The digital transformation track record has been ambiguous so far. While around 89% of businesses invested in enterprise digital transformation, they managed to gain only 31% of the expected revenue and even a smaller percentage of the promised cost savings. Since business leaders prefer the “low risk/high reward” approach to building their strategies, they naturally start questioning whether enterprise digital transformation is worth it.
The truth is that digital transformation for enterprise isn't just worth the effort. It's absolutely necessary for company growth. Whenever a mismatch between expectations and results occurs, the real root of the problem lies in belated action and insufficient understanding of symptoms. Therefore, this article will provide a deeper look into the definition of enterprise digital transformation and nine key signs that indicate the organization's need for an upgrade.
What is enterprise digital transformation?
On the surface, the definition of enterprise digital transformation is easy, intuitive even—it's the process of embedding digital technology into a business workflow. However, the superficial simplicity gives decision-makers the wrong impression and impacts their planning. For that reason, the approach to enterprise digital transformation has to be realistic and based on the most detailed definition of the term.
First of all, there are four important digital transformation facts that stakeholders need to keep in mind:
- Digital transformation isn't just one solution
Digital transformation is more than a digital product developed and integrated with the enterprise framework. It’s a part of a company strategy for fostering innovation and adapting to new conditions. To initiate the change properly, executives need to see enterprise digital transformation services as a complex and strategic process focused on a long-term impact.
- Digital transformation isn't finite
Some leaders see digital transformation for enterprise as a one-time endeavor, something they need to invest in only once while reaping the benefits for years to come. However, enterprise digital transformation is an ongoing process that includes adopting new practices, technologies, and perspectives. There is no limit or end date—as long as an enterprise can grow, its digital transformation roadmap will go on.
- Digital transformation normalizes change
Another way to mischaracterize enterprise digital transformation is to perceive it as an anti-change solution instead of a strategy that helps enterprises embrace and standardize change. Businesses believe that digital transformation is their safeguard against disruptions and a way to preserve their processes despite the change—but what digital transformation actually does is help them change without compromising their productivity or performance.
- Digital transformation updates more than technology
Since enterprise digital transformation is a constant work in progress, it goes beyond technological overhauls—it also encourages adopting a new, more flexible mindset regarding department management, communication, and the way employees interact with their workplace tools. Accordingly, if decision-makers want their adopted innovation to drive results, they need to lay some organizational and educational groundwork beforehand.
Considering these key elements, enterprise digital transformation can be described as a continuous ongoing strategy dedicated to integrating digital technology into the enterprise workflow to improve business processes and provide long-term value to employees.
9 key signs a company needs enterprise digital transformation
Numerous materials speak of the importance of enterprise digital transformation and the value it can bring to the workflow. But, when executives need to make a decision about their growth trajectory, talk is cheap—they want something they can apply to their actual environment and needs. In that case, nothing can underline the importance of digital transformation more than the state of the processes within their organization.
All enterprises need growth to exist. Digital transformation makes that growth happen. Therefore, executives need to keep an eye on the key indicators of their growing pains—once they emerge, it means it's time for change. There are many signs to remember, and knowing them all is vital.
1) Growing legacy system costs
As a rule, as long as a legacy system can serve critical business needs, it mostly remains unchanged, with only minor modifications along the way. This statement is particularly true for niche and government organizations. However, companies operating in other sectors will have to deal with growing legacy system maintenance costs and dropping efficiency sooner or later.
Additionally, the more cumbersome a legacy system becomes, the more it affects cybersecurity and data safety. The rigidity of infrastructure and lack of scalability make it much harder to connect new services or employ the latest data protection measures while providing cybercriminals with loopholes and exploits.
The longer you use an outdated legacy system, the more adjustments to the code you'll need. At some point, working with an obsolete code becomes similar to building a house of cards—adding new elements can compromise the entire system, leading to a loss of time and requiring you to invest even more money in fixing the damage.
Also, experts capable of working with particular outdated legacy systems are hard to find and even harder to hire and onboard as a full-time support team is necessary for keeping such systems functional. So, there has to be a point where you need to make a decision to stop modernizing and consider full replacement.
2) Increasing resistance to change
Around 70% of digital transformation projects fail due to enterprise employees' lack of cooperation or dynamic response. However, organizational resistance isn't the reason for such projects failing. It's actually the symptom of an enterprise in need of digital transformation—and when companies fail to implement change, it means that they hadn't addressed this symptom until it was too late.
Many companies enter a period of bureaucratic constraints and rigidity where their departments grow comfortable within established processes and stop exploring growth opportunities. Failing to notice this pattern would result in a disconnect between the leaders' vision and the departments' perception, leading to employees resisting the change or being unable to adapt to new tools and services.
The challenges of tomorrow will always be different from the challenges of today. A business needs to change and adapt—otherwise, it will collapse. This is why it must always be prepared to introduce and implement changes at a very dynamic pace.
Accordingly, when even the slightest change—whether introducing a new client support routine or a new service–is met with a lack of response, it's a sign that your enterprise lacks change management. Enterprise digital transformation aims to introduce new standards and flows, helping organizations respond and adapt dynamically and keep all departments included. For that reason, when you observe a continuous lack of growth and negative reaction to even minor innovations, you shouldn't give in to it—you need to oppose it and tackle it before it can affect your company's chances at growth.
3) Poor cross-functional synergy
A productive enterprise is one that performs as a single entity, with all departments supporting each other and timely exchanging valuable customer data, financial data, and impactful insights. Albeit such a synergy is achievable, there are bound to be road bumps along the journey.
But when executives keep running into problems caused by a lack of interdepartmental communication, it may be a sign of an enterprise straying away from the end goal and requiring some digital-powered assistance.
Bad department communication can occur for many reasons, but the effect is always devastating, even if every department is extremely good at its assigned job. For instance, the lack of synergy between a sales department and a customer service department leads to incomplete transfer of customer information, bad invoice timing, and even errors in legacy contracts—which, in turn, results in low productivity, low customer feedback, and general lack of clarity. So, no matter how strong your departments are on their own, if they can't communicate and collaborate, you don't have a strong enterprise. That should be remedied.
4) Lack of approaches to processing large amounts of insights
All enterprise processes (working with customers, vendors, and partners) always generate large volumes of data. The more data sources a company has, the more insights it has to process and analyze—but if its current data analytics tools and approaches can't keep up with the number of insights, there is a point in exploring enterprise digital transformation and ways to improve and accelerate data processing.
The mere process of working with customers can provide plenty of data to work with. However, if this information isn’t documented and processed properly, it can’t bring value to the enterprise—and it’s a growth opportunity missed.
Additionally, if a company works in several regions or has customers that operate internationally, having an outdated approach to data analysis and data processing can distort the entire customer history — instead of a comprehensive structure, there would be a puzzle of data gathered from different sources and carrying no value to the enterprise. The emergence of such issues means executives need to consider expanding their current arsenal with advanced digital transformation solutions.
Our most prominent case study shows how much of a difference enterprise digital transformation can make. Within our work for our client, we created a flexible platform that introduced a single enterprise accounting standard across all regions. With this change, all client's departments became able to receive information about any particular customer in a timely manner, creating comprehensive and actionable portfolios while organizing and managing area-specific data.
5) Limited use of cloud service
With a wide range of businesses having adopted cloud on an enterprise scale, companies that haven't yet leveraged the power of cloud computing find themselves at a disadvantage, missing several vital improvement opportunities.
- Increased flexibility. Cloud provides a wide range of tools and service models (IaaS, SaaS, PaaS) for a large variety of purposes, from collaboration to data management.
- Optimized cost efficiency. Using a cloud framework provides executives with greater cost visibility, allowing them to manage their services more efficiently and simply disable tools and platforms not currently in use.
- Process acceleration. Building an onsite infrastructure can take months. Meanwhile, building infrastructure in the cloud takes a couple of clicks due to the availability of solutions and services designed to make such tasks as easy and fast to complete as possible.
- Superior scalability. The option to adjust cloud infrastructure depending on the number of active users lets companies be more agile regarding their resource allocation as well as perform efficiently during most intense business periods, avoiding outages and server crashes.
Ecommerce businesses provide a good example of how much of a difference cloud transformation can make. For instance, retail businesses that didn't migrate to cloud experience website and service crashes during Black Friday more often than businesses that adopted cloud. As a result, the latter gets more sales and revenue, while the former spends more time fixing its online store and struggling against increased online traffic.
Concerning growth, cloud technology also offers immense value to large and growing companies, as its infrastructure makes it much easier to build and organize infrastructure approaches. With the help of cloud services, companies become able to optimize their onsite projects and systems (that often vary in terms of implementation and realization) and organize them within a single system.
If you understand your data and key enterprise problems but aren't equipped with cloud tools yet, then this is the direction you should explore within the first steps of your enterprise digital transformation strategy.
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6) Growing cybersecurity standards
Cybersecurity remains a constant challenge for large companies, corporations, and businesses that value the safety of their data. As cyberthreats keep growing and evolving, so do new safety guidelines and security measures—which means that organizations must always be able to implement and adopt them without being limited by the constraints of their current technology playbook.
Due to this, whenever executives notice that their current solutions can’t keep up with current cybersecurity standards, it’s their cue to evaluate their technological framework and research options for a major upgrade.
One of the key goals of enterprise digital transformation is ensuring organizations can respond to threats swiftly, explore data leak scenarios, and prevent actual data leaks by equipping themselves with the latest, most efficient solutions and staying up-to-date with data protection policies.
7) Innovation apathy
Companies that put innovation at the center of their focus strategy were proven to generate twice as much revenue as other organizations—which should be a solid motivator for businesses across the globe. However, the numbers show that only 8% of leaders use innovation to set a new performance frontier for themselves and their niche, while around 86% of companies still see enterprise digital transformation as a finite task rather than a continuous effort as they invest into improving parts of their businesses by implementing digital solutions.
Such insights reveal two distinct types of enterprises: the ones that embraced and integrated innovation into their workflow and those that reportedly adopted innovation but never actually progressed past its most obvious advantageous features.
While the former are in the process of maximizing the value of their digital transformation journey, the latter demonstrates apathy towards investigating innovation, which should be an alarming signal for tech executives.
Many companies aware of generative AI and other disruptive technologies don't actually use them to their full potential. For instance, they would use ChatGPT for content generation only and won't explore beyond that, remaining unaware of OpenAI's code-writing, legal analysis, and data management capabilities. These are non-obvious benefits—and when a company isn't interested in discovering them, it's a clear indicator that this company needs enterprise digital transformation.
8) Inefficient change management
Change management is foundational for every business, reflecting its ability to respond to new challenges and patterns. In some cases, companies explain their hesitancy to commit to digital transformation for enterprise without proper change management—-how can they integrate new digital solutions when they don't know where to get started?
What they don't know, however, is that by addressing the issue—no change management—they acknowledge that their business is a great candidate for digital transformation.
There is a misconception that only businesses ready for the change can proceed to digital transformation. The truth is that digital transformation is the beginning of an entirely new mindset and approach, so if your change management lacks something important, moving forward with enterprise digital transformation can fill these gaps. If a company doesn't have an established process of introducing and implementing changes, enterprise digital transformation addresses that issue and allows for building a solid yet agile framework.
9) Absence of permanent change KPIs
To continue the matter of change management, it’s worth mentioning its integral component: KPIs. Every vital process or strategy has its set of metrics for executives to track and
monitor. These metrics signify consistent progress, emerging issues, or potential setbacks.
Enterprise digital transformation isn't an exception—despite being closer to a constant WIP rather than a one-time program, it has a set of permanent KPIs that can be used to track the change's efficiency and profitability. So, when executives can't name the exact performance metrics they use to estimate the success of the implementation or if these metrics keep changing, it points to the lack of an established process.
The process of establishing KPI involves evaluating the quality of provided services, the time spent on providing services, the cost of implementing the change, and the infrastructure cost. All these metrics are only possible when there is a functional enterprise digital transformation model. Accordingly, if such KPIs are hard to identify and measure, it's an obvious sign that something must be changed.
Digital enterprise transformation strategy: main priorities
With core indications for enterprise digital transformation sorted out, tech executives now need to understand how they should approach enterprise architecture and digital transformation in the context of this new information. What should be prioritized at the beginning of the journey?
Assessing readiness for transformation
Any digital transformation roadmap will include building an innovation culture within the company and addressing any existing resistance issues. But, there is still value in doing some preliminary research and evaluating the employees' expectations and experiences with new technologies. Doing so in advance will help executives determine the best educational and onboarding strategy as well as shape a vision that will be shared across the organization.
The readiness for change is mostly measured through communication, feedback gathering, and identifying the essential components of organizational preparedness.
Thought leadership plays a large role in the success of digital transformation. How do you see the roadmap? Can you communicate the value of this journey? What kind of knowledge do you need?
Middle management support
Middle managers will be the ones collecting feedback and sharing information. Are you on the same page? Are they interested in the change? Do they have questions or suggestions?
Enterprise’s relationship with the change
If a company has a previous history of transformation, it can provide useful insights. Were past adjustments enough to deliver benefits? Were there any downsides? How did the change impact enterprise performance?
Connecting the present and future allows for a better understanding of the expected results. How is enterprise transformation going to impact your enterprise and employees? What is the desired future state? What would be the worst-case scenario?.
Addressing innovation adoption doubts
In some cases, even after the signs indicating the need for enterprise digital transformation are discovered, tech executives and decision-makers remain doubtful. Such concerns can be analyzed beforehand with the goal of tracking the root of the problem and seeing what causes the hesitation.
It's a rough example, but it is a good mental exercise. Imagine you're offered to change your current phone to a new, improved model. If you say "No," write down the reasons why. Is it because your current phone's features meet all your needs, including work-related ones? Is it because the new model sounds like something unfamiliar, a novelty you'll have to get used to? Is it functionality or personal bias that defines your decision?
Always investigate. Look deep into your concerns, study the technology you can implement, and look for non-obvious benefits of any innovations. The more you know, the more confident you’ll be about your next step.
Allying with experienced digital partners
In addition to already-defined aspects of enterprise digital transformation, there is one more to add: digital transformation is complex. It's a complicated process that requires dedication, integrity, teamwork, collaboration—and a perspective encompassing years of practical experience. For that reason, enterprise digital transformation is handled by a separate team that is familiar with the enterprise architecture and digital transformation practices.
As a rule, such teams are provided by digital partners that participate in roadmap building, enterprise digital transformation strategy mapping, solution realization, and long-term support.
A professional perspective and previous experience with enterprise digital transformation are essential for enterprises that must tackle their growth goals by implementing change management and equipping the most relevant innovative technologies. A digital partner will provide reliable consulting support, solid technological knowledge, and a robust skill set for covering each milestone of your journey —all while saving time on hiring, training, and onboarding new teams.
If you'd like to learn more about enterprise digital transformation partners and how they can address individual business challenges, let's chat! As a trusted partner of one of the Big Four leaders, we have been realizing and adopting innovative digital transformation strategies for businesses operating across the globe.
Our vetted experts will consult you on your questions, provide insightful suggestions, and outline the most detailed roadmap for your niche, enterprise type, and goals so you can proceed to advance your organization to the new frontiers of performance and productivity.