Digital transformations boost efficiency and increase revenue.
If the company you represent hasn’t already started a digital transformation, its top management team is probably thinking about it. But how many teams have the knowledge and experience required to fully understand the process? Probably not many.
The Hinge Research Institute’s recent report, The Digital Transformation Imperative: A Research Report for Professional Services Firms, surveyed 136 executives and decision-makers to answer the following:
• What is digital transformation?
• Why is digital transformation important for private companies?
• How do organizations overcome the key barriers to digital transformation?
What Is Digital Transformation?
For private companies and their boards of directors, no two digital transformations are alike. Each takes a different form depending on the industry and unique requirements of the business undergoing the process. But here’s a general definition of the process:
Digital transformation uses digital technologies and design thinking to enhance business processes, products and client experiences. The goals are to improve the value of products and services for clients, boost operational efficiencies, expand competitive advantages and increase growth and profit. Digital transformation can improve multiple areas of business and often crosses traditional functional lines.
Zooming in a little closer, most digital transformations fall into the following three categories:
• General office processes. This is the most general area of digital transformation and applies to most businesses. It could involve moving backup data from on-site servers to the cloud, or it may involve a shift to cloud-based applications like Microsoft 365.
• Specialized products or processes. This encompasses specialized technologies that relate to a specific industry or business. For example, a law firm might install AI software that increases the speed of drafting legal documents.
• Marketing and business development. This includes advanced tools for optimizing efforts related to marketing, sales pipelines and business development. For example, a marketing department could implement new tools for keyword research/SEO, social media networking and email marketing.
Why Is Digital Transformation Important for Private Companies?
The 2022 Digital Transformation Imperative study found that firms choose to digitally transform in order to achieve the following goals:
• Improving customer and client experiences
• Bolstering operations and efficiency
• Automating and streamlining processes
• Increasing sales and revenue
The next question is whether firms are achieving these digital transformation benefits. In the majority of cases, our study found that digital transformation works. Survey participants who have been through it reported the following benefits:
• Operational efficiency. 76% reported improvements.
• Client satisfaction. 70% reported increases.
• Brand awareness. 69% reported improvements.
• Top-line revenue. 64% reported increases.
• Bottom-line profits. 61% reported increases.
Only the smallest percentage of companies reported decreases in any area of performance — and in three out of five categories, no decreases were reported. Considering the slim chance of performance decreases, these results make a compelling case for digital transformation.
Overcoming the Barriers to Digital Transformation
Despite these clear advantages, only about 12% of firms in our sample have completed their own digital transformation. The study showed that firms are reluctant to engage in the process due to four key barriers.
Let’s look at the barriers to digital transformation and their potential solutions:
Lack of knowledgeable, experienced staff. Approximately 45% of companies said that they don’t have access to staff with the skills required to carry out a digital transformation. Especially as a result of “The Great Resignation,” organizations are finding it more difficult and costly than ever to source the top digital transformation talent they need. And 40% of firms revealed that — even when they had the right talent on hand —these individuals were too busy working on billable client-related tasks and couldn’t devote additional time to digital transformation activities.
Solution: Third-party firms that specialize in digital transformation firms can provide expertise in planning and executing a successful transformation.
Lack of funds. Around 40% of companies said they couldn’t afford the cost of digital transformation. This is unfortunate because, for many organizations, digital transformation could be the fastest way to increase revenue and generate more capital.
Solution: Plan and carry out your digital transformation project in a series of phases. Complete transformations with the greatest potential for increasing revenue first. This will spread out costs over time, while generating the additional capital you need.
Lack of support from key leadership. Approximately 25% of companies claimed that a lack of support from upper-level management was preventing digital transformation.
Solution: The best way to overcome challenges related to lack of support is to educate leadership on both the need for and the payoff from digital transformation. Another solution is to start small with a pilot project to demonstrate the transformation process and its benefits. After you achieve one small success, it will be easier to cultivate larger support.
Help CEOs Understand Digital Transformation Challenges
When it comes to digital transformation, it’s important for directors to keep in mind the real challenges that CEOs and managers are facing on the ground. With this understanding, it becomes apparent why only 12% of firms have carried out a digital transformation — and why leadership at your organization could be dragging its feet on the implementation of revenue-boosting technology.
Lee Frederiksen is managing partner at Hinge.