Most companies that thrived during the last two years of the COVID-19 pandemic credit digital transformation for much of their success. Companies that embraced flexible, scalable and agile technologies such as cloud, edge computing and mobile, fared better than the companies that did not.
Of course, digital transformation projects varied widely by business type and size and were more impactful in some industries than others. According to a new study by systems integrator TEKsystems, the State of Digital Transformation: Building a Framework for Digital Success, two out of five organizations said their digital transformation efforts “often” failed to net the business benefits they were expecting.
The organizations that did cite success are doubling down. They are investing more in digital transformation and seeing positive ROI sooner than the companies who said their digital transformation investments did not pay off.
“After absorbing the initial blows of the pandemic, these companies focused on building resiliency and flexibility into their business,” the study said. “Digital leaders are accelerating their rate of technology investment and strategically applying technology to enable business transformation. In doing so, digital leaders broaden the gap between themselves and the digital laggards.”
Only 10% of digital leaders reported they were reducing their technology investments compared to 71% who said they would be increasing them. Digital “laggards” also reported increasing their technology investments but not at the same rate. Only 58% of laggards said their spending was increasing while 14% said they would be decreasing technology spending in 2022.
Forty-four percent of digital leaders said they expected a positive ROI within three years vs. 35% of laggards. An almost equal number of laggards, 45%, however, said they expected positive ROI within five years.
“Digital leaders are investing more dollars per digital initiative and expect a 12% higher return,” the report said.
Where they are spending
A plurality of respondents, 46%, said that improving customer experience and engagement was the top priority for their digital transformation initiatives. This was followed by:
- Improving operational efficiency (36%)
- Upgrading IT systems (35%)
- Transforming business processes (35%)
- Improving innovation (26%)
- Increasing speed to market with existing products and services (23%)
- Introducing new business models (23%)
- Improving cyber security (23%)
- Introducing new products or services (22%)
- Improving the employee experience (18%)
SEE: Guide to becoming a digital transformation champion (TechRepublic Premium)
The challenges they face
The top five challenges organizations face implementing digital transformation were:
- The complexity of their IT environments coupled with a siloed mindset and behaviors
- Too many competing tech priorities
- Gaps in technical talent
- Security concerns and compliance constraints
- Change management and implementation complications
Of the five, not having enough of or the right talent jumped eight positions from the 2021 digital transformation survey. All the others remained relatively unchanged.
“Nine out of 10 organizations don’t have the talent they need to succeed with digital transformation,” the survey said. “When companies hit the fast-forward button on transformation, weaknesses become abundantly clear.”
Only 7% of respondents said they did not need to upgrade or change their current talent landscape compared to 55% who said they did.
The most in-demand skills were cybersecurity (48%), data analytics (48%), cloud (46%), business analysis (37%) and AI (37%). Of these top five, AI stood out as the area with the largest skills gap, with 57% of respondents saying they did not have the skills they needed. Interestingly, the second largest skills gap identified was blockchain, but only 15% of respondents indicated this was a skill they considered critical.
Perhaps in an attempt to make up for these gaps and needs, 83% of digital leaders and 62% of laggards said they make diversity and inclusion a priority during the hiring process. And, with the pandemic waning, only 25% of organizations said they expect most of their employees to work remotely in 2022. This is down from 40% in 2021.
SEE: Digital transformation: A cheat sheet (TechRepublic)
Tips to digital transformation success
To be successful in your digital transformation efforts, the study suggests:
- Focusing on the customer and building “engaging experiences for your target audience”
- Making it a collective effort by getting the business and IT to work together
- Starting with the end in mind so you know where you are going and how to get there
- Reevaluating your business partner ecosystem to ensure you have the right mix to achieve your goals
- Investing in people, processes and customers as well as technology
- Being mindful of unintentional bias in your hiring
- Prioritizing organizational change management
- Embracing disruption by creating flexibility and resiliency within the organization
- Understanding that digital transformation is more of journey than a destination
“Every digital transformation journey begins, but it never fully concludes. Digital leaders continuously adapt to a fluid market landscape and changing customer behaviors, transforming their business for the future,” the report said.