Top Digital Transformation Challenges and How to Mitigate Them

Digital transformation isn’t something you get to opt out of because it’s difficult, expensive, or you just don’t feel like dealing with it right now.

Skip the harrowing journey and your business dies. Commit to transformation, and well, the odds aren’t much better — the path to DX success is riddled with potentially fatal pitfalls.

If you feel trapped between two terrible outcomes, we totally get it. Fortunately, there’s a lot you can do to not only survive this journey – but thrive long-term.

Below, we offer a realistic view of the digital transformation challenges today’s orgs are up against — and what real companies are doing to mitigate them.

You’re Still Using Legacy Tech for Critical Processes

Legacy systems cause all sorts of problems. Siloed decision-making. Fragmented experiences. Data issues. The list goes on.

Fixing these problems, however, is a significant challenge, as they also complicate the process of replacing existing solutions – and, from there, getting started with DX.

Overcoming the barriers of legacy tech can be a long, complicated journey in and of itself.

But it’s important to remember that, at first, your primary goal is laying the foundation for transformation. You’re several phases away from the more exciting stuff.

You’re also going to need to redesign business processes that you’ve likely been using for years. Transitioning old ways to new platforms means you’re limiting your potential.

According to CFO.com, if employees are complaining about the limitations of their current software or providers have announced plans to discontinue support, you’re overdue for a transformation.

Similarly, if employees are still relying on manual processes or don’t have access to actionable, real-time reporting tools, DX is an urgent priority.

Change management is going to be a big deal here. A comprehensive change management strategy ensures a smooth transition from one system to a new, cloud-based one with transformative capabilities.

Now, working with a partner is recommended — regardless of where you’re at in your DX journey. But, if you’re working with legacy tech and processes, an outside expert is the best way to fast-track your cloud migration and start optimizing processes ASAP.

Nailing this initial stepping stone is crucially important. If you fail at this stage in the game, transformation doesn’t happen at all.

Achieving Business Agility

Agility isn’t really about “failing fast” or reckless risk taking. Rather, it’s about flexibility, exploring solutions, and being able to advance the strategy by using data to iterate and improve – even if the data takes you to unexpected places.

Achieving agility is harder than it sounds.

Inability to experiment is a big problem. A lot of this comes down to an unwillingness to change.

Or, for leadership, a failure to cultivate the kind of environment that nurtures curiosity, innovation, and a widespread willingness to explore potential solutions to complex problems — even if it means many of those ideas ultimately fail.

But, another common barrier isn’t that employees are unwilling to adopt new agile practices — it’s that they don’t know how. There are all these self-serve analytics and low-code development platforms that promise to democratize development and data science.

Which is great, but what’s often missing from this conversation is the fact that people still need hands-on training to use them in exploratory, outcome-driven ways.

Employees can probably figure out how to pull some reports or build a really basic chatbot, but that doesn’t mean they’re prepared to build value-driven solutions.

They’ll also need to learn how to measure the impact of problems and potential solutions, as well as diagnose issues and ID opportunities.

People who don’t have experience with Agile or DevOps practices might also have a hard time adapting to this cyclical approach. Particularly if they’re used to projects with a clear beginning and end.

So, in those cases, transformation will require building new habits – and reinforcing them – through repetition and by using data to demonstrate the impact of iterative changes.

Security Threats Have Become Much More… Threatening

Data sprawl, distributed networks of devices, apps, and infrastructure, IoT & OT, etc. – have introduced an explosion of vulnerabilities and threats, in large part, because the threat surface has outgrown traditional security protections.

As with agility, cybersecurity is one of those areas that non-technical employees may need to get used to. Historically, cybersecurity was the exclusive domain of IT. It was considered too technical for anyone outside of the department, including executives to fully grasp.

Splunk experts say security should be deeply embedded into all parts of the business strategy from the very first stages of planning. Every decision must be considered with security in mind.

Additionally, orgs will likely need to update their entire security strategy to support DX – implementing best practices and protections designed for today’s digital ecosystem. For example, the Zero Trust framework offers multi-layered protections that prevent security gaps/vulnerabilities from slipping through the cracks.

Implementing solutions that offer automated threat detection and response, ID verification, and centralized security management go a long way in keeping your org safe from all these new threats.

As you look for new solutions and/or develop your own, you’ll need to make sure that security protections are implemented into the code – and that the right policies and protections are in place before you deploy them.

You Need to Budget for Continuous Transformation

Budgeting for digital transformation has always been challenging. A key reason many projects fail is because the money runs out before the project is finished – even in instances where business leaders put together thoughtful, detailed project plans.

What makes DX budgeting so tricky is that a lot of it is about planning for future unknowns.

Plans change, projects evolve, mistakes happen – and as a result, orgs end up taking on unexpected expenses.

Making things even more challenging is the fact that transformation is a continuous process. Meaning, you’ll need to budget for ongoing optimizations, upgrades, and tech investments, otherwise, you’ll fall behind and lose more time and money playing catchup – again.

Inflation, of course, is also shaking things up. According to recent GetApp data, executives are either halting or scaling back on necessary investments. And, PwC found that 53% of CFOs plan to cut IT investments post-pandemic, with 25% targeting digital transformation projects – despite the fact that those investments would put them in a better place financially in the long term.

Gartner VP Analyst Mike Cisek told CIODive that most challenges related to IT initiatives and tech-driven growth point back to resource limitations. He says making the right tactical and strategic decisions is critical to avoiding waste and executing on DX goals at scale.

Small to mid-sized companies, especially during times of economic uncertainty,

IT spending is evolving and a lot of orgs are rethinking their priorities. For example, they’re allocating funds to more “protective” investments and focusing on strategic areas like cybersecurity that help them minimize risks, rather than splashier solutions that, while impressive, aren’t essential to core operations.

Investing in emerging tech before you’ve mastered the basics is one of the worst things you can do here. Or, as this recent InfoWorld article puts it, don’t, for example, put all your eggs into the Web3 basket unless you’re prepared to leverage it effectively — and you have a proven business case that justifies this investment.

Experts advise organizations to instead prioritize investments in composable, adaptable technologies that solve for current needs and challenges — but can be easily adapted around future requirements — even if they take you in an unexpected direction.

Additionally, you’ll want to make sure that you don’t spend money on projects you’re not prepared to fund 100%. For example, don’t install a bunch of IoT sensors in your warehouse until your infrastructure can support real-time data streaming and you’ve got adequate security protections in place.

Instead, prioritize investments in technologies that can help you do more with fewer resources. Think – automation or low-code platforms. Working with managed services or outsourcing providers might also help you get more bang for your IT budget and fill critical gaps without the burden of hiring and developing talent, managing equipment, and paying for extra space.

What we’re trying to say is, you’ll need to come up with a budget that covers everything – including a cushion for unexpected expenses.

Business Model Innovation is Harder Than You Think

Business model innovation involves using new technologies to not only drive greater efficiencies but to improve operations, service offerings, and customer experiences.

Key elements include data-driven decisions, connected, optimized operational systems, and strategic process automation.

Evolving business models is crucial to digital transformation. It’s where you cross the invisible threshold between basic process improvements and the proactive strategies that create value — in ways that no one else can.

Now, some industries have it harder than others.

Professional services firms, for example, have always worked with complex business models involving many moving parts.

The core value they provide comes from human expertise, so DX, for them, means finding ways to package and scale that expertise in new ways.

Organizations with complex supply chain, logistics, or manufacturing operations face significant challenges, too.

This group also deals with many “moving parts,” but in a much more literal way. We’re talking: physical inventory, vehicles, and heavy machinery — plus the IoT devices that connect them to the rest of the business (and often introduce a whole new set of risks).

Across the board, organizations need experts capable of leading digitization and innovation initiatives.

These might include internal leaders, as well as external partners, consultants, as well as outsourcing companies and freelancers who can help you evaluate and improve existing strategies and fill gaps right now.

Long-term, you’ll need to prioritize investments in training and development that focuses on building critical skills that drive innovation – and rethinking how you recruit and hire talent.

You’re Playing Catchup with More “Mature” Competitors

Another major challenge companies are currently grappling with is bridging the digital maturity gap between themselves and savvier competitors that have been transforming for years.

If you’re just figuring out the cloud or digitizing basic processes, the idea of competing with brands that have already mastered advanced automations/ML/AI.

Long-term, it’s going to be about education. Creating a talent pipeline. Upskilling and reskilling. Planning future initiatives – i.e. – mapping out the next phases of your transformation, but adjusting those plans based on the data when it’s time to start putting those plans into action.

Basically, you’re going to want to put safeguards in place that will ensure that your business will never again fall behind – because things are only going to get more complicated in the future.

Transformations Are Unique to Each Business

The last major challenge on our list is that every digital transformation journey is different.

Even similar companies that operate within the same industry will likely have completely different reasons for pursuing DX in the first place, and thus have different objectives, metrics, and barriers to success.

Because transformations are one-of-a-kind, there’s no official playbook for business leaders to follow. Instead, the digital transformation strategies and roadmaps that are out there tend to go super broad, focusing on general areas where there’s a lot of overlap.

Things like data sprawl, security, and budgeting challenges are pretty universal but it’s important to understand that organizations face difficulties unique to their industry and their own business.

You might also find some useful insights about DX initiatives within a specific industry – i.e.: professional services, retail, manufacturing – based on common business requirements and challenges.

But again, every decision and investment you make must be driven by the needs of your customers, employees, and other stakeholders and backed by cold, hard data.

Final Thoughts

The big lesson in all this is that if you’re going to take on digital transformation, then you need to have a plan. The biggest mistake you can make is underestimating the time, effort, and investment that comes with taking on any major transformation.

Before you do anything else, you’ll need to get familiar with common challenges — and come up with a plan for tackling them head-on – or better yet, avoiding them altogether.

Another thing you’ll want to do is find a partner that can help you identify and overcome these challenges makes a significant difference when it comes to avoiding big problems and preparing for the future.

Velosio is a Microsoft partner with over 30 years of experience helping clients innovate and transform their business with the latest technology, best practices, and deep industry expertise. Contact us today to request a consultation or learn more about our digital transformation services.