Why digital transformation? Challenge vs opportunity

Why digital transformation? There are challenges, but says Dr Joanne Phoenix, from Sensor City, those who fail to adapt and become digitally-driven will simply fall behind.

The term ‘digital transformation’ has become somewhat of a buzzword in recent years and, as with many other technical buzzwords, few know or understand what it means for them. That’s a problem in itself — if a business leader doesn’t fully understand something, or if the benefits aren’t clear, the road to adoption is unlikely to run smoothly.

Despite this, in 2018 Gartner found that all industries ranked ‘becoming a digital business’ as one of their top 10 objectives, while IDG found that 89% of companies plan to adopt a digital-first strategy.

So, what constitutes ‘digital transformation’ and how does a company become fully digitally transformed? Put simply, it is the integration of new advanced technologies, such as Internet of Things (IoT) or cloud computing, into business to increase efficiency, productivity, and ultimately improve a business’ bottom line. As for the latter point, it could be argued that no business will ever complete a journey of digital transformation. It is a perpetual journey, influenced by the fast-paced world we live in today and driven by constant innovation and radical ideas.

Air Malta competes in a cutthroat business, where economies of scale are massive. So how does this tiny airline stay competitive? Alan Talbot tells Information Age how Air Malta’s digital transformation programme gave it an edge. But first, it needed a success.

The challenge

While the benefits of becoming a digital business are clear, two thirds of companies are yet to make the change. Here are the leading challenges in digital transformation:

Budget

Implementing any new system or process into a business often has some element of investment, and the same is true of digital technologies. In fact, it’s predicted that spending will reach $1.7 trillion by the end of 2019. But with 50% of senior executives citing insufficient budget as a leading issue, businesses need to think laterally about the return on investment that follows digital technology implementation.

Legacy systems

Dubbed as the biggest barrier to digital transformation, legacy systems are holding businesses back as many are reluctant to adopt new technologies over old operating systems, methods and computing programmes. While there are more subtle changes that can be made internally without extending as far as a company’s IT department, making the leap and doing away with legacy IT systems is where significant return will be seen.

Globant’s Rachel Armstrong tells Information Age how digital transformation needs sprints, and how this global company helps organisations work with customers to digitally transform.

Talent

With two-thirds of IT decision makers unable to deliver digital projects as a result of a skills gap, investment in digital skills is also a must. Whether it’s investing in existing teams to evolve the skill set or bringing new people on board, without the right skills at the right time, digital transformation projects won’t be successful. Some companies, for example, will find that digital change has led to the creation of specialist roles that weren’t needed before, such as robotics technicians or big data analysts. If this is the case, businesses need to thoroughly understand what skills they are lacking, and then recruit to plug the gap.

The digitisation of the global economy has had many effects on global enterprises but few are more significant than the overwhelming desire to undergo digital transformation. Modern companies are under tremendous pressure to undergo this process lest they be left in the past, but digital transformation failure rates have become a major problem.

Culture

Risk-averse culture is an immediate barrier to digital adoption, with a recent Harvard Business Review survey revealing that 49% have experienced collaboration as a challenge to digital transformation. Implementation in one department or silos across a business won’t work – change needs to reflect the entire organisation.

Marco Ryan, a veteran in digital business transformation, likens this process to a digital onion, and compares the old way of doing things to the Parthenon. His ideas shed light on the true purpose and meaning of digital transformation

The opportunity

If we look at the world’s leading businesses today – think Amazon, Netflix and Apple – they all have one thing in common – they are entirely digital, and they didn’t get where they are today from playing it safe. They have made the investment in people and technology, while allowing to thrive.

Many make the mistake of thinking that digital transformation is just for the large customer-facing corporates, when in reality, it is quickly becoming a sink or swim situation for start-ups and SMEs, too. Whether it’s streamlining processes, improving customer satisfaction or flexibility — all of which lead to heavy cost savings — the benefits significantly outweigh the risks if implemented in the right way.

The opportunity for businesses moving to a digital way of working is undeniable. What can begin as a small introduction of advanced technologies can quickly roll out into the entire organisation.

With spending estimated to reach $2 trillion by 2022, the time for businesses of all sizes to act is now and those that fail to get on board will risk missing out on the significant growth pot that’s up for grabs. For many sectors, the story will be that those who fail to adapt and become digitally-driven will simply fall behind.

Dr Joanne Phoenix is interim executive director at Sensor City