According to our sentiment study of 540+ CIOs and IT leaders, over 75% of businesses find themselves on an accelerated path to digital maturity. Half of them are already bearing fruits of transformation efforts, while the other half are in advanced stages of interventions and actions. However, when one looks at the flip side, research shows that 70% of the time, digital transformation execution might be unable to meet its objectives. Fortunately, digital native organizations and industry leaders have been able to identify the critical challenges to digital transformation.
Based on our research, Vision 2023: Digital Acceleration Insights for Asia Pacific, we share the key digital transformation challenges that organizations might face in their journey and the best practices to overcome them.
Lack of cross functional collaboration
For a long time, IT teams are considered majorly responsible for technology implementation. While the trend has moved towards a situation where digital transformation is an organization wide priority, the sentiment is still skewed towards a siloed approach. Invariably, according to our study, 54% of CIOs believe that the lack of cross functional collaboration is the biggest impediment to transformation success. Currently, different functions are carrying a myopic picture of what transformation means and its impact, taking the bare minimum onus to facilitate its execution.
How to address facilitate co-creation and collaboration?
To address this challenge, the top management and those in leadership positions need to take charge to facilitate cross functional collaboration by:
- Showcasing the big picture: Illustrate what digital transformation goals seek to achieve and the role of each cross functional team. Emphasize the importance of collaborating for collective success.
- Educating the teams: A major reason why cross functional collaboration fails is the lack of awareness. It is important to educate teams about the latest digital transformation trends and help them understand their contribution to the digital strategy and execution.
- Highlight interdependencies and build accountability: Focus on defining how each role is interdependent with others. Create integrated and cross functional roadmaps for transformation highlighting intersections between the roles of different departments. At the same time, it is important to build accountability and encourage teams to take ownership to collaborate and achieve digital success.
Inadequate technical skill set
49% of businesses from our study claim the inability to hire or access the adequate technical skills is proving to be a major impediment towards digital transformation. This suggests that there is a clear shortage of people who have the required skills to lead transformation success. It is important to understand that technical skills are no longer limited to developers and coders, but are required across roles, including sales and others to create a truly transformative experience.
In fact, according to another study, about 95% of individuals surveyed in India acknowledged that they require more digital skills — the ability and knowledge to apply digital technologies for tasks in the workplace. Furthermore, it is expected that there will be an 85 million person shortage by 2030, which could lead to a collective $8.5 trillion loss.
It is interesting to note that hiring the right skills is only one part of the problem. Businesses are also struggling with transforming the mindsets of existing employees for upskilling or skills transformation. To encapsulate the challenge, organizations are having a clear shortage of talent with the right skills because of the lack of people who are skilled for transformation, combined with a resistance towards upskilling and reskilling.
How to address bridge the talent gap?
Inadequate technical skills is not only a digital transformation challenge, but can add financial and reputational risks for businesses. On the one hand, it can slacken the process of transformation. On the other hand, any gap in execution can lead to security concerns along with damaging organizational reputation. To bridge the same, organizations must:
- Facilitate upskilling: Organizations need to facilitate upskilling and reskilling of employees. The aim should be to add hard technical skills of data sciences and AI to the pool, along with facilitating uptake of complementary skills like critical thinking, problem solving, etc. At the same time, it is important to make upskilling an organization-wide campaign.
- Widen the hiring pool: Organizations need to increasingly shift their focus away from role or domain expertise to skills specific hiring. While ensuring subject matter expertise, hirers need to be flexible towards previous experience of the candidates. Weight their experience and expertise in the skill needed, rather than focusing specifically on the tenure in a particular industry. Furthermore, full time hiring can be supplemented with expert project based hiring which can help bridge the skills gap on demand basis.
- Leverage technology for learning: Finally, businesses must embrace technology led learning to bridge the skills gap. With e-learning platforms, companies can easily customize learning modules based on their business objectives and keep a repository for refresher courses. The idea is to facilitate digital learning for skills building.
Missing KPIs and metrics
For 42% of CXOs, missing KPIs or metrics to justify the impact of digitalization is standing in the way of successful execution. While organizations have clarity over what their goals from digital transformation are, they lack clarity on KPIs or metrics to measure impact or outcomes aligned with the objectives.
This lack of KPIs or metrics leads to a situation where advocates of transformation find it difficult to justify the progress made, resulting in lack of confidence in digital projects.
How to identify the right measurement metrics?
Investing time in identifying measurable KPIs in the initial phase of projects to ensure easy track on progress. Some of the top KPIs for digital transformation based on industry sentiment include:
- Productivity increase (Hours saved): Productivity can be mapped by assessing change in revenue or profit per employee. Tracking saved hours to perform a related activity post digital transformation adds weightage.
- Adoption: Rate of adoption by employees across departments adds to the success of digital transformation. Wider acceptance accelerates the rest of the performance parameters leading to visible success.
- Customer experience (User lifetime value): An impact or change on a customer experience metric such as OSAT (overall satisfaction score) or NPS (Net Performance Score) or CES (customer effort score), further adds to the success factor.
- Rate of innovation: Checking if transformation has helped organization innovate faster or bring about incremental changes in considered processes to be more efficient and effective. Innovation rate can lead to reduced costs, improved productivity, etc.
While these are just a few starting points, there can be other KPIs or metrics that can be used for transformation success based on the implementation department.
Lack of prioritization
Another challenge that might be standing in the way of digital transformation success is confusion when it comes to finalizing initiatives. Unlike many other processes, digital transformation doesn’t have a lack of ideas. Rather, the challenge is the exact opposite. There are several ideas and projects that teams may come up with. Thus, the challenge comes when the organization is unable to prioritize between the different projects. According to our research, 39% IT leaders claim lack of prioritization of digital projects, especially considering the budget constraints.
How to facilitate strategic prioritization?
To ensure considerate prioritization, one may account the following factors:
- Commence with one overarching goal: Initiating with a big goal that is aligned with the business objectives. This goal should be the deciding factor for any project to hit the priority mark.
- Start with small wins: Second, acknowledge and appreciate small wins. Many people are apprehensive about digital transformation potential and resistant towards the same. Therefore, emphasizing on small wins during the progress of the projects will help gain more support.
- Identify pain points: Finally, identify the organizations’ top pain points and prioritize projects which can directly contribute towards fixing or bridging these pain points.
These points can help get started to prioritize digital transformation initiatives and address any challenges that come along the way.
In addition to the above mentioned challenges, other challenges like lack of vision, budgetary allocations, technology understanding, and more may also stand in the way of digital transformation success. However, it is promising to note that organizations are increasingly seeing these challenges as opportunities to further crystalize their efforts and make execution seamless. Some of the redressal approaches mentioned above can help businesses overcome critical digital transformation challenges in 2023 and lead digitalization success.