Digital transformation is an on-trend topic – and for a good reason. In response to the ongoing COVID-19 pandemic, businesses and organizations of all sizes are seeking solutions to take their operations online by digitizing manual, labor-intensive processes.
According to Dr. Zeynep Hizir, head of strategic development at SS&C Technologies, digital transformation alleviates business processes’ bottlenecks through software solutions.
“At its simplest, it is the replacement of non-digital or manual businesses processes with digital processes,” says Hizir. “[Digital transformation] is achieved by adopting specialist technologies that ‘digitalize’ operations, which in turn helps save money, improves efficiency, and reduces risk; digital transformation also enables companies to work smarter, and means human staff can better focus on the more enjoyable, less mundane tasks.”
With industries facing labor shortages worldwide due to pandemic hesitancy and a shrinking workforce, digital transformation is one tactic to extend existing workers’ capabilities. However, digital transformation isn’t as simple as flipping a switch. Strategic decision-making is necessary when procuring digital transformation tools to ensure solutions align and resolve technology pain points.
This article will discuss common challenges organizations face when implementing digital transformation initiatives and provide recommendations.
Digital transformation challenges and recommendations
Digital transformation does not come without challenges. However, companies can mitigate hardships by clearly articulating their current technology shortcomings. Here, we’ll discuss items businesses should consider before pursuing a digital transformation initiative.
Making sound investments
Challenge: Digital transformation is a capital-intensive endeavor.
In 2020, the global digital transformation market was valued at $336.14 billion and was forecasted to grow to $400.34 billion in 2021. With more software solutions entering the market, identifying the correct solution for your business can be a murky process. Software procurement can be costly, and implementation timelines can stretch months, even years. Depending on where an organization is in its digital transformation journey, it may need several new tools to remain competitive. However, understanding what complementary tools exist and why companies use them is frequently challenging to define. As a result, companies can fall victim to poor decision-making by investing in solutions that are not compatible, quickly adopted, or simplify existing business processes.
Solution: Strategically explore what technology you need and how to manage it.
First, it’s vital to align technical and executive leadership goals regarding software procurement. At times, a divide exists between leadership and IT departments regarding what is desirable and attainable. Because of this, it’s necessary to consider what digital initiatives meet your organization’s needs and whether implementing them is feasible – if not, you may experience software churn. For example, according to New York-based start-up, Blissfully, in 2019, organizations experienced a 42% turnover of SaaS applications in two years. Without these considerations, organizations may risk funding that may be more worthwhile for other endeavors.
Once a software procurement strategy is in place, it’s essential to determine how to manage software solutions. In 2021, organizations used an average of 110 software as a service (SaaS) applications. With high SaaS churn rates, it’s increasingly necessary for a software oversight system to be in place, either in IT departments or through third-party vendors. By managing what applications are used, how they’re used, and who has access to them, organizations can begin to monitor critical metrics like usage, adoption, and integration with other solutions.
Prioritizing technology over business
Challenge: Technology-first approaches makes businesses passive actors.
Often, companies try to adapt their business to technology rather than tailor software solutions to align with business goals. As a result, many companies find themselves putting technology in the driver’s seat without defining measurable outcomes for how technology can positively impact business performance. By taking a technology-first approach, businesses may lose focus on their purpose, goals, and strengths.
Solution: Use digital transformation as an opportunity to mine for new, digital-friendly business models.
Identify critical business functions, and observe where processes and data streams exist to determine areas mature for digital transformation. Then, rather than make sweeping changes organization-wide, prioritize which business functions can benefit from digitization first and sequentially guide remaining operations to minimize disruption.
In addition, identify digital transformation goals. Define OKRs for digital transformation strategies, test, and report on performance. By taking a more focused approach to digital transformation, organizations can monitor whether implementation is successful and improve with less burdensome technology investments.
Improving adoption and usage rates
Challenge: Adoption rates of new technology tools is low among employees.
After months of planning, your business has successfully implemented a new software solution. However, workers are hesitant to adopt new technologies and platforms, resulting in low usage rates and obstructing return on investment. What causes this?
According to a 2019 survey conducted by the Economist Intelligence Unit, two main reasons for the slow adoptions rate exist. First are employees’ vague understanding of how a specific technology fits into the business needs. The second is a lack of initiative to drive change. Often, employees are comfortable with what’s familiar, even if processes are outdated or are more labor-intensive.
Solution: Up-skill employees, create feedback loops, and socialize change.
When technology change management occurs, employers must gain mindshare from their employees to ‘socialize’ new tools and processes. Creating accessible opportunities to up-skill, whether through training courses or seminars, is fundamental to growing employee adoption rates. In addition, establishing technology evangelists within the organization, especially those from less tech-savvy backgrounds, can help influence employees to adopt new tools, whether through regular communication, training sessions, or proof of concept. Lastly, organizations should enable employee feedback loops to receive input from workers regarding technology adoption, including what works well, what can be improved, and whether technology helps employees effectively execute tasks.
The debate between proprietary or third-party software
Challenge: Which software use cases require proprietary software development?
In theory, building custom-built software specific to a business or organization’s industry and operations is a highly desirable solution. Proprietary software enables organizations to configure software to particular processes or needs while containing company and customer data. However, proprietary software requires significant technical, financial, and time investment, which may not be available to all organizations. On the other hand, third-party software vendors may take less time to implement but may not precisely align with business processes or demonstrate ROI.
Solution: Identify where software strengths and weaknesses exist.
Unless your business specializes specifically in software development, creating a custom-built solution may not be practical or even feasible. Pulling resources away from core business functions to develop proprietary software is costly. Software is never final; it requires constant updates to resolve bugs, customize new features, and refine operations. In addition, managing data security once the software is in place poses additional challenges, including physical space to store servers and proactive monitoring to eliminate threats. Except for large enterprises or specialized industries, building and maintaining propriety software is often challenging.
Instead, identify where software needs exist and explore third-party software vendors. Third-party vendors have a significant advantage for auxiliary business functions like eCommerce and workflow management. First, cloud computing is becoming more available, enabling organizations to perform business functions remotely. In addition, data and security are contained via cloud servers, alleviating IT departments of extraneous network and security responsibilities. Lastly, software vendors offer in-house specialists to manage, update, and maintain software products.
When choosing between proprietary or third-party software, it’s necessary to be realistic about your business’s strengths and weaknesses to strategically invest in technology initiatives aligned with core business functions.
Gain a competitive edge with digital transformation
Digital transformation is occurring in practically every industry and every business function. Developing a strategic path to digital transformation can help minimize technology growing pains, produce ROI more quickly, and streamline operations to unlock new efficiencies and cost savings.
Want to more learn ways you can leverage digital transformation to improve business performance? Connect with us to learn how CS-STRATEGIES can support your digital transformation strategy.