7 biggest digital transformation challenges of 2022
In an era ruled by superior customer experiences and businesses converging towards being more customer-focused, digital transformation is a priority for all top business leaders. But not all digital transformation efforts yield successful outcomes.
Organizations don’t always see the expected results immediately and often lose the stamina to witness the sustained impact of digital transformation. At times, these digital adoption projects are even halted due to specific challenges along the way.
We’ll dig deeper into these digital transformation challenges and look at what companies can do to navigate these obstacles. But before we dive in, let’s look at what digital transformation actually means.
What is digital transformation?
Digital transformation is a journey that organizations take to rethink their business model and deliberately incorporate modern, digital technologies in order to improve their business processes, culture, and the overall customer experience they deliver. This could mean embracing more cloud-based technologies, better usage of data, newer working models for employees, or even moving to more online selling channels.
Prasad Ramakrishnan, who has successfully led businesses to transition from traditional IT architecture to cloud-only systems and is currently the Chief Information Officer(CIO) at Freshworks, sees digital transformation as a balance of three components.
Businesses usually embark on a digital transformation journey to innovate and improve operational efficiency, giving themselves a competitive advantage. However, more recently, organizations have been forced to digitally adapt due to rapidly evolving customer expectations and needs.
The pandemic has brought in new customer behavior, including a surge in remote work, telemedicine, online learning, e-commerce, etc., which demand greater digital intervention. Both traditional and modern companies are pushed to innovate rapidly and find newer, digital operating models.
Companies unearthed several other benefits of digital adoption, including increased revenue generation, enhanced operational efficiencies, and, more importantly, getting closer to customers.
However, on the flip side, since businesses didn’t have the time to map a clear strategy for their transformation, executives were left unprepared for the challenges brought in by digital adoption along the way. Companies didn’t think through the implications on supply chain processes, data management, and security, which added more challenges to the digital transformation process.
What are the 7 major digital transformation challenges?
Now that we know why companies need to transform digitally, let’s look at some key challenges to digital transformation, along with a few actionable expert tips on how to overcome them.
Challenge #1: charting a detailed digital transformation strategy
A misinformed transformation strategy and lack of clarity on the strategy are the two hardest challenges for companies to overcome. – McKinsey.
Having a clear vision, well-defined business goals, and attainable targets are essential for a successful digital transformation.
Prasad Ramakrishnan reiterates the value of having a solid strategy in place, stating, “Successful digital transformations start with a clear definition of the problem statement and a clear roadmap to what we want to achieve in each phase of the transformation. We need to articulate the problem statement and the vision clearly.”
“For example, the rapid transition to the cloud that most companies had to do in response to the pandemic. In making this transition, companies did not have the luxury of taking a step back, reviewing problem statements, reviewing solution options, and making the “right” decision. The decision was forced on them. Companies that already had a well-baked plan to transform responded much better than those who weren’t prepared,” adds Prasad.
Tips to overcome the challenge:
Allocate time and resources to analyze customer needs, technology trends, and define the problem statement before looking at the possible solutions.
Split the process into stages or phases, each with clear business goals, actionable steps, and measurable targets.
Identify the skills and stakeholders responsible for heading and executing the different phases of business transformation.
Periodically review and tweak your digital transformation strategy to meet your long-term goals.
Challenge #2: navigating employee pushback And solving for specialized IT skills
One of the major challenges of digital transformation for most companies is employee adoption and its impact on their culture and organizational structure.
You can’t accomplish your goals without the support of the entire organization, or at least a majority of them. Many of your employees may feel threatened about their job security by these changes, affecting morale or productivity and impacting the overall organizational culture.
Plus, there’s a significant skill gap in completing the type of change that most digital businesses need. Data-driven business analysts, capable cloud architects, IT program managers, and cybersecurity roles are difficult to fill.
Implementing any kind of technology transformation requires leadership and direction from the top. Leaders need to make communication a focus — there must be a clear articulation of why, when, and how you are doing what you are doing. – Prasad Ramakrishnan, CIO of Freshworks.
Unless there’s org-level buy-in for implementing the digital processes, it is hard to keep the momentum going. Having a solid change management strategy — a plan to align and manage people to new processes and tools — is a good first step.
Tips to overcome the challenge:
Assemble a capable leadership team overseen closely by the CEO or the owner in the case of small businesses or a CTO/CIO to own the end-to-end transformation journey for larger enterprises.
Clearly communicate the expectations, roles, and responsibilities of employees and their part in the overall transformation vision. Frequently get updates and align your team in achieving the goals of your digital transformation program.
On-board no-code or low code, intuitive tech platforms that don’t require specialized skills and can be picked up easily by your existing workforce.
Address the fear and threat of replaceability faced by employees. Give your employees the confidence that they’ll have new, easily adaptable roles even after digital adoption.
When Tree of life — a subscription-based book and course material services store — had to shut their on-campus stores due to the pandemic, they onboarded their store managers as online customer support agents. Handling their support queries on Freshdesk, the store managers quickly found their way around the tool, owing to the simple interface and the internal knowledge base, without compromising seamless customer engagement.
Challenge #3: budget constraints for digital transformation projects
Many companies might also face funding challenges while planning digital transformation programs. Onboarding new tools, training employees, hiring for specialized digital skills, or roping in business consultants, add to an organization’s expenses.
Unfortunately, due to the upfront investment in the necessary technology, a company’s executive board or top management is often skeptical about the ROI of the whole process and may not be willing to allocate the required budgets right away.
Tips to overcome the challenge:
Drive home the point of viewing the digital transformation efforts as a long-term strategic vision that’ll boost company revenue eventually.
Break down your vision into achievable targets and roll out the transformation project in smaller, measurable phases. Prioritize the resource allocation and related budgets for each phase. You’ll then be able to show the outcome of these phases to get further funding.
Have an implementable plan and project the forecasted ROI—both qualitative and quantitative returns—of the digital transformation efforts. As Gartner1 suggests, correlate technological investments with the expected outcomes.
Explore and suggest alternative options to implement your digital transformation process. Maybe, for your business, outsourcing your entire business process transformation project might be a more viable option than hiring additional employees and ramping them up.
Challenge #4: being flexible and adapting to evolving customer needs
We live in an experience economy. More than ever, customers value how they experience brands above everything else. Crafting delightful digital experiences lies in anticipating customer needs and transforming the customer journey.
The COVID-19 crisis has altered how consumers engage with brands. Customers expect better personalization, faster responses from businesses, and are willing to interact with companies on multiple channels.
With such rising expectations and fast-changing customer needs, brands can’t stay satisfied with one huge digital overhaul. The mindset of viewing digital transformation as a one-time project rather than an ongoing process proves to be a challenge to organizations. After digital adoption, businesses must be agile in assessing how they can further seize digital opportunities to achieve delight across all customer touchpoints.
Tips to overcome the challenge:
Ask for feedback from your customers and employees on how you’re progressing in your digital transformation initiatives. Ensure to align your strategy and goals as per the feedback you receive.
Don’t hesitate to bring in more digital channels and messaging platforms that cater to evolving customer needs of receiving instant responses from brands. After Instaprint – UK’s largest online printer, innovated and introduced chat support via Freshdesk and integrations with messaging applications like WhatsApp and Facebook Messenger, they saw order values rise by 24%.
As digital channels and the number of online interactions increase, strive to give an omnichannel experience that’s on par with evolving customer expectations of having frictionless customer journeys.
Ingrain a customer-centric culture. Take Zappos, for example. Though they entered a saturated industry, they decided to differentiate themselves with excellent customer service, employee training, and organizational culture. When they put their customers first, they could change direction and provide what their customers needed.
Challenge #5:Leveraging available data and utilizing analytics capabilities
The role of data in any digital transformation is highly significant. Data helps you make informed decisions while formulating your transformation strategy and understanding customer preferences.
Heading the IT vision and execution at Freshworks, Prasad Ramakrishnan notes, “Data should highlight the current state and help formulate the vision for the future metrics – which then drives the key changes that need to be implemented to reach the desired state. For example, if you’re transforming your customer support function, you need strong baseline data on call volume, on-time resolution, first-time resolution, etc., to know what you would like to be when you complete the transformation.”
Though customer data is available on many systems within organizations, businesses are not entirely confident of their data usage. Only 24% of organizations2 think their organization is data-driven, and about 86% of B2B companies3 accept that they can use their data better.
Valuable customer insights that can aid in critical decision-making reside in silos within CRM, ERP, payment, support tools, etc. Brands find it challenging to break down these silos and use robust analytics to deliver personalized customer experiences.
Tips to overcome the challenge:
Adopting artificial intelligence (AI) and machine learning capabilities help businesses crunch data in real time and personalize conversations with customers.
Break down data silos by integrating information across different departments to gain a holistic view of your customers.
Hire people with sharp data analytics skills to help put your data to proper use. Formulating the right questions enables you to find the correct answers from data.
Challenge #6: moving away from legacy systems and business models
Every business relies on products or services developed with principles and processes that have enabled it to survive to date. But sometimes, that legacy can be more of a burden than an asset.
Kodak is a notorious example of failing to move from a successful yet legacy business model. Though they invented the digital camera years before it became known to the public, they decided to sit on the invention because it threatened the legacy film industry instead of acting on the opportunity.
On the contrary, Bell Atlantic saw that landlines were dying and decided to lead the charge in the transition to mobile phones. You know them today as Verizon.
Traditional operating models and legacy systems incur high maintenance costs and are seen as challenges to digital transformation as they are also difficult to adapt to shifting customer demands.
Legacy infrastructure has a lot of capital deployed into them and is paying down the capital investments in the form of depreciation. This problem does not exist for cloud-native platforms and companies. Companies can pull back or invest based on market conditions and the availability of budget. – Prasad Ramakrishnan.
Tips to overcome the challenge:
The push to move from legacy models should come from the leadership team. The executive team needs to prioritize customer-focused and align their teams to move nimbly.
Motivate employees to take on innovative projects and encourage them to explore new technologies that contribute to revenue growth.
Adopt cloud-based technologies which are more cost effective and scalable than legacy platforms. “With cloud-native companies, there is increased agility. Cloud-native platforms such as Freshworks’ suite of products enable traditional environments to move in a phased manner to the desired state. For instance, if you have a lot of money invested in your global help desk based on an on-prem deployment model, you can take one location or one function at a time and transition that to a cloud-based model. This way, there will be a slow increase in the cloud footprint, while there is a reduction in the on-prem spend,” suggests Prasad Ramakrishnan.
Start with pilot projects like small-scale workflow automation or new collaboration tools for one department that shows the success of new digital solutions before rolling out an elaborate plan for massive digital adoption.
Challenge #7: understanding and assessing cybersecurity risks
The looming threats over data security and privacy might pose a challenge for companies looking to take on digital transformation initiatives. Their fears are valid as cybercrimes cost businesses a lot, and a rise in cyber threats is observed with the acceleration in digital transformation after the pandemic.
Data breaches and malware attacks have become more common as businesses embrace digital processes. That’s why nearly 94% of companies4 are keen on keeping their digital transformation initiatives secure in the post-pandemic era.
Yet, IT leaders and top-level executives are not happy with their current risk governance and cybersecurity measures. The cyber threat landscape is constantly evolving, and only a culture of security and secure design practices can help defend any organization.
Being an expert in defining and implementing security compliance for various companies, Prasad Ramakrishnan vouches on building a culture of security to resist cyber-attacks.
Security needs to be part of the heart, soul, and culture of every company. Most practitioners spend millions of dollars on security tools, forgetting that the weakest link in the security journey is not the systems, not the tools, but the people. Human mistakes and oversight are the biggest reasons companies get compromised. – Prasad Ramakrishnan, CIO of Freshworks.
Tips to overcome the challenge:
Conduct regular employee training on the dangers of cyber threats and their role in avoiding security risks.
Carry out periodic risk assessments and review of security incident response plans.
Use customer data responsibly and comply with security standards while migrating to cloud computing.
Customer delight – the epicenter of digital transformation
Despite the challenges faced in steering digital adoption, the rewards of enriched customer experiences and streamlined internal processes are immense for your organization. You definitely can’t go wrong when you put customer delight at the center of all your digital initiatives.
When you align your organization with pursuing customer delight at all times, overcoming these digital transformation challenges will be much easier. Cloud-native technologies and tools like Freshdesk and the Freshworks suite of products are built to help you ease your digital transformation journey. Get an in-depth look at the functioning and specifics of a cloud-based ticketing software here.
Equip your team with the right digital tools and start crafting delightful experiences for your customers.
Updated on September 23, 2022.
Source:
2.https://venturebeat.com/2021/05/13/data-analytics-and-digital-transformation/
4.https://www.statista.com/statistics/1228924/post-pandemic-cybersecurity-priorities/
Start using Freshdesk today!
Scale faster with a unified, intelligent customer support platform.