Overcoming the top obstacles to digital transformations
To achieve digital transformation, a growing number of organizations are increasing their investments in big data, enterprise resource planning and Internet of Things technologies. But many of those firms are encountering obstacles to those efforts that do not involve technology readiness.
Instead, a recent study by enterprise application software firm IFS - The Digital Change report – revealed that the top barriers to digital transformation success are aversion to change within the organization (cited by 36 percent) and security threats/concerns (also cited by 36 percent), followed by lack of standard processes (cited by 35 percent) and legislation and compliance (cited by 35 percent).
Information Management spoke with Antony Bourne, president, global industries at IFS, about the study and why he believes so many organizations struggle with digital transformation.
Information Management: From your firm’s experience with customers, what seem to be the most common obstacles that organizations are encountering in their digital transformation efforts?
Antony Bourne: Organizational change is usually challenging, and that is just what digital transformation requires. Technologies coming into greater common usage—including IoT and mobility—are creating new business opportunities.
IoT technologies can for instance send an alert to a manufacturer that a machine requires service. This enables a manufacturer to service a warranty agreement, add an annual maintenance or operation service line or even move to a completely outcome-based model. If they take advantage of these opportunities, a company will have to make big changes to what they measure, how people get paid, and how value flows from shareholders to the customer.
According to a recent IFS Digital Change survey of decision makers within sectors such as manufacturing, oil and gas, aviation, construction and contracting, and service, the number one barrier to a successful digital transformation lies within an organization’s employees. In fact, 42 percent of surveyed executives cited aversion to change as the number one barrier within their company.
The second and third reported barriers are more technical and process-oriented and therefore more straightforward to address. These include “security threats/concerns” (39 percent) and “absence of the right organizational and governance model” (38 percent).
While the digital technologies such as big data and analytics, enterprise resource planning (ERP) and the Internet of Things (IoT) are vital to digitally transforming an organization, it is the “transformation” part of digital transformation that is most challenging.
Companies undergoing change need strong executive sponsorship for these transformation initiatives. This is not an IT project. It is an opportunity to see how the business can be redesigned with greater agility and less value-added work, all while adding value to customers.
IM: What are the most common goals cited by firms behind their digital transformation efforts?
Bourne: Many companies hoping to initiate successful plans for digital transformation are not only looking to improve their product, but also to add new ways for their customer to receive value from their product. Business process automation, servitization and outcomes-based models—we are now only starting to understand the potential. But as a whole, we are seeing a trend away from digital transformation efforts designed to reduce cost and towards companies interested in growing revenue and differentiating themselves in a crowded market.
IM: How do or will these organizations measure actual success with digital transformation?
Bourne: While we recognize that the definition of ‘success’ varies widely from industry to industry, even company to company, we tell our customers to define KPIs early in the project, so they know what they’ll need to monitor and measure throughout. This may be increased uptime, improved response time, increased customer satisfaction scores, even environmental impacts.
We also recommend our customers start with well-defined IoT projects designed to solve specific problems rather than trying to drive broad, wholesale transformation all at once.
IM: How does the availability of talented people who know how to deliver transformational technologies impact the likelihood of successful digital transformation?
Bourne: The need for staffing, tools and outside expertise is also crucial for companies in their effort to ensure successful digital transformation. Who you partner with matters.
According to the Digital Change survey, 34 percent of companies still feel either slightly or totally unprepared to deal with digital transformation due to talent deficiency. Even further, when asked to name the specific areas that are expected to experience the greatest deficit in talented staff, 40 percent cited “business intelligence” and 39 percent cited “cyber security” – both of which are crucial components to a successful digital transformation.
Other areas experiencing a concerning degree of talent deficit include “AI and robotics” (30 percent), “big data/analytics” (24 percent), and “the cloud” (21 percent).
The skills gap within many of these industries continues to mystify many business owners, but as the gap continues to become acknowledged, efforts to reduce it continue to grow across the board and better empower these companies to reach digital transformation.
IM: What lessons have you learned from customers that have been successful with digital transformation?
Bourne: We’ve seen a common theme across our customers from pest control to printers to magazine distribution to manufacturing: start small and keep it simple.
The reason for this is that many companies are not able to roll out digital transformation technologies across their entire operation. It may be too risky or too costly.
Instead, we suggest that many companies need to start with a small project, define the KPIs, identify appropriate technologies. From here, they can test the technologies in a contained project, and secure small wins and big learnings so they can get buy-in from management to go bigger and broader.
Many of our customers follow this pattern as it reduces risk and allows the opportunity to garner needed support, from management and the employees whom the change will impact most directly.