Over the last year, COVID-19 restrictions brought a new urgency for businesses to begin or accelerate their digital transformation. A McKinsey Global Survey of executives recently found the adoption of digital technology has speeded up by several years in response to the pandemic, and most of those changes will be long-term. The road to becoming a digital business is rarely smooth, however, and there are many obstacles that can hinder an organization’s efforts. What difficulties are businesses likely to encounter and how can they move past them?
While leading an executive search for a digital transformation leader for a Fortune 100 global consumer foods business, Carpe Diem Global Partners had the opportunity to speak with dozens of Digital Transformation Leaders from Fortune 500 companies on journeys to transform the way data and insights are enabling better functional decision making. Over the last 3 months, we learned of the main challenges being encountered in leading a digital transformation. These leaders represented Consumer, Hospitality, Technology and Transportation industries. While technology is a pillar of digital transformation, we found that the impact of large-scale change on the people within the organization was at the heart of most digital transformation challenges. In fact, speaking with dozens of these business leaders, three common obstacles stood out.
Hardware and software technology adoption
Digital transformation relies on adopting digital technologies to create or modify business processes, but as one leader noted, “very often you have outdated tech infrastructure.” For most organizations, it’s necessary to invest in new technology and modernize legacy systems to meet the demands of the new digital business model. Both present challenges.
Legacy systems are a significant hurdle when digitizing business processes. They’re notoriously cumbersome, expensive to maintain, and difficult to update. But because they contain large volumes of data and documentation, they are often essential to the organization’s IT infrastructure. Upgrading and integrating them with newer solutions so the organization can leverage the value of their data requires time and skills that may stretch the organization’s resources and commitment. Even the successful upgrade of a system can be problematic if its users, who are accustomed to using it in its previous state, are resistant to the modernized version.
New technology presents its own set of challenges. Employees typically must be onboarded with every new tool the company adopts. Applications vary widely in features, functions, and user interfaces, so there are no guarantee teams will be able to transition from their older tools to the newer ones without being well trained in new skills and processes. Unlike legacy systems, new technology has the advantage of robust vendor support, but employees may still be hesitant to incorporate new tools into their familiar workflows.
In either of these cases, organizations will have to allow time to adapt to and optimize technological changes and the new workflows they enable. IT leaders can also help make users more comfortable with their tools, according to one leader. “IT needs to be passionate about the technology,” they said. “They need to empower people to use tech and show how it makes them more efficient.”
Culture shift
Each organization has its own culture—its collective behaviors, attitudes, and values. That culture is critical for determining how well teams can support the new digital strategy in the short and long term. It’s well established that companies that emphasize innovation, transparency, and continuous improvement are more likely to achieve their digital strategy goals, but it will be difficult for those values to take root if you have a risk-averse culture. It’s important for business leaders to first identify the organization’s cultural tendencies and any potential barriers, then encourage the necessary mindset changes.
Business leaders can foster a successful transformation by sharing a clear vision and helping associates understand their critical role in the transformation journey. It’s important to be inclusive by listening to, and when appropriate, acting on ideas from across the organization. Educating staff on the new technology and rewarding new thinking can also help dispel fear of the unknown and make employees feel more comfortable with the process so that the necessary cultural shift can take place.
Change management
Several business leaders identified change management as the key challenge in their digital transformation journey. Ineffective change management can have dire consequences—according to McKinsey & Company, 70 percent of change projects fail to achieve their goals due to employee resistance and lack of senior leadership support.
While businesses have always struggled to some extent with organizational change, the scale, pace, and complexity of digital transformation can make it particularly disruptive for the workforce. It’s not uncommon for employees to fear changes in their roles, have concerns about job security, and resent the disruption to their working lives. Leaders must understand and address these issues so the digital transformation initiative can succeed.
While there are many change-management practices to consider, increasing employee involvement in the process, providing senior-level support, and engaging with them regularly to solicit feedback on what is and isn’t working are all important components.
These market insights from Carpe Diem Global Partners are gathered from the firm’s extensive client work leading Board, CEO, CXO, and CHRO executive search engagements for public and private multinational companies. For deeper, custom insights, contact Jeff DeFazio at info@carpediempartners.com.