digital-transition

Digital Transformation: 6 Challenges Businesses Face

Trend Analysis

Digital disruption is moving at a rapid clip, encompassing all aspects of business and society. Understanding this dynamic and making the necessary changes is at the core of digital transformation. The starting point is to assess your organization’s state of digital preparedness based not just on technology, but on a comprehensive (and realistic) picture of digital integration and transformation throughout the organization.

Digital transformation poses six challenges to businesses of all sizes:

  1. Leadership
  2. Stakeholder Experience
  3. Employee and Supplier Engagement
  4. Increased Competition
  5. Talent Acquisition and Upskilling
  6. Cybersecurity Challenges

1. Leadership

The C-Suite must lead the organization through the process of digital transformation by adopting a digital mindset. Adopting a digital mindset requires organizations to foster a culture of innovation, collaboration, and continuous learning. This cultural shift may face resistance from employees accustomed to traditional ways of working and interacting.

The executive team will need to rethink its business and operating models to foster cross-channel connectivity and continuous engagement with customers, suppliers, employees, investors, and other stakeholders. They can set the tone by collaborating with managers on designing an organization-wide Integrated Digital Marketing (IDM) strategy (see Chapter 6) while encouraging ongoing innovation. Organizations need to pursue innovation to disrupt their own business model (before the competition does) and maintain their competitive advantage.

2. Stakeholder Experience

In Chapter 3, we discussed the proliferation of digital channels and devices as Drivers of Change. They provide stakeholders with a new power: real-time access to competitive pricing information and product reviews, and an open venue to interact with others and share information. Social and mobile access to data and information that they previously relied on from brands has fundamentally transformed the stakeholder experience and engagement with businesses and with each other.

3. Employee and Supplier Engagement

Change doesn’t end with the customer. With transparency as a core value of the digital culture, businesses need to drive collaborative and cross-channel engagement with their suppliers and partners. They need to feel communicated with in a timely manner.

Furthermore, employees are now communicating up and down the hierarchy, breaking down barriers between these groups and functional siloes. The employee’s role has expanded to that of brand champion as well as contributor to product innovation.

4. Increased Competition

With the evolving stakeholder-centric marketplace, increased competition and declining brand choices are emerging. Research from Ernst & Young’s digital team notes the following:

“Consumers want choice, without the cost of developing and maintaining multiple relationships; and companies are continually seeking ways to retain and develop increased share of wallet through deeper customer relationships. These two forces are made possible by digital advance and globalization. Digital channels lower barriers to entry and increase globalization, leading to a spiral of intensifying competition and commoditization. Innovative organizations are taking the opportunity to diversify, bringing cross-industry convergence and blurring of the boundaries between industries. “

The result is the emergence of ‘superbrands,’ such as Tesco, Apple, or Nike that transcend multiple industries and national boundaries. Apple is in the music, smartphone, connected TV, and computer businesses, among other verticals. Their brand advocates and champions engage and upsell the Apple community to new applications and products across the company’s product line, maintaining their loyalty to the brand and helping Apple maintain its competitive advantage.

Nike began selling shoes; now it’s a global sports company, selling clothing, equipment, and fitness apparel and devices. Nike’s ability to horizontally expand, trading on its global super brand, immediately opens opportunities and establishes traction in new verticals that would be difficult for another company to penetrate so quickly.

The battle to gain brand positioning has intensified, as the creation of superbrands has become a core component in an organization’s digital strategy.

5. Talent Acquisition and Upskilling

Digital transformation necessitates a shift in skill requirements within the organization. As technologies evolve, organizations need to attract and retain talent with digital proficiency and expertise. This shift often requires upskilling or reskilling existing employees to adapt to the changing landscape. Investing in training programs and promoting a learning culture ensures organizations have the necessary skills to leverage digital tools effectively. Organizations need to recruit for the future with job skills they may not have considered in the past to meet the changes in the digital marketplace.

6. Cybersecurity Challenges

With increased digital connectivity, organizations face heightened cybersecurity risks. As data becomes a valuable asset, organizations must prioritize robust security measures to protect sensitive information. Cybersecurity threats, such as data breaches and ransomware attacks, can severely impact an organization’s reputation, customer trust, and financial stability. It is crucial for businesses to invest in cybersecurity technologies, implement best practices, and educate employees on cyber threats.

Though these are often the most prevalent challenges cited by organizations going through digital transformation, countless others exist. To meet the manifold challenges posed by digital transformation, individuals and organizations have the confidence and commitment to make digital integration a strategic imperative.

Questions
  1. How is your organization responding to each of the challenges outlined above?
  2. Try and think of an organization that is excelling at digital transformation, and another that is failing at it. What do they have in common; what are they doing differently?