Product School

Three Barriers to Successful Digital Transformation (And How to Overcome Them)

Nathan Thomas

Author: Nathan Thomas

January 9, 2023 - 7 min read

Updated: January 24, 2024 - 7 min read

Many venerable companies who once defined themselves as innovators are now stuck using out-of-date tech that is hampering their growth. Internal voices and pressure from stakeholders are impelling change, but inertia and other forms of resistance are preventing this. If this sounds familiar, then the world of Product Management can offer solutions, no matter your industry. Here we’ll examine three barriers to successful digital transformation, and how to overcome them. But first, let’s look at the why:

Why Digital Transformation?

Digital transformation means complete modernization: Bringing your entire organization online and using the best technology available to increase efficiency across all departments. When successful, digital transformation can ensure your competitiveness by increasing your overall efficiency and your agility to drive Product-Led Growth and adapt to a changing environment.

What is Digital Transformation?

A photo from NASA of the earth at night, with city lights webbing across the surface

Digital transformation involves digitizing all data and integrating information and systems that previously sat isolated in different boxes. With the internet now ingrained in our daily lives, you’d think digital transformation would already be sorted at most major companies, but the reality is starkly different. The 2020 pandemic impelled digital transformation as companies were forced to go remote and provide online services. But even in 2021, IBM reports that “60% of  US and UK CTOs and CIOs believe that their “IT modernization program is not yet ready for the future.”

According to Siemens Advanta, over 60% of digital transformations fail—they run over budget, miss deadlines, and fail to provide the boost in growth, efficiency, and productivity that they ought to. The world of Product Management can offer solutions and help you ensure that your digital transformation not only happens but also delivers on its promise to empower your growth and competitiveness in a changing economy.

Here are the three biggest barriers to successful digital transformation we have seen, and how Product Management and a Product Mindset can be deployed to overcome them and ensure that your digital transformation is a success. 

Barrier One: Lack of Strategic Alignment

Digital transformation is a means, not an end. Improved efficiency is a “How” not a “Why.” Your “Why “is the strategic objective of your business, and it’s this overarching purpose that the “How” of your digital transformation must serve. Start by making a thorough audit of your current systems, and consider how much is lost at each stage due to the inefficiencies, redundancies, and blindspots of your current system. Then, start thinking about the potential of digital transformation to not only correct for this lost revenue but to potentially significantly increase it thanks to Product-Led Growth.

Digital transformation can allow you to unleash a new level of growth by making your Product your number one sales and marketing tool. This approach is best pursued in an agile manner and requires data and a mindset of experimentation to ensure success. Because of this, Product-Led Growth is achieved through digital transformation that is strategically aligned with your organization’s goals. If you are pursuing digital transformation with Product-Led Growth as your destination, then you’re going to find it much easier to select the right tools and integrations to achieve your goals.

Barrier Two: Internal Resistance

person with hand up to camera, covering their face. hand is in focus, body and background are out of focus

Things have been done this way for years, perhaps decades, so why change? Some version of the old “if it ain’t broke, don’t fix it” maxim is likely to come up when you’re dealing with people who are used to getting their job done a certain way. One way to overcome this is, of course, through edict, however, cooperation is much better than compliance: If you can get enthusiastic buy-in across the team, you’ll find it much easier to roll out the changes you need to. 

The first step toward achieving buy-in is to communicate a compelling “Why.” It’s not sufficient to simply say that your tech stack needed an upgrade. Instead, connect it to the mission of the company and explain how the greater efficiency you unlock will impel you towards your goals. Having explained the big picture, you can now explain how the transformation you are proposing will make life easier for your employees in the long run. Greater efficiency. Less wasted effort. They will advance quicker to their KPIs with less hassle and more opportunity to exceed their targets. Finally, think about what fears this new change may bring to light: Are people concerned about being made redundant, or about no longer being able to thrive in a new and unfamiliar environment? Like a good Product Manager, listen to each stakeholder, understand their concerns, and over-communicate at every stage.

Examples of how you can win over different personality types within your organization:

Achieving Buy-In Example: The Tech Laggard

This person is resistant to all changes in technology. In this case, communicate to them that, while there will be some relearning available during the adjustment period, in the long run, their job will get much easier. Explain that training and IT support will be constantly available, so their questions will always be answered. Reassure. 

Achieving Buy-In Example: The Whizz Kid

This person has probably been pushing for digital transformation for years, but “wouldn’t have done it this way.” They probably have a million questions about why you chose this tool and not that one. Being able to give a strategic rationale for these choices will help you win them over, as will empathy. Consider providing them an opportunity to feel a sense of ownership in the process, perhaps by asking them to support you in a more proactive way in the transition.

Achieving Buy-In Example: The Overcapacity 

Someone who always insists on being stretched to their limit may see the digital transformation as merely more work to do, and work that they will resist because it is not directly connected (as far as they can see) to their goals. Like Laggard, explain that support is on hand, and in the long term, it will decrease their burdens not increase them. And, be sure to communicate the strategic purpose of what you are doing. This brings us to…

Barrier Three: Short-Term Budgeting 

The fantasy writer Terry Pratchett tells a parable about a man who can only afford to buy cheap shoes. Every year they fall apart, and so each new winter he needs to buy a new pair, eventually spending more than the expensive shoes would have cost. Meanwhile, the man who could afford to buy an expensive pair has spent less money, and his feet are still warm and dry. The point is a simple one in this context: Short-term budgeting can have expensive consequences in the long run, in terms of cost and also in terms of lost opportunities.

When budgeting for a successful digital transformation, think of your investment not only in the context of the jobs that need to be done but also as an investment in your future potential for Product-Led Growth. Over time, the dollars you spend on technology, training, and integration will come back to you not only in revenue gains due to increased efficiency, but also by the increased surface area you have created to sell your product. By making your product a growth engine, you will have freed yourself from previous constraints and opened up whole new horizons of potential for expansion and customer acquisition. 

When once-innovative companies get stuck in the past, there are the 3 barriers to digital transformation that usually stand in the way.

Updated: January 24, 2024

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