Digital Essays 2017: Top challenges for digital transformation – by Imad Sarrouf, commercial and technology director, DMS

With every new opportunity for companies to evolve, there come significant challenges. How businesses address them will determine their growth and progress.

Digital transformation is a game-changer. Like every market disruption, digital requires companies to shift perspectives and invest in modern skills and talent. Businesses and their change drivers still face monumental challenges to successfully achieve their own digital transformation and it’s difficult for many executives and colleagues to prioritise digital initiatives ahead of personal skills and responsibilities. Many companies are just not equipped to adapt to disruption.

A lack of digital literacy and expertise will greatly restrain the process of transformation, which requires a dedicated employee engagement programme and signals the important role that human resources departments must play. Although employee engagement is critical, it sits atop a long list of equally difficult challenges.

Digital transformation is wrongly seen as a short-term cost centre instead of a long-term investment in competitiveness
Rather than treating digital transformation as an investment in value creation, many companies look upon such initiatives as costs. It’s easy to see any expenditure on the unknown as a risk, or even unnecessary. Instead of embracing digital transformation at its face value, it is common for all stakeholders to restrain the need for big investments – especially if a company is doing well today. However, without investments or endeavours into new territories, digital transformation’s return on investment becomes muted.

Culture, budgets and resources are either catalysts or inhibitors
Corporate cultures continue to remain a top obstruction to change, impacting the support that digital transformation initiatives require on all fronts. Without an empowered culture focused on agility and growth, digital transformation and innovation are greatly hindered. In addition, it is difficult and perhaps pointless to solve cultural challenges in one swift action while dealing with all the other competing priorities.

Change management is essential to successful digital transformation Not enough of the conversations about digital transformation focus on human dynamics and helping people change and support new directions. In cases where digital transformation moves ahead, it requires classic change-management programmes to move forward while improving and modernising company culture, work and employee engagement.

All companies are becoming technology companies
Businesses are facing a wave of disruptive technologies, fated for implementation across every facet of their ecosystems. Disruptive technologies (such as AR, VR, AI, machine learning, big data, IoT and programmatic trading) all require technical ownership and special skillsets in order to be designed and implemented effectively. Increasingly, therefore, all types of businesses are steadily becoming technology companies. This fundamental transformation of a company’s technology stack will replace legacy systems and trading functionalities with a new, scalable platform for trading, delivering and paying, with improved customer data organisation as well as closer integration with other systems, including inventory management.

Corporate innovation
Corporate innovation is becoming an executive-level mandate, operating in parallel with – but separately from – digital transformation initiatives. Just across the span of the last few years, it’s clear that businesses have been making innovation a priority. While executives are learning as they go, there are already big steps being taken towards the maturity of innovation models. Innovation programmes have to start somewhere, after all.

These efforts help to introduce stakeholders and decision makers to alternative approaches to innovation and transformation. Exposure to entrepreneurs, tech giants and investors often provides executives with new perspectives that reveal new possibilities, which differ from their day-to-day corporate thinking.

By mere observation and by tracking the state of digital transformation, some companies show some signs of progress. They’re focusing on understanding the evolution of digital customers and employees. They’re investing in technologies, processes and experiences that better cater to customer and employee expectations and behaviours. Teams are forming in organisations to champion and collaborate on key initiatives. Businesses are demonstrating that innovation is vital to competitiveness.

At the same time, digital transformation is progressing slowly and not yet penetrating deep enough within organisations to change corporate DNA from being legacy based to becoming more agile. Workforces are not yet familiar with how the new digital ecosystem is changing customers’ and employees’ business transactions and behaviours. Investments remain very limited, with the short-term in focus. Corporate culture is still mainly risk-averse and not yet empowering new thinking or pursuits.

Every industry faces disruption. Digital Darwinism favours the adaptable. This fact makes digital transformation a critical opportunity and a viable threat at the same time. Change requires bold vision and innovation – not only to adapt, but also to establish new value propositions and competitive advantages in a dynamic economy.