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Plutora Blog - Digital Transformation, IT Governance, Release Management, Software Development, Value Stream Management

Top 4 Digital Transformation Challenges (And how to solve them)

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Companies across industries are investing in digital transformations to improve productivity and deliver innovative customer-centric software. Digital native companies continue to reshape markets, leaving traditional incumbents vulnerable to disruption. As enterprises begin to explore their digital transformation pathway, there are four common challenges they face to a successful transition.

Top Digital Transformation Challenges

1. Culture

According to a 2016 Digital McKinsey survey, the most significant obstacle to achieving digital goals is cultural and behavioral challenges. Digital transformation requires significant structural and process changes. However, traditional incumbents have a strong organizational culture and can face resistance to implementing new workflows. From long-term employees to risk-averse managers to corporate politics, several cultural factors can hinder a digital initiative.

Organizations can confront these cultural barriers by creating a workforce transition plan as part of their digital transformation initiative. This plan should include communicating to employees the digital transformation strategy, objectives, and timing. It also should consist of identified skill gaps. Once identified, organizations can create opportunities to upskill existing employees to meet future needs. Workforce transition plans acknowledge that digital transformations are a marathon and not a sprint and manage cultural change throughout the process.

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2. Digital Strategy and Vision 

Companies are under a great deal of market pressure to deliver software applications faster to their customers. As a result, they tend to focus more on the tools, and operational end states that promise performance benefits instead of the value those performance improvements will provide to their customers and company. This tendency can create additional digital transformation challenges through abrupt shifts in organizational structures and business workflows without the internal alignment and readiness to operate within them. Many companies also often continue to rely on previous success metrics that do not apply to the new processes. These missteps can doom a digital transformation.

When creating a digital transformation initiative, it is imperative to begin by defining what success means. A well-defined strategy requires a vision for what the digitally transformed company will be as well as new metrics that will capture progress toward that vision. The digital transformation vision should incorporate the company’s existing core competencies and strengths and how to augment them through the conversion.

3. IT infrastructure and digital expertise

Many traditional incumbent enterprises rely at least in part on an inflexible technology stack that supports monolithic applications. This is a barrier to transitioning technologies because it complicates application release dependencies and adopting Agile+DevOps methodologies. At the same time, employees may not have the experience with new technologies required to transition IT infrastructure and applications and use those new technologies. 

To make progress toward their digital transformation without destabilizing the software development process, organizations can adopt a bimodal IT approach. This approach includes mode 1, which spearheads new technology and process adoption, and mode 2, which maintains existing practices. Bimodal IT enables organizations to manage the risk of digital transformation. Mode 1 teams are assigned new or supporting applications while Mode 2 team manage mission-critical applications. In this way, the organization can take a piecemeal approach to their digital transformation, determining the next step based on the measured outcomes of prior Mode 1 performance.

4. Organizational Structure

Many companies have created organizational structures that optimize a department’s internal objectives. In this structure, departments usually only provide status updates periodically to stakeholders. This silos data both within and across departments. Data is not visible across teams, feedback is on a defined cadence, and workflows are inflexible and unable to improve efficiency.

One of the most challenging components in converting to a customer-focused software company is the need to build continuous improvement into processes. Whatever the technology stack, workflows, and skillsets, the digital transformation initially implements will quickly become outdated. Developing the ability to respond rapidly to market changes requires a fundamental shift in an organization’s structure. Beginning with leadership, the organization needs to create workflows that align with the customer journey. These workflows shift a team’s focus from project to a single product, creating entirely new KPIs. Additionally, short feedback loops built into workflows identify issues quickly, making the team more nimble. The resulting autonomous, flexible team can continuously improve their process and react to customer feedback to deliver increasing application value

The major digital transformation challenges center around people

It is easy to replicate the technology, organizational structure, and workflow of digital native companies on paper. It can look as simple as updating a software version, but it is not. The technology may be straightforward, but people are not. Modern software development tools and processes enable new workflows that organizations need time to adapt to and optimize. Without visibility into the application release processes that deliver customer value, an enterprise is unable to effectively manage its digital transformation challenges. Plutora’s Value Stream Management platform delivers end-to-end visibility and AI-powered predictive insights across the portfolio, enabling the data-driven decision making necessary to navigate their digital transformation journey successfully.