While remarks about the importance of digital transformation (DT) keep popping up, setting our teeth on edge, there’s still little to no understanding of what exactly this undertaking is. Is it already digital transformation when brick-and-mortar shoppers head toward e-commerce solutions? We dive deep into the essence of this notion and identify the key digital transformation challenges that are critical to any organization’s effective functioning when building Business 4.0.
So what is digital transformation after all?
In simple terms, digital transformation is a continuous customer-driven process that uses technologies to remodel all the areas of business, from branding to operations. Why? In short, this is done to enable your enterprise ecosystem to meet external challenges such as ongoing market changes and ever-growing customers’ demands.
It’s a shortcut innovation to unlock potential where it seemed impossible without cutting-edge technologies:
What would you say if asked which country had the highest share of cashless payments in the world in 2012? The United States? China? The answer is Kenya. It is the country that overtook the world in the percentage of non-cash payments thanks to technology innovation.
These payments have been made through USSD requests (mobile operator M-Pesa, Vodafone group). The whole Western world went the way of building banking infrastructure – banks, branch banks, ATMs, terminals, bank cards, chips, magnetic stripes – it is a huge amount of money. Kenya didn’t have the opportunity to invest in developing the same infrastructure. That’s why the country followed a different way – adopting new technology. As a result, they surpassed many Western countries in the share of non-cash payments.— Stepan Lapshinov, digital officer, CBDO Whitebird
Anyway, going all digital straight away is a nonviable delusion even for the most decisive business owners. What will work is taking incremental steps toward digital transformation. You might start with answering a simple question: at what stage of the digital transformation process is your organization right now? If it’s difficult to identify which processes inherent to digitalization you have already implemented and which are still missing, get advice from experts in the field of software development. It may turn out that you have issues in the stages that precede the digital transformation itself, for instance, lack of automation can be one of the most common holdups. Then break these barriers first because unresolved problems tend to turn into a snowball that can wreck your business ambitions.
Five dimensions of digital transformation
According to the IDC survey, digital transformation projects deliver a return on investment in less than 12 months, and these improvements speak for themselves.
Decreases in operating and inventory costs and an increase in revenue are one of the main benefits of the DT. However, nothing worth having comes on a silver platter — digital transformation is difficult, and 70% of projects fail to achieve their goals. Which challenges can you face during this period and how to deal with them to stay among 30% of successful digital transformation initiatives? *instinctools experts highlight five transformational dimensions and the challenges you may face in each of them. We use the term ‘dimension’ when speaking about the transformation areas to underline the all-encompassing and multifaceted nature of the process.
As customers’ expectations are the main driver of digital transformation, you can’t start this journey without having detailed and accessible data about your consumers. Leverage and deepen understanding of your audience using Business Intelligence (BI) and Data Analytics services to figure out how the company can make more money.
Take the gas station chain, which collects and analyzes data about their customers: cars they drive, fuel they fill up and how often they do it, additional services they use, etc. This information will help the organization understand what’s most beneficial for them and how to increase the average check and attract new customers.
The main challenge here is ineffective data management. Handling a mind-boggling data flow is difficult in itself. Couple that with the need to keep data secure and the task becomes several times more complicated.
The purpose of data management is not to gather as much information as possible but get the right data leading to actionable insights. That’s why the information should be of high quality, categorized, and easily accessible.
Consider how you collect and organize the information and review your actual data warehousing and quality management as data is a keystone of a digital transformation. Is the level of data accessibility appropriate? Is the customers’ information centralized? One of the ways to unlock the potential of your data is implementing Enterprise Data Management (EDM) within your digital transformation strategy. EDM includes such processes as collecting, organizing, managing, securely storing data sets into your information architecture.
- Operating model
This dimension is about ‘how’ digital transformation helps work to be done and goals to be accomplished. Unfortunately, inefficient business processes can impede this initiative.
For example, if your organization wasn’t born digital but you want it to keep up with the new players, can you reach this goal without automating repetitive day-to-day tasks? Unlikely. Automation is a hyper-trend and one of the key areas of technological investments for a reason but to leverage it entirely you need to set clear KPIs you want to achieve thanks to its adoption. Otherwise, if the end goal of the process stays uncertain for different teams, you can barely estimate the automation efficiency.
To get complete visibility of your business processes use Business Process Management (BPM). Following this approach, you’ll figure out how to re-engineer your business operations for better outcomes. For example, you can benefit from cloud computing services by migrating to the cloud from legacy platforms or taking advantage of cloud optimization if you’ve already moved to the cloud.
Another challenge of this digital transformation dimension is achieving the proper level of security. COVID became a major booster for the digitalization of businesses. But the flip side is a huge security lapse because of remote work. To ensure the appropriate level of security you’ll need the help of agile methodologies, one of which is the practice of DevSecOps. At *instinctools, we integrate security into DevOps services at the beginning of the product delivery lifecycle by default to reduce vulnerabilities faster without impacting the deployment frequency and delivery speed.
Lack of organizational change management is one of the key transformation challenges that put your digitalization plans on hold. Only equal engagement of the C-suite and employees can guarantee that the transformational path is worth taking.
All the main stakeholders should be involved in the digital transformation process right from the start. The lack of buy-in support from the beginning can result in employee pushback. A familiar routine made them feel comfortable whereas transformation may look like a threat to their livelihoods. To turn your employees from opponents of new technologies adoption to supporters of innovations, make them confident that they’ll have new, easily adaptable roles in the newly established workflow.
Also, remember that your employees have a limit on the number of changes they can successfully process. Therefore, if there are a lot of changes coming, prioritize them to make your staff less stressed.
Another problem you may face while implementing new technologies such as BI, DevOps, cloud computing, etc. is a skill shortage and lack of expertise among your employees.
Take advantage of augmented teams so that your project will be done properly and won’t turn into a weapon against you.
- Customer experience
Evolving customer needs inspire businesses to move forward but they are also the major challenge. The requirements for companies in terms of customer service are exceptionally high. What was earlier a nice-to-have option, such as an omnichannel experience, now is becoming a necessity. It’s good to deliver offerings targeted at a certain customer segment. But what if you go the extra mile and provide a highly individualized experience to each of your customers? Personalization makes it easier to reduce marketing and sales costs — they can be cut by 10-20%. Additionally, such an approach helps to put your business on the fast track to success by increasing the number of regular customers. Consider that the return on investment from programs that targeted loyal customers is three times higher than that of mass promotions. According to McKinsey, only 15% of retailers have fully implemented personalization strategies — use this advantage to outperform your competitors.
Aside from getting detailed data on who your customers are you need to be able to make use of this information as quickly and easily as possible, observe the data comfortably to receive information in an intelligible form, and get actionable insights faster. That’s what comprehensible and insightful data visualization is for. You can also invest in marketing research to see what technologies your customers need and get in-depth customer segmentation or directly ask for feedback from your customers to shape your digital transformation strategy according to the answers.
Moving somewhere because you intuitively get that you should move is not enough, as not being able to identify the right direction and destination will lead you nowhere. Therefore, one more digital transformation challenge is the lack of a defined strategy. Of course, there might be earth-shattering situations such as the Covid-19 outbreak was, that accelerate digital transformation to incredible speeds making companies that want to stay afloat have to keep up with the pace. Sometimes, considering new market conditions, you should react immediately — there’s no time to take a step back to review whether your plan is thought-out enough. But if you begin your digital transformation journey under more favorable conditions, allow sufficient time to find your reasons for the transformation and your way to fulfill it since the absence of a clear digital transformation strategy may result in budget constraints. Think of your priorities and long-term goals to make decisions that’ll let you respond to customers’ needs without breaking the bank.
Finding your roadmap to the digital transformation
Digital transformation is a journey rather than a destination, so there’s no need to look for an endpoint. You know how it works in real life — by the time the first half of your wishes come true, the other half will double. The same is with digital transformation — by the time you’ve implemented what you initially intended, there probably will be something new you’ll need to adopt. So don’t throw yourself into a dubious venture clicking on PPC ads that promise to help you remodel your entire business once and for all in several months after which you allegedly will rest on the laurels. Better think of what technologies are the most crucial for your company? Can you move step by step to catch up with and even get ahead of your competitors or do you need an innovative approach from the start? Numerous challenges that accompany transformation may seem insurmountable, but they are manageable with the support of an experienced and reliable partner. If you grapple with the complexity of identifying your digital transformation strategy, get in touch with our experts. They’ll prove that this process isn’t kind of a larger-than-life challenge but a manageable journey instead.