Digital transformation challenges in 2021

Editor’s note: This interview with Amancio Bouza was recorded for Coding Over Cocktails - a podcast by Lonti previously known as Toro Cloud.

Digital transformation allows organisations to adjust to new technologies and take advantage of their benefits in order to build business value. However, the road to digital transformation requires not only a technological change, but a cultural one as well.

Requiring a change in technologies, processes, and manpower, the road to transformation could get overwhelmingly complex along the way.

This is why attempts at digital transformation for many organisations could be prone to failure. And according to Amancio Bouza, API thought leader and author of "The Blockers and Catalysts of Digital Transformation", it’s more than the technology. The journey towards digital transformation is not achieved overnight.

"It's not about just setting up the new technologies that are out there to leverage these benefits, but it's really about the transformation of the identity of the organisation," he shares during an episode of Coding Over Cocktails.

The state of digital transformation

Couchbase surveyed 450 C-suite executives in the US, UK, France and Germany in 2019 on how their organisations are doing on their journey towards digital transformation. A majority of them report hitting failures, major delays, and some lowered expectations on their digital transformation projects, making up 81% of the respondents. Forty-two (42%) said they were falling behind schedules or were at risk of being so with their most important digital transformation projects.

On the other hand, 73% say they would talk about the huge potential their projects could have had but fell short of being something truly innovative once deployed. This percentage however, was a safe drop from 2018’s 80% and 2017’s 90%, meaning more and more business organisations are starting to find their way around their digital transformation projects. All 73% of the respondents also agreed that digital innovation made drastic improvements to their end-user experience - a rise from 64% in 2018 and 52% in 2017.

Specific benefits that came about because of digital transformation were also named in the survey, with efficiency in working being the top benefit pointed out by 58% of the respondents. Improved customer experience and better work productivity were each recognised by 50%.

Although potential failures lurk around the corner when working on digital transformation projects, enterprises are still taking the risk. Digital transformation is a challenge that IT leaders are willing to take on not only because of the tech benefits but also because of the impact it will have on their organisations as the new generation of workers in the digital age come in.

Identifying Digital Transformation Challenges

In the survey, 40% say that one of the factors that get in the way of digital transformation is the complexity of technologies. Thirty-two (32%) responded with the lack of resources while 30% pointed to the lack of skills. Thirty (30%) say that their reliance on legacy technology also keeps them from pursuing digital transformation. Other challenges mentioned by the respondents include the lack of budget and the notion that the risk of failure was high.

However, there are also risks if an enterprise decides not to pursue their digital transformation projects. Among the respondents, a whopping 87% said they felt at risk if they fail to innovate digitally. Forty six percent (46%) raised their concerns about staying relevant in the market if they were not able to move forward with their projects. Loss of staff was also a risk among the respondents, with 42% fearing they might lose their IT employees to more innovative competitors, and 32% on losing employees in other areas of their operations.

But is integrating technologies the biggest challenge during the process of digital transformation?

Bouza disagrees.

"[The big challenge] is really changing the behaviours, about how to use this technology, how to collaborate, how to bring developers, the IT together with the business and really understanding the customer needs."

Experts at Gartner echo the same sentiment, and identified six factors that are keeping an organization from becoming a digital business and what can be done to resolve and overcome them:

• A change-resisting culture
• Collaboration in an organisation is crucial, playing a key role in digital innovation as well. Boundaries need to be crossed and new ideas must be put on the roadmap for explorations. However, most organisations have created a culture of isolation and hierarchies in their operations, making change even harder to achieve. And culture, according to Gartner research VP Marcus Blosch, is "organisational dark matter."
• "The challenge is that many organisations have developed a culture of hierarchy and clear boundaries between areas of responsibilities. Digital innovation requires the opposite: collaborative cross-functional and self-directed teams that are not afraid of uncertain outcomes."
• Gartner advises IT execs to start small and establish a digital mindset. Digital innovation teams can be created and can help develop a new culture. The core teams can then work with the digital innovation team to scale new ideas and let the new culture settle throughout the whole organisation.
• Limited sharing and collaboration
• People inside the organisation may have issues with project ownerships, control of processes, information, and systems – this could make others hesitant to share what they already know, making collaboration even harder. Digital transformation could be very different from what the staff are used to, as it calls for collaborative cross-functional teams.
• Marcus suggests that the organisation find a starting point by identifying a common ground among the employees. "It's not necessary to have everyone on board in the early stages," he adds. "Build a first version, test the idea and use the success story to gain the momentum needed for the next step."
• The business isn't ready
• It’s easy to get caught up in the hype around digital transformation. However, business leaders would realise along the way that their organisation may not have enough resources or skills needed to even begin the process.
• Blosch advises that organisations address their "digital readiness" in order to understand how much both their business and IT areas are prepared for the changes to come. They can then work closely with the organisation’s early adopters who are willing to leverage digital technologies for operations. Remember though, that going digital may only be relevant to certain parts of the organisation.
• The talent gap
• Organizations are organised according to certain functions such as IT, admin, sales, and other departments and are generally focused on business operations. Implementing changes can take a while in an environment like this. For digital innovation to take place, organisations need to take a different approach.
• In a digital business, people, processes, and technology blend and work together to build new services and business models. The people need to be equipped with new skills that are centered on innovation, creativity and new technologies, such as AI and IoT. Blosch says that there are two approaches that can help breach the talent gap - upskill and bimodal.
• "In smaller or more innovative organisations, it is possible to redefine individuals' roles to include more skills and competencies needed to support digital. In other organisations, using a bimodal approach makes sense by creating a separate group to handle innovation with the requisite skill set."
• The current practices don't support the talent
• Aside from having a great pool of talent available, an organisation needs to have the right practices as well to ensure that they can work effectively. Digital can’t support highly structured and slow conventional processes. Organisations should find the best practices that will suit their needs, as there are no tried and tested models that can work for all.
• For example, some organisations according to Bosch may opt for a product management-based approach for digital innovations as this allows for multiple iterations. Operational innovations can follow once the digital team is equipped enough to share the practices they’ve learned to the rest of the organisation.
• Change isn't easy
• This goes without saying – especially when it comes to digital transformation projects. From acquiring the needed technologies, changing organisational structures, to finding potential partners, the organisation will need to allot time, money, and resources to find success.
• Gartner advises enterprises to adapt a platform-based approach that can support continuous change and design principles. They can then work on top of that platform and allow new services to draw from it and its fundamental services. In the long run, this helps create organisational capabilities that make change simpler and faster.

Conclusion

Digital transformation penetrates all parts and processes of the business. Thus, digital technology is integrated into all business operations. People and machines work in a blended environment. Therefore, organisations must set clear-cut benchmarks and understanding of issues to make all of this work effectively.

Bouza emphasises that digital transformation isn’t just about incorporating new technologies and automating business processes but it’s about changing the behaviours of the organisation towards using these technologies. He calls for a cultural change in order to properly execute a digital transformation strategy in an organisation.

"Just imagine a caterpillar [as companies], and all the companies think ‘let’s eat more and get bigger!’ then you are just becoming a bigger caterpillar. Digital transformation is really about going into a cocoon, and transforming the identity of the organisation, of what you are able to do." He adds that a digital transformation strategy can’t be dictated from a top-down management. Rather, it needs to be a collaborative approach to learning what the market and its stakeholders involved in the project need.

And businesses are doing their best to keep up with digital technologies and be at least a step ahead of their competitors. Toro Cloud founder and CEO David Brown also shares how it’s important that an organisation appreciates and takes into consideration their customers’ and business partners’ who are also likely going into a digital transformation journey of their own.

"Successful companies will help facilitate the digital transformation of not only themselves but that of their customers and business partners by evolving to the way they would like to conduct business in the future," Brown says.

You can catch more of our great discussion about embarking on a digital transformation journey during the new normal with Amancio Bouza by listening to this episode of Coding over Cocktails, a podcast by Toro Cloud.

Coding Over Cocktails is a podcast created by Lonti previously known as Toro Cloud, a company that offers a low-code, API centric platform for application development & integration.

This podcast series tackles issues faced by enterprises as they manage the process of digital transformation, application integration, low-code application development, data management, and business process automation. It’s available for streaming in most major podcast platforms, including Spotify, Apple, Google Podcasts, SoundCloud, and Stitcher.