls to deal with the consumer expectations.
- Effective usage of algorithms to understand the consumer behavior.
ITC: ITC, started an amazing digital initiative called e-Choupal program with a vision to link farmers via the internet. It was a big project that used mission critical engineering systems to provide services to 4 million farmers in 40,000 villages. Presently, It is helping farmers in getting a competitive price for their produce.
- Ambitious and planned approach
- Personalized marketing strategy based on distributed leadership.
- Vigilant performance measurement processes to access the progress.
- Digital platforms encompassing 6,500 centres.
- Strong focus on R&D based innovation.
Argos: The UK based retailer used an approach of constructive destruction to bring over the transformation. The retailer successfully digitized five of its brick and mortar stores in London. With this, Argos discovered new ways to reduce the path to purchase. The company website offers 30,000 products. In future, the organization is planning to further open 10 new stores to sell 40,000 products.
- Effective usage of interactive features and displays supporting the connected devices.
- Sustainable and secured API strategy to support digital retail initiatives.
- Reliance on Omni channel analytics.
- An ecosystem that supports 60 seconds collection
- Strong network of contact centers, mobile devices, web and digital marketing.
Starbucks: The Company was not a prominent digital expert few years back. However, there is something mysteriously powerful about its digital transformation drive which attracts us towards it. The coffee maker is using ground breaking digital tech to support the operations at 23,000 stores globally.
- Mobile channels to support 7 million mobile application users.
- Strategically placed mobile payment system that collects 10% of in-store payments.
- Unique digital capabilities to engage the user.
- Engaging content that gathered:
- 54 million Facebook fans
- 3.4 million Twitter fans
- 900,000 instagram followers
Asian Paints: The paint and coating manufacturer from India was highly successful in digitizing its business. The company began its digital initiative in 2000 by setting up an ERP based supply chain management system for. With this move, the manufacturer freed up its working capital. The organization also set up a Customer Relationship Management application. In 2010, Asian Paints went a step ahead for establishing a single corporate call center. The sales and collections team was separated for removing the operational inefficiencies and getting more visibility.
- Simple and intuitive interface of the application
- Planned and phased approach
- Strong reliance on training and development initiatives.
Which of these Digital Transformation Campaign is Your Favorite?
Best Practices Followed by the Digital Masters
Successful digital masters have adjusted themselves to change by closely observing their needs and making delicate calibrations. The following are some of the best practices they follow:
Comprehensive strategy: Ensure that no dirt is dished out when it comes to preparing digital transformation strategy. Involve stakeholders and top executives for making the strategy full proof. List down the core organizational assets that need to be digitized first. After that, create a transformative vision to digitize. The strategy making process should be structured around social wiring (wikis, blogs, videos, etc.), adaptability (moving away from legacy system), executive involvement and innovation.
Flexible and comprehensive budget: Setting a clear budget will define the success of digital project. A good budget comprehensively considers different cost factors like infrastructure, compliance, training and development, consultancy, maintenance, etc. On top of that, a budget must be prepared as per the different stages of the project. Besides a 3 or 4 year budget, it is better to set up a short term budget that is discussed with different departments.
Chief Digital Officer: A chief digital transformation and business analytics Officer should be someone who can bring everyone on the same page. The role should be entrusted to an existing employee who has demonstrated expertise in resolving conflicts with tact. Besides guiding teams in moving away from conventional legacy systems, he should know the art of harnessing different technologies for overcoming any business problem. Successful digital leaders have also created distinct leadership roles, shared units and digital governance committees.
Innovative Mindset: The CIO’s and CEO’s shall collaboratively make efforts to bridge the gaps and build an ecosystem of confidence and trust. Try bringing positive changes by articulating the worth of the transformation process. Foster new ways of working and encouraging conversation. Inspire the team to innovate new ideas for solving critical business problems. Lastly, incentivize the employees to boost their morale.
Learning & development needs: The biggest problem of working with technologies is that they continue to shift gears. Having a settled, learning and development approach becomes an even bigger problem. The HR managers should do everything to keep the learning and development calendar organic. Raise the bar, measure the effectiveness, refine the talent and repeat this process over and again to build talent in-house. Equal emphasis on hiring the best of talent and knowledge sharing initiatives.
Security arrangements: No digital business transformation can take place without security. Micro segmentation (Separating the virtual machines), secured architecture, granular network access, access management, 24X7 monitoring, are some of the measures to safeguard the information security. Don’t forget to involve information security experts in securing the change management process.
Setting up a platform to communicate: Having a good internal communication platform solves more than one problem. A good communication platform keeps the project team updated, brings transparency and ensures that the wheels are rolling smoothly. The platform should be embedded with dexterous features to update every single change, including project progress and explain setbacks.
Tools for harnessing the analytical data: Firms using advanced analytics to increase their reach and engagement are supposed to thrive in the digital world. Advanced analytics help in creating targeted sales strategies and fine tuning the products as per the customer requirements. Many companies have set up innovation labs and departments to identify specific customer needs and provide tailored discount and promotional coupons.
“What is an art?” I asked this question to a budding fine art professional few years back. He replied, “Anything that makes the existence and living experience sublime is art.” I applied this approach to DT (that provides glimpses of human computer relation in the future) and concluded that it is an art as well. But it shares some dissimilarities with the traditional art forms. Firstly, it is not isolated in a museum: secondly, it is coevolving along with the human race; and thirdly, in this art form the craftsmen need to exercise a higher degree of care and diligence.