The Rewards and Risks of Fast Tracking Digital Transformation: RisksBy Kamran Khalid, Head of Business Analysis Group & Head of PreSales at NETSOL Technologies Inc. on 10-05-2021
The majority of twenty-first-century entrepreneurs understand the value and necessity of digital transformation. However, if you ask them to describe it, too many will associate it with the haphazard deployment of emerging technologies that may or may not work together.
In reality, digital transformation entails overhauling a company's processes through careful planning, consultations and trainings in order to increase business efficiency and profits by combining old and new technologies. While this appears to be a simple task, a McKinsey & Company survey found that only about a third of these efforts result in long-term improvements. Rushing into such drastic changes in an organization is not recommended as planning, resource training and implementation takes time. Hence, understanding and preparing for the roadblocks that businesses might face while fast tracking digital transformation can be key to successful transformations.
Rushing into transforming only front-end and customer facing facets of business and risk of forgoing real change:
When it comes to deploying technology quickly in order to follow the industry trend, it can be tempting to concentrate only on the front-end and customer-facing aspects of your company. As a result, businesses have been known to confuse a redesigned user interface with digital transformation. While providing an excellent customer experience is critical to a company's success, it should be accomplished primarily by facilitating structural changes within the company.
According to McKinsey & Company, companies that implemented self-serve technology for internal use by employees and partners were twice as likely to report a successful transformation as those that did not. This was also true for companies that used digital tools to make information more accessible within the company, resulting in a better communication, decision making and consequent customer experience. Hence, in order to fast tracking digital transformation, decision makers often opt to only transform front-end facets of businesses. This will not bring long term return on investments. Real change comes from within which can take its due time; culture, suitable tech stack, info sharing among other things!
Risk of having an untrained and dissatisfied human capital due to rapid transformation of core business processes:
When most people think of the challenges of fast tracking digital transformation, security and budget concerns are among the first that spring to mind. Nonetheless, the biggest obstacle most business organizations face in the whole process has little to do with technology and more to do with human capital.
One of the most common challenges businesses face in the digital transformation process is to bridge the skills gap, which can lead to employee resistance. Any new technology brings with it the need for training and reskilling, which isn't necessarily a bad thing. In fact, it can be a great way to encourage your employees to think outside the box and solve problems in new ways. It's no surprise that organizations that encouraged employees to try new ideas had a 1.7 times higher success rate than those that didn't, proving the case for a human-centric approach to digital transformation. Therefore, it is highly recommended to ensure that the training of human capital is prioritized if change management wants to really transform their businesses successfully.
Risk of high variance in budget estimates leading to overspending or not spending in the right areas of transformation:
Budget constraints were a concern for organizations across the board when it came to digital transformation, according to an Altimeter Group survey of 300 technology and business stakeholders.
The whole process is widely thought of as being a costly affair, but it does not have to devastate your budget. Careful, long-term planning can go a long way toward lowering your costs and increasing your return on investment. However, far too many businesses fall into the trap of wanting to do everything quickly and independently. On the other hand, strategic partnerships with proven vendors and service providers can significantly reduce the costs, and give you access to a pool of knowledge and resources at a fraction of the cost of infrastructure and talent. This will also help save valuable time and reduce risk of failure. As for the unidentified factors - and there will be many - the tried-and-tested best practice of including your CIO in the budgeting process, adopting an agile approach, and setting aside contingency funds will go a long way in ensuring a smooth transition. Rushing into budget planning for digital transformation and not involving experts in the whole process can lead to rapid cash out flows and overspending.
Risk of going digital without leadership and lack of vision:
Digital transformation is not just the transformation of technologies and processes, rather it has to be a transformation of entire organizational culture. Leadership is the single most important factor in determining the success or failure of digital transformation, more than technology itself. Digital transformation requires an overhaul of company culture and strategy. Without proper vision and direction, digital transformation is bound to fail. Leaders need to identify the areas where transformation is required, engage and empower employees and tie the transformation objectives with that of organization's long term strategic goals.
The responsibility of making right decisions at the right time while driving the transformation process falls on leadership's shoulders, ultimately, defining the outcome of the transformation. With too many startups disrupting the market and big organizations jumping to either collaborate with them or acquire them, timing of digital transformation is becoming more pertinent in terms of leveraging the benefits. If decisions are not taken at the right time, by the time transformation is completed, market may have evolved to something else and the transformation may not bring the desired outcomes.
Risk of going through transformation without a focused approach:
Another reason business experience a failure in digital transformation is when departments are working in silos rather than working as a unit. Transformation needs to be brought into the organization as a whole involving all departments rather than different departments taking initiatives on their own. Digital transformation owners need to ensure a proper strategy is in place which involves all business areas.
When it comes to strategizing digital transformation, senior management need to start with achieving small wins before going for a major transformation. Starting too many projects at once often leads to a lack of focus and mismanaged projects, ultimately, resulting in failure of all projects altogether.
If you have any questions, please reach out. We, at NETSOL Technologies Inc., will be pleased to discuss more about how your organization can effectively fast track digital transformation.
Kamran Khalid, Head of Business Analysis Group & Head of PreSales at NETSOL Technologies Inc.
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