The biggest challenges of Digitalization (and how to master them)

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8 min read

To compete in local and global markets and provide customers and users with flexible and individual experiences, enterprises need to digitize. But for many, it's not easy to take the first step.

Content:

  1. Resources & Time
  2. Skills & Know-how
  3. Budget & Funding
  4. Selection & Implementation
  5. Adoption & Culture

The digital transformation is two-fold: it is about infrastructure & budget and it is about management & culture. When it comes to the challenges that companies face regarding their digital transformation, they rarely face only technical or budgetary issues. More often than not, it is a lack a clear vision. If the leadership of a business does not captain their digital strategy, it will be much harder for the executives to get the right resources, support and goals for a successful transformation.

I therefore dug through several studies covering all or singular industries as well as global and local markets to identify the biggest challenges and suggest solutions. But beware: quite often these are directly tied to how leadership prioritizes and gets involved in the digitalization strategy of their business. A successful digital strategy has a leadership with clear goals, holistic communication and prioritized budget & resource allocations.

Resources & Time

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In a survey by IBM and The Manufacturers (PDF), Manufacturing companies stated that resourcing and time were the biggest challenge of the digital transformation. And this is not just a manufacturing issue. To digitalize a business takes a lot of resources but with daily business to attend to, digitalization efforts often end up on the sidelines.  

"Time is our biggest problem. People are too focused on day-to-day activities and don't have - or aren't given - the time to think more strategically and explore more efficient ways of doing things." (quote by a participant of the IBM survey)

Leadership needs to prioritize its digital strategy and allocate resources

It is not enough to have digitalization as a goal and set responsibilities. If the people responsible for the digital transformation still have to do their regular workload, they won't be able to fully concentrate on a strategy that demands full attention.

A big problem in this case might be differing views on how much leadership actually supports this process.

An example can be found in a PWC study regarding Cyber Security measures in companies. According to the study, 37% of the surveyed CEOs believe that they "ensure adequate resources, funding, and sufficient priority". However, only 30% of non-CEOs agreed.

If the leadership defines their support differently than the executives then it's high time to communicate a strategy together. Executives who are responsible with the digital strategy need to give their requirements to successfully plan, evaluate and implement the new technologies and leadership needs to make sure that these requirements can be met.

External resources can speed up the process

Additionally, a company can take on additional resources to fill in any gaps and prevent a decrease in day-to-day productivity. Nowadays, there are numerous options to support internal resources with external staff, whether it's through operations centers, captive centers, or staff augmentation.


Find out how the financial institutin Stadtsparkasse München replaced complicated excel lists with a secure, intuitive and automated system. 

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Skills & Know-how

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Another common challenge is the lack of sufficient experience and know-how to plan the digitalization of a business. Especially in industries or markets that are rather at the beginning of their digital transformation, it can be hard to implement internal training strategies or hire the right personnel with sufficient industry/market know-how.

In fact, this is one of the Top3 hurdles named by companies in the Baker McKenzie "2021/2022 Digital Transformation & Cloud Survey" (PDF).

Identify the skills you need in your company

In a Gartner article on digital skills, the analyst explains that companies often fail to identify the skills that are actually needed for digitalization projects. In turn, they are not able to prepare sufficient job descriptions or training models when hiring or training staff. According to Gartner, every second company claims that it has problems with the identification of the necessary skills to transform their business.

To identify the needed skills, a company needs to know what it actually wants to digitize and why. Additionally, it helps to have an idea about the preferred technology, since different systems and platforms demand different skills and qualifications.

If business cases can be identified, along with the technology, it is much easier to define the skills that are necessary to develop and implement digital solutions. In essence, this is a strategic issue that needs to be addressed by upper-level management and can't just lie with the HR department.

Create interdisciplinary working groups

The digital transformation is not just an IT topic but requires an interdisciplinary approach to

  • connect different business units,
  • include regulatory, compliance and functionality requirements,
  • and set up a single data source to enable a seamless flow of information across different business units.

The digital transformation is not just an IT topic but requires an interdisciplinary approach.

It is therefore advisable to not leave the project within one business unit but create a team of different (motivated) stakeholders who can combine their expertise and viewpoints to plan and execute a holistic strategy.

If external resources are considered, it is still best to include this team to support the project and give input, to make sure that all requirements are met.

Budget & Funding

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Lack of resources usually go hand in hand with lack of funding. Often, companies misinterpret an "agile approach" to digital transformation as something that costs nothing because it will be done "on the go". However, agility doesn't mean that everything is DIY but rather that the project will not be developed as a whole but in incremental phases to reduce errors and increase efficiency.

Agility doesn't mean that everything is DIY.

Budget & Funding is a leadership topic

In its essence, budgeting for the digital transformation needs to be a leadership topic and should not be the responsibility of a single business unit since it covers the entire company. Of course, it can help to allocate budget of different aspects to different business units but C-level management needs to make sure that this is done in a way that the business units don't have to fight over their individual budgets.

Digital transformation is not a one-time investment

It is important to understand digitalization as an ongoing process that also demands on-going investment. After the initial implementation of a new system or platform, the investment will probably decrease by a lot but there should still be funds available for individual adaptions, further development, and optimization. It helps to create a roadmap that will not only mark the major milestones of implementation but also offer a long-term look at future projects (and goals) such as roll-out to other business units, markets and countries.

Selection & Implementation

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Whether a company plans to replace or connect a legacy system or start from scratch: the amount of technology available seems overwhelming. To prevent connectivity issues, poor UX or vendor lock-in, preparation and evaluation is key.

However, if left solely to a single business unit (e.g., IT department), the final system might fit all technical and compliance requirements but could be inefficient when it comes to usability, connectivity to other systems and applications, and other necessary functions. In turn, if only the marketing team ins involved with the selection, it might run into technical problems, such as lack of compliance or interconnectivity with other systems.

Collect requirements & use cases to create long- and short lists

As with the general project group, a requirements catalog should be developed in an interdisciplinary team, to combine info on the

  • technological necessities,
  • regulations and compliance,
  • data management,
  • functionalities and usability,
  • automation possibilities,
  • individual programming/changes
  • localization options,
  • costs,
  • service options,
  • connectivity,
  • training options,
  • etc.

This catalog needs to be categorized in "Must Haves" and "Nice to Haves". Additionally, it helps to identify specific use cases that a system must perform/optimize to support its users. Vendors can then explain how their technology specifically can support these use cases.

Technology partners offer implementation services

When it comes to the implementation, most companies rely on partners that can either guide the process or take on the implementation. Most vendors either offer these services themselves or can suggest partners. 

As an implementation partner of numerous big technology vendors, we at DIGITALL also suggest customers to look for partners that haveindustry know-how, and possibly experience with specific use cases. Most partners work with agile methods nowadays that ensure that the system really "runs", has individual functionalities if needed, and can be rolled out smoothly without big issues that might halt general operations. 

An advantage of working with partners is the know-how that the internal team can gain and use it for follow-up projects. 

Adoption & Culture

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One of the most crucial and most difficult challenges of the digital transformation is the adoption of new technology in day-to-day business (by all stakeholders) and the change of culture that usually comes with it. Quite often, it's not just the move from excel files to a central CRM system but the change to a different working culture that can be daunting.

Any change in routines and processes has a learning curve.

The increase in transparency, for example, is objectively a positive result which reduces data silos and supports collaboration. However, on an individual level, it can also mean that employees feel "controlled".

Furthermore, any change in routines and processes has a learning curve that most people initially see critical. To change habits is difficult and should be understood as such by the management. People need time to get used to something new, even if adds value to their life.

Communicate the changes in regard to the value they bring everyone

Under the umbrella term "change management", we usually find strategies and communication processes to include all stakeholders in the process of change by regular communicating results and goals, offering feedback channels, and focusing on the positive outcomes of change.

It is important to communicate on an individual level because the advantages of digitalization differ between stakeholders. Whereas IT might see a decrease in manual maintenance tasks and risk prevention, customer-facing units might be put off initially by the many new processes they have to get used to. However, they can profit from a more holistic customer view that leads to better results.

Advantages need to be "pitched" and measured with KPI. If the results are not satisfactory, processes, functions, and training might need to be adapted (with the input of the users).

Train and educate employees to become digital champions

In most of our DIGITALL projects, the onboarding and training is an especially important topic. Aside from workshops, self-learning materials are recommended to give users the opportunity to take their time and look up information when they need it. By digitalizing the self-learning process, itself, you can also track how many users have finished their online lessons to see how well the adoption is going.


DIGITALL offers both Managed Services to support your digital projects and Technology Services such as training a dedicated team of specialists for your business. 

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by Juliane Waack

Juliane Waack is Editor in Chief at DIGITALL and writes about the digital transformation, megatrends and why a healthy culture is essential for a successful business.

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