The barriers to digital transformation – and how you overcome them

What is digital transformation?

Digital transformation means integrating digital technology into every area of the business. That changes how the company works and creates value for customers. Digital transformation happens on two levels:

• In the digitalization of internal processes and workflows (e.g. customer relationship management or internal project tools)
• In the digitalization of customer relationships (e.g. marketing, sales, support)

What benefits does digital transformation bring companies?

At a time when resources such as timber, steel, aluminium and plastic are becoming scarcer and more expensive and the minimum wage is rising, many companies are facing economic problems. The effects of the coronavirus crisis are also still clearly noticeable and are driving hundreds of companies into ruin. To come out of the crisis successfully, brands have to rethink. Greater efficiency, productivity and cost savings are the goals. Digitalizing work processes not only helps companies get through the uncertain period, it also equips them for the future.

Digital companies …

• … reach global growth markets through new business models.
• … achieve higher profits.
• … react faster to market changes and are more competitive.
• … have more loyal customers.
• … offer their employees greater flexibility.
• … are more attractive to highly qualified skilled workers.

Although the benefits of digital transformation are recognised in companies, putting it into practice often falls by the wayside. Sometimes that comes down to a lack of motivation among employees – because change is only possible when everyone pulls in the same direction. In this eBook you will learn how to bring your workforce with you through digital transformation, keep them motivated over the long term and establish changes as new routines.

Why is digitalization in companies so slow?

Defending existing structures

The problem

„We have always done it this way, so why should we change it?“ At 65 per cent, defending existing structures is the biggest barrier to digitalization for companies. When departments do not want to change their work processes, the reason is often convenience. Digital transformation requires a step outside your own comfort zone. New work processes have to be introduced, new ways of thinking learned. Often there is a great deal of uncertainty in the mix as well. Will I be replaced by machines? How will my day-to-day work change?

The solution

This is how you overcome this barrier: with honest and empathetic communication you can address uncertainties and fears and show the benefits of digital transformation. As an employer you can describe how digital technologies can take pressure off employees and support them – including with concrete examples of success from other companies. The understanding and motivation of your employees play a central role in whether the changeover works.

Digital transformation takes courage. Even if it is hard: companies have to free themselves from perfection and absolute certainty. Allowing change and actively shaping it is a challenge – but it pays off. Because anyone who stays with tried-and-tested structures and waits to see what the competition does will quickly be overtaken by them. And in the worst case that can even mean the end of the business.

Strict division of labour

The problem

Digitalization dissolves the classic division of labour. Teams move closer together and have to be restructured. At the same time new roles, positions and functions emerge, such as digital officer. The mistake many companies make is to see digital transformation as the job of individual specialist departments. According to the Fujitsu study, half of all companies assign responsibility to their IT teams. When pilot projects are set up around a single function and carried by one department, an overarching view is missing.

The solution

Because digital transformation affects every area of the company, it needs close cooperation between all specialist departments. Digital transformation is a matter for the boss, for managers and for employees alike. Connecting departments lets information flow faster, which results in shorter implementation cycles. New digital features can then also be brought to market more quickly, for example.

Managers lacking digital skills

The problem

Although the majority of decision-makers are enthusiastic about the possibilities of digitalization, they lack central skills for putting it into practice. According to the Fujitsu study, managers overestimate their own abilities. In reality they lack the skills to develop digital business models and an understanding of the complexity of digital transformation. Not least, this is down to the fact that departments compete in their plans, interests and priorities when it comes to digitalization. These often opposing views leave managers unsure and make management even harder.

The solution

Management levels need more digital skills. Decision-makers can either acquire them themselves through training. Or they bring a digitalization partner on board to advise them throughout the whole course of digital transformation on business processes, digital ecosystems and platforms as well as data security and system integration.

Employees lacking technical knowledge

The problem

Managers often see employees as the brake on digital transformation. They lack concrete technical knowledge, for example about particular analytics tools. But the necessary soft skills such as communication ability, flexibility or time management are also not sufficiently present and have to be developed.

The solution

In training courses, workshops and coaching sessions employees can learn how to handle new software. Intuitive systems that are easy to operate even for employees who are not technically minded help here. In the end it comes down to attitude – and to how it is conveyed. Employees do not hold digital transformation back. They need leadership.

Many independent pilot projects

The problem

For 65 per cent of managers, the challenge of digital transformation lies in the fact that the digital projects are not sufficiently aligned with each other. The digital strategy is unclear and confused. At the same time, budgets for larger projects are often not released. So departments are forced to try to get the most out of small projects.

The solution

So that companies do not lose themselves in an excess of small projects, they need an overall strategy with a concrete vision and key figures that define success. On that basis, individual measures can be planned, implemented and evaluated top-down. Larger, interconnected projects do need a bigger budget. But companies have to keep in mind that these are assessed against different criteria and can make a long-term contribution to digital transformation.

Why do companies withdraw from digital transformation?

In response to the problems of digital transformation, some companies decide to pull back. A lack of interest and commitment, or the belief that existing initiatives are enough, tempts them to put digitalization on the waiting list. By international comparison, Germany shows the lowest willingness to invest in digital projects. Progress is only being made in large companies and urban centres; small and medium-sized businesses are lagging behind on innovation.

The problem: right now no company can afford this standstill. Because digital transformation is also being forced by outside developments over which managing directors have little or no influence. While all stakeholders adapt to a digital way of living and working, companies that do not keep pace with the times fall behind and are overtaken by the competition.

Digitalizing too slowly can have drastic consequences for companies:

Reduced productivity and profitability

Over the past decade, employee productivity has risen by less than one per cent a year and fell again during the coronavirus crisis. Hospitality, industry and service providers are particularly badly affected. Against the backdrop of demographic change, this development is highly problematic.

A lack of appeal to qualified employees

Employers who to this day have not digitalized, or have done so only to a small extent, lose their appeal above all with younger generations of workers. Against the backdrop of the skilled labor shortage, digital transformation becomes vital for survival.

Financial losses

While the competition automates routine tasks and frees up capacity for its core business, companies that have not digitalized are at a disadvantage. That also shows up in customer satisfaction and can lead to customers switching to competitors. Financial losses are the result.

The crisis that will come with the disappearance of non-digital, inefficient sectors of the economy is closer for some companies than for others. For some, the order book still covers several years; for others the end comes sooner. Digital transformation can no longer be put off. So the rule is: strengthen the core business and use the resources that frees up to build a new digital business.

Is digitalizing at high speed a way out of the crisis?

Faced with the dangers that come with digitalizing too slowly, the idea of a fast changeover is tempting. Many companies would be glad to accelerate digital transformation. However, implementation at high speed is not to be recommended. Because it leaves less time for the strategy, planning and mobilisation that successful change processes cannot do without. Decisions about the future of the company must not be made in a rush; they need a clear forecast of results and the right resources. On top of that, a company that concentrates on digital transformation alone would neglect other priorities.

Conclusion: take new paths step by step

Continuous, gradual digital transformation makes the transition easier and gives customers and employees time to adjust to the change. It is worth working to the change management principle and creating digital KPIs that assess the success of each measure. These should not stand apart from one another but interact as part of an overall strategy. Depending on the skills of your managers, cooperating with competent technology partners can prove useful. We at clockin are happy to support you with our digital know-how.calss

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