The Digital Transformation Challenges and Opportunities in the Hybrid World

The Digital Transformation Challenges
and Opportunities in the Hybrid World

AUTHORED BY: MILONEE PAREKH, KNOLSKAPE EDITORAL TEAM

Digital transformation has become a necessary tool for organizations to stay competitive and relevant in the rapidly evolving technology landscape of today. The business landscape has undergone a significant shift in recent years, with many companies adopting new technologies to streamline their operations, enhance their customer experiences, and improve their bottom line.

The adoption of digital technologies has brought about significant changes in the business world. For example, the global digital transformation market is expected to grow at a CAGR of 22.7% from 2021 to 2028, reaching a value of $2.3 trillion by the end of 2028. Furthermore, a study by IDC estimates that digital transformation spending will reach $6.8 trillion globally between 2020 and 2023.

Businesses are leveraging digital transformation to stay competitive and meet changing consumer demands. For instance, a study by Salesforce found that 75% of consumers expect companies to provide a consistent experience across all channels, including social media, websites, and in-person interactions. By adopting digital technologies, businesses can create a seamless omnichannel experience that meets these expectations.

Digital transformation is not only beneficial for customer experiences but also for internal operations. A study by McKinsey found that businesses that implement digital transformation in their operations can see up to a 40% reduction in operational costs. For instance, a company may invest in automation tools to streamline their supply chain, reducing the need for manual intervention and increasing operational efficiency.

However, digital transformation is not just about adopting new technologies. It requires a fundamental shift in the company’s culture and mindset towards a more customer-centric and agile approach. Companies must also prioritize the upskilling of their workforce to ensure they have the necessary skills to leverage new digital technologies effectively.

What is a Digital Transformation?

The process of leveraging digital technologies to develop new business practices, cultural norms, and customer experiences in order to satisfy shifting customer and market demands is known as “digital transformation.” Digital transformation is the process of rethinking a company in the digital era.

Sales, marketing, and customer service are no longer limited to their conventional duties. Instead, how you view and interact with customers is the starting point and final point of digital transformation. We have the ability to rethink how we conduct business and interact with our customers by utilizing digital technology as we go from paper to spreadsheets to smart applications for managing our firm.

Why do companies need Digital Transformation?

Digital transformation is essential for businesses to remain competitive in today’s digital economy. In fact, a study by McKinsey & Company found that companies that embrace digital transformation are 1.5 times more likely to be in the top quartile of their industry in terms of financial performance. Additionally, a survey by Harvard Business Review revealed that 70% of companies either have a digital transformation strategy in place or are working on one.

These statistics highlight the importance of digital transformation for businesses. By adopting digital technologies, businesses can improve their efficiency, reduce costs, and provide a better customer experience. This, in turn, can lead to increased revenue and a competitive advantage. Businesses that fail to embrace digital transformation risk falling behind their competitors and becoming irrelevant in today’s digital age.

Opportunities in Digital Transformation

Cost concerns are a major factor in the digital transformation of many businesses. Reduced operational costs result from moving data to a public, private, or hybrid cloud environment. Team members can work on different projects because it reduces hardware and software expenditure. However, apart from cost savings, digital transformation can provide multiple other opportunities for growth including:

Enhanced data collection

While most firms amass vast amounts of client data, the real benefit comes from maximizing this data for analysis that can advance the company. For better business intelligence, digital transformation builds a mechanism for acquiring the appropriate data and fully integrating it.

It develops a means for multiple functional units inside an organization to convert raw data into insights across numerous touch points. It results in a single perspective of the customer journey, operations, production, finance, and business prospects as a result.

Stronger resource management

A set of business tools is created through the digital transformation of information and resources. It consolidates corporate resources and lessens vendor overlap in place of scattered software and databases. A central repository for corporate insight can be created by integrating applications, databases, and software through digital transformation.

No specific division or function is responsible for digital transformation. It covers every aspect of a company and can result in process innovation and efficiency amongst units. Every department makes use of sensitive data, from sales and marketing to finance and the C Suite. Anywhere that data moves, it must be optimized and secured, and teams must be given simple-to-use tools to complete their tasks.

Data-driven customer insights

To access customer insights, data may be the key. You can develop a business strategy that is even more focused on your customers’ demands by better understanding your target market. These insights can aid in the success of a firm by utilizing both structured data (personal customer information) and unstructured data, such as social media metrics.

More relevant, individualized, and flexible information may be delivered by strategies thanks to data.

A better customer experience

Think about how digital transformation may not just increase team productivity but also give your consumers more seamless, intuitive experiences. This includes everything from email correspondence to user portals, digital goods, and even the frequency of your outreach to potential customers.

Consumers have high standards for their online experiences. Customers are accustomed to having a huge selection, affordable rates, and quick delivery. Customer experience (CX) is the new front on which brands are competing. According to Gartner, more than two-thirds of businesses claim that their main competitive advantage is customer experience.

Accenture reports that CX “has emerged as the key driver of sustainable business growth.” They suggest that even a single point increase in CX scores can results in millions of dollars in annual growth.

Encourages digital culture (with improved collaboration)

Digital transformation promotes a digital culture by giving team members the appropriate tools that are suited to their surroundings.

These tools not only make it easier to collaborate, but they also help the company as a whole advance digitally. The change to a digital culture is essential for firms to continue operating sustainably. It forces team members to upgrade their skills and learn digitally so they can profit from the digital transition.

Increased profits

Businesses that transition to the digital economy become more productive and profitable. Take into account these findings provided by Oxford Economics and the SAP Center for Business Insights:

80% of organizations that have completed digital transformation report increased profits.

85% say they have increased their market share.

On average, leaders expect 23% higher revenue growth than competitors.

Increased agility

Organizations become more agile thanks to digital transformation. Businesses can embrace Continuous Improvement (CI) practices and increase their agility through digital transformation by learning from the world of software development. This creates a speedier environment for invention and adaptability while also opening the door to advancement.

Improved productivity

Workflow may be streamlined, and productivity can be increased with the appropriate tech tools working together. Team members are given the ability to work more productively by automating numerous manual procedures and integrating data across the entire enterprise.

Opportunities in Digital Transformation

Siloed decision-making

Silos within organizations hinder digital transformation. They are a barrier in practically every stage of transformation, from developing strategies to putting them into practice.

While each team or department concentrates on resolving its own issues and accomplishing its own objectives, silos result in disjointed decision-making. Lack of a cohesive vision that drives every team toward a shared corporate objective exacerbates the issue. This then limits organizational efficiencies and prevents innovation.

Charting a detailed digital transformation strategy

A successful digital transformation requires having a distinct vision, well-articulated corporate objectives, and realistic goals. A concise issue statement and a clear plan outlining our goals for each phase of the transformation are the foundation of all successful digital transformations. The issue statement and the vision must be clearly stated.

Consider the urgent move most businesses had to make to the cloud in reaction to the epidemic. Companies did not have the luxury of pausing to consider issue statements, solution alternatives, and the “correct” choice when making this move. They were compelled to make the choice. Businesses who already had a solid transformation plan in place fared better than those who weren’t ready.

Legacy systems

Experimenting outside of your comfort zone is challenging, even in business. Despite the existence of more flexible and reliable platforms, this is evident in businesses that continue to use legacy systems. After all, they have made a large financial investment in these systems and continue to gain from them.

These legacy systems are among the main barriers in the digital transformation, nevertheless, because they are still powered by antiquated software and antiquated technologies. It is more difficult for them to integrate with new technology and adapt to changes because they are frequently slow and rigid. Its susceptibility to security breaches is an even more urgent issue.

Kodak is a well-known illustration of a company that failed to depart from a tried-and-true business model. They created the digital camera years before it was widely known, but instead of capitalizing on the chance, they chose to hold onto it because it threatened the established film industry.

In contrast, Bell Atlantic decided to spearhead the shift to mobile phones after realizing that landlines were vanishing. Today, they are known as Verizon.

Due to their high maintenance costs and difficulty in adapting to changing client needs, traditional operational models and legacy systems are considered as obstacles to digital transformation.

Navigating employee pushback and solving for specialized IT skills

Employee acceptance and its effects on corporate culture are two of the biggest obstacles to digital transformation for the majority of businesses. Without the backing of the majority, if not the entire organization, you cannot achieve your aims. These changes may make many of your workers feel insecure about their employment, which could have an adverse effect on morale or productivity as well as the general corporate culture.

However, the kind of change that the majority of digital firms require is difficult to implement due to a huge talent gap. Roles for cybersecurity, IT program managers, data-driven business analysts, and qualified cloud architects are hard to fill. Maintaining the momentum is challenging without organizational buy-in for executing the digital procedures.

Insufficient budget for technological change

Financial limitations may have slowed the adoption of digital transformation strategies for organizations that suffered considerable losses as a result of the pandemic. The truth is that putting new digital solutions into practice is a costly process that demands large investments.

The misconception that technology expenses are a part of operating costs is another challenge. Businesses allot insufficient funding for digital transformation when they fail to view it as a strategic investment. In the end, this prevents effective implementation and limits future flexibility and agility.

Shortage of technological resources

Businesses currently struggle with a lack of additional resources necessary for the adoption of digital initiatives in addition to a talent scarcity. Several businesses are still hindered by the global lack of microchips. Then there are the persistent problems that continue to obstruct the availability of IT gear and supplies. The lack of sufficient resources prevents timely allocation to the appropriate activities.

Increased security risks

The prevalence of malware attacks and data breaches has increased as firms adopt digital procedures. Because of this, almost 94% of businesses are concerned about protecting their digital transformation activities in the post-pandemic age.

Many businesses hastened the adoption of digital technologies in order to adjust to the unexpected shifts in consumer needs. They were now more exposed to rising cybersecurity concerns as a result. Also, this made other organizations apprehensive about suffering similar breaches when they launch their own programs.

Nonetheless, the concern is not unfounded. The challenge of collaborating with numerous SaaS vendors is challenging. Even for businesses with a strong tech dev team, determining the security quality of each third-party platform and product is a significant task.

Overcoming the challenges posed by digital transformation

The obstacles of digital transformation can be overwhelming, and certain aspects are out of your control. You may still take action to get over obstacles and guide your company through a seamless transition to a digital future. Here are a few tips to overcome the barriers.

Align your digital transformation programs with business outcomes

Make it clear that you see your efforts at digital transformation as part of a long-term strategic strategy that will eventually increase your company’s income.

Break your vision to attainable goals and implement the transformation project in manageable chunks.

Set each phase’s resource allocation and associated budgets in order of importance. If you need more money, you may then demonstrate how these phases worked.

Create an actionable plan and forecast the ROI of your digital transformation efforts, including both qualitative and quantitative returns. Correlate technical investments with the desired results, as suggested by Gartner.

Investigate and make suggestions for alternate ways to carry out your digital transformation project. Maybe outsourcing your entire business process transformation project makes more sense for your company than ramping up your current staff of personnel.

Make organizational change a core element of digital transformation

The top management needs to press for the transition away from legacy systems. Prioritizing customer-focused initiatives and coordinating their teams will help the executive team move swiftly.
Encourage staff members to take on creative projects and learn about cutting-edge technologies that will boost sales.
Before implementing an intricate strategy for widespread digital adoption, start with pilot projects that demonstrate the viability of new digital solutions, such as small-scale process automation or new collaboration platforms for one department.

Maintain transparent communication at all levels

Create a strong leadership team that will be closely supervised by the CEO or owner in the case of small businesses, or a CTO or CIO in the case of bigger businesses, to own the end-to-end transformation path.

Be sure that everyone knows what is expected of them, what their roles are, and how they fit into the larger transformation plan.

Get updates frequently and work with your team to achieve the objectives of your digital transformation program.

Craft a solid implementation plan

Before considering potential solutions, set aside time and resources to research consumer demands, technological developments, and the issue description.

Divide the process into segments or stages, each with distinct business objectives, doable steps, and quantifiable goals.

Determine the stakeholders and talents in charge of leading and carrying out the various business transformation phases.

To achieve your long-term objectives, periodically examine and adjust your digital transformation approach.

Bridge the skills gap

Introduce your existing workforce to low- or no-code, intuitive IT solutions that don’t need specialized knowledge and are simple to use.

Address the anxiety that employees have and the possibility of being replaced. Provide your staff the assurance that, even after the introduction of digital technology, they will have new, easily adaptable responsibilities.

Enhance your cybersecurity strategy

Regularly educate employees on the hazards posed by cyberthreats and their part in reducing security concerns.

Review security incident response strategies and conduct frequent risk assessments.

By moving to cloud computing, use client data properly and abide by security guidelines.

Way Forward

Digital transformation presents both challenges and opportunities for businesses in the hybrid world.

In today’s ever-changing business landscape, digital transformation has become a necessary tool for companies to remain competitive and relevant. Businesses must embrace new digital technologies and processes to drive growth, improve customer experiences, and increase efficiency in their operations. However, successfully navigating the challenges and opportunities of digital transformation requires a clear digital strategy and investment in upskilling the workforce.

To stay ahead of the competition, businesses must understand the benefits of digital transformation. For example, a report by McKinsey & Company found that companies that prioritize digital transformation can increase their annual revenue growth by 2.5 times and their profit growth by 1.8 times. Furthermore, businesses that have embraced digital transformation have experienced a 16% increase in customer satisfaction, according to a study by Deloitte.

A clear digital strategy is critical for businesses to achieve their goals. The strategy should align with the overall business objectives and prioritize digital initiatives that are most likely to drive business outcomes. For instance, a company might invest in automation tools to streamline their supply chain and reduce costs. Alternatively, a retailer might focus on building an omnichannel experience that integrates physical stores with online sales.

However, implementing a digital strategy requires investment in new technologies and upskilling of the workforce. According to a survey by PwC, 77% of CEOs believe that lack of digital skills is the biggest threat to their business. Thus, companies must invest in upskilling programs that enable their employees to leverage new digital technologies effectively.

KNOLSKAPE’s Digital Transformation Courses

KNOLSKAPE’s Digital Transformation courses are designed to equip organizations’ workforce with the skills and mindset needed to thrive in the digital age. Participants can gain a profound grasp of how digital technology affects their professions, clients, stakeholders, and the business thanks to our immersive learning method. Participants get useful insights and build the skills necessary to confidently navigate the digital landscape through immersive simulations, gamified evaluations, individualized coaching, and interactive activities.