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Top 3 digital transformation challenges and how to solve them

Heading into 2021, IT leaders must take the reins of their organizations' digital transformation efforts. Bestselling author Isaac Sacolick outlines the primary challenges organizations face and how to solve them.

Recent surveys show that digital transformation continues to be a top priority for IT organizations. CIOs and IT leaders are partnering with business leaders on a range of digital transformation initiatives aimed at bringing business benefits. They include developing new digitally enabled products, improving employee experiences, automating workflow steps, instituting data-driven practices, and experimenting with artificial intelligence, IoT and blockchain.

But every digital leader will tell you that the digital transformation journey is a long one, and every year, the planning and execution have different challenges. For CIOs just starting transformation programs, the hardest part is often getting business heads and decision-makers to agree on a digital strategy, priorities and funding. For IT organizations with success in developing and deploying new technologies, the challenge is often in establishing a transformation process so that people across the organization take advantage of new digital capabilities and sunset legacy processes. 

In 2020, leaders abruptly pivoted their digital transformation strategies to support remote working and other health and safety priorities brought on by the COVID-19 pandemic. Heading into 2021, IT and digital leaders must continue to respond to changing working conditions amid increasing COVID-19 numbers, but as vaccines become available there's also the hope of evolving to a new normal. The changing environment will create challenges for digital transformation leaders on what initiatives get prioritized, which technologies are selected and how to engage employees.

Below are three primary digital transformation challenges organizations are likely to face in 2021 and how to solve them.

1. COVID-19 spurs new customer needs, expectations

Whether you work in a B2B or B2C business, everyone's customers have been impacted by COVID-19, creating different needs and opportunities. The changes are most noticeable in retail, where online sales jumped 4.3 points in the second quarter of the year to 16.1%, up from 11.8% in Q1 and 10.8% in the same quarter in the prior year, according to consumer data company Statista. A recent consumer survey showed that an astounding 87% of shoppers prefer to shop in stores with touchless or robust self-checkout options. Businesses in banking, healthcare, higher education and many other industries also saw significant shifts in demand for their product and services.

In 2020, the ability to deliver a customer experience in tune with the unprecedented customer needs and CX opportunities created by COVID-19 played a critical role in business success.

The challenge in 2021 is to adapt your digital transformation roadmaps to a new set of customer needs and expectations.

Next steps: Marketing teams should perform market research to get outside-in perspectives on customer demand and the competition. In addition, IT must arm business leaders with real-time metrics, aggregate analytics, dashboards and other tools providing an inside view around revenue, product usage, sales activities, marketing programs and customer service.

Every company is on a journey to advance data and analytics capabilities in their organizations; what capabilities leaders should prioritize depends on the company's overall maturity as a data-driven organization. Many organizations will turn to citizen data science programs, customer 360 platforms, data integration capabilities and data quality disciplines to identify timely insights and prioritize opportunities to improve customer experience.

2. Gaps persist in technical expertise and technology integration skills

While most CEOs aren't on airplanes reading about hyped technologies and how competitors are successfully developing differentiating data and technology capabilities, the sentiment still permeates the executive mindset. More than ever, CEOs need their IT leaders to deliver strong, secure and scalable technology capabilities.

Digital transformation maturity scale

Whether organizations have the IT skills required to deliver these capabilities is an open question. A recent CIO study from Harvey Nash/KMPG, for example, reported that the percentage of organizations reporting that skill shortages were  holding them back dropped to 54%, down from 65% before the pandemic, but the drop was much less than during the 2008 financial crisis and demand for technology remains robust.

Technical skills may also become more available as COVID-19 opened many organizations to geographically dispersed talent pools through remote working, but gaining technical expertise in security, architecture and integration remains a significant challenge when assembling digital transformation teams. This expertise is even more critical in 2021 because there are often hundreds of technology products and services with competing capabilities and confusing terminology in most categories. Running efficient proofs of concept with optimal success criteria requires a strong understanding of business drivers and technical capabilities. Furthermore, organizations need expertise to develop multi-cloud, data, service and application integration strategies. 

To close technical gaps, the challenge in 2021 is to stop emulating the technical strategies evangelized at the biggest and most successful technology companies.

Next steps: Most organizations don't have Google's talent, Netflix's culture, Spotify's agile team dynamics or a large bank's technology budgets.

To close the technical expertise gaps, most organizations should consider the following:

  • Seek outside digital technology experts, especially on digital practices and platform selections.
  • Consider low-code and no-code platforms to simplify application development.
  • Develop partnerships with service providers to accelerate application modernization efforts.
  • Channel investments to fewer strategic platforms and establish centers of excellence for them.
  • Grow analytics acumen outside of IT with citizen data science and proactive data governance.
  • Prove expertise on one public cloud and establish DevOps practices from Day One.
  • Focus internal competencies on understanding end-user needs, agile planning and delivery practices, and implementing integrations.

The upshot is that while all organizations must invest in data and technology capabilities, not every company will succeed -- or should attempt to succeed -- in trying to operate like a software company. The architectures, practices and skills required must be realistic and feasible for the organization. And -- good news -- platform vendors today are responding to the respective needs of non-software companies by competing to make digital technologies more accessible to mainstream organizations.

3. Old organizational structures, leadership styles hinder digital transformation success

Just as marketing departments must relearn customer needs in the COVID-19 era, IT organizations must recalibrate their implementation strategies, realigning the organization to enable greater remote work and collaboration is essential in 2021.

According to the aforementioned CIO study from KPMG, almost 70% of IT leaders believe that over 20% of the workforce will work remotely post-COVID-19, implying that agile teams following Jeff Bezos' two-pizza rule on team size will likely have one or two members working remotely.

Most IT leaders reacted to the COVID-19 challenges in 2020. In 2021, it's time to be proactive on organizational structure and leadership changes.

Next steps: It's doubtful that many leaders made long-term changes in their organizational structure and talent management processes to support a more remote and distributed workforce. These challenges need consideration in 2021, as most leaders believe they need to accelerate digital transformation programs. Getting an agile, innovative and efficient IT organization that can collaborate remotely is a challenge that will separate successful IT organizations from others that struggle to adapt.

The challenge in 2021 is making organizational structure changes that promote empathetic leadership. Many employees will be facing different stresses at home and life in 2021, depending on how much COVID-19 affects them and how fast vaccines make impacts. The last things IT leaders can afford are employee pushbacks on digital transformation strategies when the stresses outside of work affect their ability to focus and complete tasks productively.

In addition, digital transformation initiatives are only successful when change management programs enable employees to adapt to new technologies, workflow changes and data-driven practices. Beyond getting the IT organization optimized, CIO and IT leaders should play a role in broader culture changes and organization realignments.

A big part of the solution is to educate leaders across the enterprise on the value -- and the urgent need -- to adopt active listening skills, so that they can sense when people need help and when others are ready for greater challenges.

Promoting self-organizing, diverse and multidisciplinary agile teams should be a top priority for all enterprise leaders. Organizations that haven't figured out how to extend agile practices beyond application development and include people from marketing, sales, finance and operations as agile teammates miss key benefits. Agile teams are empowered to commit to the work they accept and adjust their collaboration practices based on what's needed to deliver that work successfully. Agile equips teams to make adjustments to the circumstances and challenges facing them.

Promoting empathy, adaptability, realistic goals and appropriately selected technology platforms are exactly what digital transformation leaders need to succeed in 2021.

Looking for more resources on digital transformation?

These articles provide timely information on digital transformation best practices, online learning courses, must-read books and examples of companies that have succeeded in digital transformation.

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Isaac Sacolick, president of StarCIO, guides companies through smarter, faster, innovative and better digital transformation programs that deliver business results. He is the author of the Amazon bestseller "Driving Digital: The Leader's Guide to Business Transformation through Technology," which covers agile, DevOps, data science and other critical digital transformation practices. Sacolick is a recognized top social CIO, digital transformation influencer, industry speaker, and blogger at Social, Agile and Transformation.

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