— November 28, 2017
Experts in the business world agree that digital transformation is an opportunity for businesses of every size. Customers’ buying habits have changed dramatically with the introduction of digital and mobile devices. Businesses must therefore change the way they develop, sell, and distribute their products or services in order to match these buying habits. One would expect, therefore, that most business leaders across the board would take pains to prioritize digital transformation efforts. Early results, however, show that the majority of businesses are experiencing digital transformation challenges. Moreover, those businesses that are putting real efforts towards digital transformation are failing to keep stride with their customers’ buying habits.
Altimeter, a branch of Prophet consultancy that specializes in helping companies with innovation and digital transformation, recently released its 2017 report on the State of Digital Transformation. The report summarized the key findings with the statement, “Many companies surveyed in 2017 are still struggling with technological and human challenges of Digital Transformation.” The report outlines the top challenge areas businesses are facing on their digital transformation journey.
Evolving Employee and Customer Desires
According to Altimeter’s report, one of the top challenges for companies on the digital transformation journey is meeting the expectations of both their customers and their own employees. Digital transformation’s effect on human life has been comprehensive. People expect the benefits of digitization in both their work lives and buying habits. Consumers now use digital devices in many of their daily life activities, such as shopping, entertainment, fitness, and communication. Digitization also makes things like communication and information sharing easier and more efficient. As a result, employees expect the benefits of digitization in their work lives. Companies that fail to understand what both their employees and customers want, therefore, will quickly fall behind their competitors. The issue is further compounded because another important part of digitization is the ability to make adjustments in real-time to match continually evolving customer and employee behavior.
Curiously, however, Altimeter’s report also found that fewer than half of the companies surveyed were actively investing in understanding customer and employee behavior. The contrast between companies that were successful at digital transformation and those that were not was stark in this regard. The successful companies directed a significant part of their budgets towards becoming more innovative in responding to customer and employee expectations.
Digital Transformation Needs Change Management
The second area of digital transformation that companies find challenging is in change management. Altimeter’s study cites company culture and other “human barriers” as two of the top challenges companies face in the digital transformation journey. Not only are employees (especially those who have been with a company long-term) often reluctant to change their habits, but corporate politics, fear and skepticism, and even sabotage can obstruct digital transformation efforts. Change management is crucial, therefore, to moving digital transformation forward while keeping employees engaged.
Lack of Definition and Leadership
From the introduction of the phrase “digital transformation,” it has suffered from a lack of clear and consistent definition. Part of the reason for this obscurity is that digitization looks different for every company. Factors such as a company’s market, value proposition, and business model all play into the outcome of digital transformation for a specific company. It is difficult, therefore, to define digital transformation beyond vague terms such as “creating new revenue streams” and “meeting customer expectations.” As a result, many companies do not have a clear understanding of how digital transformation will play out for their particular organizations.
Moreover, because it is so all-encompassing, many companies struggle to assign specific leadership to digital transformation. Altimeter’s study found that only 40% of the companies surveyed had any type of executive-mandated organization devoted to transformation. Of those, the executive leading the effort was most often the CIO, although this was the case for only 28% of all companies.
In order to undergo true transformation, digital transformation efforts must be cross-functional. Adding a digital department to a company’s organizational structure may act as a band-aid, but it will not be able to provide the continual and fundamental change that digital transformation requires.
Digital Transformation Challenges- Opportunity for Consultants
The good news for consultants is that the challenges of digital transformation present an enormous business opportunity for consultants. Many consulting firms have by now developed digital transformation consulting services. But now that the specific challenges businesses face have been identified, consultants would do well to develop focused offerings around these challenges. With diagnostics that address each obstacle specifically, consultants can determine exactly the degree to which their clients are affected. By digitizing their data collection and management, they can continue to run pulses on their clients, gathering consistent data that shows progress or regress. By helping their clients to address the specific problems of evolving client/employee expectations and desires, change management, and lack of definition and leadership, consultants will ensure that their clients are on the road to successful transformation.