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The Key Challenges of Digital Transformation

The Key Challenges of Digital Transformation

Posted on: March 26, 2021

Written by Francesca Checchinato, Andreas Hinterhuber and Tiziano Vescovi, Editors of Managing Digital Transformation.

Digital and especially mobile technology has fundamentally changed the way people behave as well as most of the companies’ business models. New technologies, the availability of data about consumers and the interconnection among machines and human processes affect companies’ strategies and operations, transforming the management.

But, what do we need to know about Digital Transformation? Why is this concept so important in 2021?

Digital transformation is a process that aims to improve the companies’ management thanks to the combinations of information, computing, communication, and connectivity technologies. It is pervasive and growth-oriented, but above all it is given. It is no more a question of if or when, the key questions relate to how to develop and implement a digital transformation strategy.

Some companies do not really accept this new reality, but the most is beginning to transform their businesses. The COVID-19 pandemic stressed the need of digital, to be able to work in other places as well as to provide services and goods through online channels. It has contributed to accelerate this ongoing phenomenon, but there is a problem: even if a firm acknowledges the potentiality of digital technology, sometimes it is not able to strategically embrace it. But traditional companies cannot wait for implementing the technologies because they often compete with born-digital companies that already possess a digital approach and the required competencies. The latter starts to lead some markets and transforming some industries (i.e. tourism, bank services) and this transformation will have an impact on the whole supply chain.

Just a few studies tried to give an overview of the digital transformation and its challenges, but there still is a lack of knowledge about digital transformation and how it should be implemented.

Thus, we would highlight here 4 main issues, that traditional companies have to deal with, especially in what we call “introducing digital” and “implementing digital strategies” phases:

1 – competencies related to digital. If a company want to really become digital oriented, it must support its employees, providing learning programmes that help them to deal with this new management approach and with big data. It means being able to read and understand new typologies of (unstructured) data, to process them and to take decisions accordingly. Firms need to develop both technological and analytics capabilities in their teams.

2 - organizational culture where trials and learn approach start becoming the leading way of thinking about processes. A new mindset is required to successfully operates in this fast-moving world, where the only chance to survive the competitors is to provide solutions, even if they are in a beta version and can have some shortcomings. Moreover, networking activities among departments are needed to share data and adopt a systematic instead a function-based point of view.

3 – support. Internal support, in terms of senior managers and owners acting as advocates of this transformation. If the company’s leading people do not believe and support these changes, it is quite difficult employees are motivated to change their approach and exit from their comfort zone. External support, in terms of policies, to help firms in this journey providing both resources to improve their informative systems and technologies, and learning programmes.

4 - technology. This is the last point because technology is just an enabler of digital transformation. In our book we highlighted how technology is a conditio sine qua non, but it is not sufficient to guarantee an effective digital transformation. Thus, firms don’t have to start from technology, but use the best technology to achieve their goals.