Digital Transformation: 5 Challenges Businesses Face

Trend Analysis

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

Digital transformation poses five challenges to businesses of all sizes:

  1. Leadership
  2. Customer experience
  3. Employee and Supplier Engagement
  4. Increased Competition
  5. Talent war

1. Leadership

The C-Suite must lead the organization through the process of digital transformation by adopting a digital mindset. The executive team will need to rethink their business and operating models to foster cross-channel connectivity and continuous engagement with customers, suppliers, employees, and investors. They can set the tone by collaborating with managers on designing an organization-wide digital strategy, 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. Customer Experience

We have discussed the proliferation of digital channels and devices as drivers of change. They provide consumers 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 customer experience and engagement with businesses, and with each other.

3. Employee and Supplier Engagement

Change doesn’t end with the customer. With transparency as 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 customer-centric marketplace, increased competition and declining brand choice is 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, phone, TV and computer businesses. Their brand advocates engage and upsell the Apple community to new applications and products across their product line, maintaining their loyalty and competitive advantage.

Nike began selling shoes; now is a global sports company, selling clothing, equipment and fitness. The opportunity to horizontally expand, trading on its global super brand, immediately opens opportunities and establishes traction in a new vertical that would 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 War

Fully 90% of all jobs in 2015 will require information and communication technology skills, according to research by Capgemini. Yet more than half the companies polled lacked social media skills. Furthermore, it is projected that there is a need for 1.5 million digital marketers with analytical skills and digital media savvy in both the US and the UK by 2018. This gap will generate an intense war for talent both on the managerial and technical levels. Organizations need to recruit for the future with jobs skills that they have not considered to meet forthcoming changes in the digital marketplace.

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.


  1. How is your organization responding to each of the five 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?