10 Digital transformation challenges and how to overcome them

This blog won't begin with the question: "Do you remember when we jotted down client information in notebooks or made door-to-door sales calls?" Over the past decade, digitalization has advanced so far that it's hard to recall life before we could try on products online with VR or sign documents with a simple swipe.

Digital transformation is no longer just a trend – it’s our reality, fueled by technological progress, COVID-19, the following economic recession, and various political agendas, both global and regional: just take a look at the survey held by McKinsey & Company.

Exactly digitalization compels organizations to change their models and adapt to new conditions, ensuring they remain relevant. We won't discuss the process itself, but rather uncover business transformation challenges many companies face. 

10 digital transformation challenges

Digital transformation refers to the process of using digital technologies to fundamentally change how organizations operate and deliver value to their customers. It's about adopting new tools and methods that can improve efficiency, enhance customer experiences, and create new business models.

“Did you know that only about 30% of digital transformations can be considered fully formed and successful? This statistic highlights just how challenging this journey can be for many companies.”

Andrey Savich, CTO at SolveIt

Here are the 10 most common challenges of digital transformation that organizations often encounter:

1. Budget сonstraints

Many companies worry about overspending on new technologies. Organizations often have limited budgets and must prioritize, monitor, and plan their investments carefully from the commercial point. 

Imagine a chain of medical clinics allocates funds to upgrade its CRM system but struggles to choose the right subscription plan and ends up purchasing redundant functionality. Later, they discovered their need could be satisfied by designing a simpler and more cost-effective custom app. Finding the right financial balance in current limitations is crucial to ensure digitalization delivers benefits instead of wasted investments. Maybe using a straightforward expense report template, signing up for a cloud based tool or install a local software, anything that serves the purpose as per the comfort is the ideal solution.

Let's recall: General Electric faced significant budget challenges when investing in its Predix platform, leading to a reassessment of their financial strategies.

2. Lack of transformation strategy

Without a lucid plan, digital transformation can become chaotic. Without a clear direction, teams may duplicate efforts, miss critical opportunities, and fail to align technology with business objectives. Helpful tools in this process are wireframe examples, which visually outline the user journey and ensure clarity in planning.

Take a retailer that may want to enhance its online shopping experience but fails to integrate its inventory management system due to the lack of a clear plan. Allowing the situation to drift without defining specific timelines for digitalization, its goals, and concrete steps leads to ineffective, ad-hoc actions, which for sure will affect all the business processes: out-of-stock issues, delayed deliveries, and documentation workflow issues. 

Let's recall: Target's hasty expansion into Canada resulted in inventory and supply chain issues, ultimately leading to significant losses due to a lack of a comprehensive strategy.

3. Skills gap

The skills gap is a prevalent digital transformation challenge for many organizations. Employees may lack the necessary skills in their in-house team to implement and use new technologies effectively.

Suppose a manufacturing company aimed to digitize its accounting and financial operations but refused to invest in training and adoption, believing that employees would figure it out on their own. The time spent on studying help documents by their own management could have already been transformed into a functioning e-sign and configure-price-quote processes with the new software, generating profits for business as early as yesterday.

Let's recall: Zalando, the European online fashion retailer, identified a skills gap in data analytics and machine learning, prompting them to invest in attracting specialized talent.

4. Cybersecurity concerns

As businesses embrace automation, they face a digital transformation challenge in the form of cyberattack threats, driven by increased data volume and network expansion, which create more access points for attackers.

For instance, if a healthcare provider transitions to electronic health records custom software without proper security protocols, it risks exposing patient information to breaches, leading to legal and financial repercussions. This can result in hefty fines for non-compliance with regulations like HIPAA, damage to the provider's reputation, and ultimately a huge financial loss associated with remediation.

Let's recall: T-Mobile faced significant cybersecurity challenges during its digital transformation when a 2021 data breach exposed the personal info of over 40 million customers.

5. Legacy system integrations

Many organizations still rely on outdated technology that complicates the integration of new systems or has insufficient documentation, making it difficult to understand their operation and modify them.

Let's say a financial consultancy may want to adopt a modern mobile banking platform but find that its existing core banking system is incompatible. This poses risks of data loss, requires significant man-hours for manual operations, and creates confusion among staff: who should they contact? Where should they find actual information? Should the input of the new data refer to the new system or the old one?

Let's recall: HP failed when integrating its legacy systems with a new SAP ERP, which resulted in 20% of server orders unfulfilled and a $160 million loss due to logistical failures.

6. Lack of tech specialists

Finding experienced IT experts can be challenging. Small and medium size organizations may need to compete for talent in a tight labor market, which can slow down their transformation efforts. 

For example, a marketplace startup might struggle to hire enough software engineers for their mobile MVP, which aims to digitalize logistics operations of traditional supply chains, delaying the launch of a new product. It can be difficult for a business to accurately assess the real expertise of the development team, as well as estimate project scope unbiasedly, especially without a technical background.

Let's recall: Gojek, an Indonesian ride-hailing startup, struggled to hire skilled software engineers, hindering their ability to innovate and expand platform features.

7. Resistance to сhange

People often resist change due to comfort with existing processes, creating digitalization challenges. This happens if employees don't see how changes benefit their work or the organization.

A mid-sized marketing firm decides to implement a new project management tool to enhance collaboration and streamline workflows but faces significant resistance from employees who are comfortable with using spreadsheets and email. Add here that management fails to clearly communicate the reasons for the transition, and here is the result: an atmosphere of distrust and pessimism.

Let's recall: Slack faced resistance among teams unfamiliar with the platform, requiring focused change management efforts to ease the transition from email.

8. Lack of agility

New tools definitely require new approaches. Rigid processes hinder quick decision-making and scaling operations, placing companies at a competitive disadvantage. Embracing flexibility is essential for innovation.

There’s no need to look far for examples: many restaurants and offline shops were not technologically prepared during the COVID-19 pandemic. Even if they had a web or mobile application for online ordering, some processes and the software itself were not scalable and simply couldn’t handle the demand. Those who refused to acknowledge the long-term impact of this business shift lost out, as they were unable to adapt.

Let's recall: Zocdoc struggled to pivot to telehealth services during the COVID-19 pandemic, revealing limitations in their operational flexibility.

9. Poor data management

This is a significant digital transformation challenge, as successful automation initiatives hinge on accurate and accessible data – otherwise, it results in misinformed decisions and operational inefficiencies.

Imagine if a prominent hotel chain had fragmented data management. Guest preferences noted during check-in were recorded in one system, while feedback from post-stay surveys was collected in another. Data from social media interactions and online reviews resided in yet another silo, making it nearly impossible for staff to access a comprehensive view of each guest's experience and nullifying all marketing efforts.

Let's recall: Walmart faced challenges integrating data from physical stores and online platforms, prompting significant investments in data analytics to improve their operations.

10. Measuring ROI

Many digital transformation efforts yield long-term benefits that may not be immediately visible. Organizations often struggle to connect short-term investments to long-term value, leading to challenges in justifying expenditures.

A travel agency invests in a new online booking platform. While there is a 15% increase in online bookings within six months, the true ROI extends beyond immediate financial metrics. Improved customer satisfaction and employee productivity illustrate that the value of digital initiatives often encompasses qualitative benefits that are difficult to quantify and very often don't even have specific KPIs.

Let's recall: Sephora's mobile app boosted customer interactions, but qualitative benefits like improved customer experience and loyalty were hard to digitalize.

5 tips to overcome challenges of digital transformation

As you may have noticed, both large and small enterprises grapple with digital transformation risks and challenges.

Navigating these waters can be tricky, but with the right strategies, you can turn potential pitfalls into stepping stones. Here are five tips to help you tackle them:

1. Develop an implementation plan 

“It should begin with a clear definition of the project’s goals and objectives, ensuring alignment across all stakeholders. It must outline the scope of work, detailing the specific technologies and processes to be adopted.”

Andrey Savich, CTO at SolveIt

A well-structured timeline with key milestones will help keep the project on track, while resource allocation should identify the necessary personnel, technology, and training needed for a successful transition. A comprehensive budget is essential, covering expenses related to software, hardware, training sessions, app design costs, and ongoing support.

2. Invest in the right technology

When selecting either ready-made automation tools or frameworks for your custom solutions, consider three factors: scalability, the availability of sufficient documentation, and the presence of technical talent in the market.

A new digital application or process won't be efficient by itself alone: it's essential to provide adequate training and support for your employees or customers. Remember that adaptation often hinges on user experience, so don't neglect UX/UI design factors of the product. Ensure that the chosen technology is intuitive and easy to understand from the outset. 

3. Consider a custom solution

Commonly,  founders, CTOs, and innovation managers, especially at resource-constrained companies, are well-informed about the latest tools that can facilitate a smooth transition, but sometimes seeking external consultation can be beneficial.

While some businesses may find off-the-shelf solutions or their mix sufficient, others require a more tailored approach with custom development to truly thrive. Tech partners understand the unique specific needs of your business and can develop customized solutions or integrations that drive real results, ultimately saving you time and resources in the long run.

4. Leverage data-driven insights

Data is the lifeblood of any digital transformation initiative. However, many organizations struggle to translate raw data, even if there are no doubts about its quality, into actionable insights that are aligned with business objectives . 

A specialized partner can provide the necessary tools and expertise to migrate and analyze data effectively. With their support, you can uncover trends and patterns that inform your strategic decisions. This partnership not only enhances your analytical capabilities but also positions your business to make informed choices that drive growth.

5. Tap into specialized knowledge

The scale of digitalization varies for each business. Some processes can be successfully automated at the local level by the organizations themselves. To avoid challenges in digital transformation for more complex cases, it may be essential to engage experts.

Reliable partners can bring fresh industry perspectives and business domain insights that can help you sidestep common missteps. Their extensive experience and well-established transition plans help systematize most operations, provide accurate estimates of timelines and budgets, and highlight where the bottlenecks are.

Final words 

The significance of addressing the challenges of digital transformation for any business cannot be overstated, as this journey is often fraught with risks. You don’t have to navigate these difficulties alone. Consider partnering with a reliable team that can help you avoid common pitfalls and ensure successful project implementation.

The SolveIt team can be your guide through this process – feel free to explore our portfolio for more details and to check out transformation journeys through the perspectives of our clients’ testimonials. Let’s discuss how we can achieve your digital transition together!