The digital transformation roadmap

By now, digital transformation may seem like old news. Some fundamental transformation technologies have been around for well over a decade and almost every company has some form of digital strategy in place. Digital transformation is something like digital evolution for companies, and similar to biological evolution, there is no end. There is not, and in fact cannot be, a final destination for digital transformation, which is why staying on top of transformation trends must remain a priority among the C-suite.

Business decision-makers still see digital transformation as a central component of their company’s growth strategy. About half of C-level executives develop digital strategies to differentiate themselves from their competitors, while an additional 28% believe digital transformation projects are necessary to keep up with industry peers. But the clearest indication of the importance of digital transformation is the 64% of executives who, in 2021, recognised that their firm must create an entirely new digital business in order to remain economically viable.

Unsurprisingly, digital transformation continues to be a top priority among IT executives - those most often in charge of bringing an organisation’s digital strategy to fruition.

Investments and market growth

The IDC has projected spending on digital transformation technologies and services to reach $2.8tn by 2025. Based on the IDC’s data below, the compound annual growth rate (CAGR) of the digital transformation market worldwide was 9.34% between 2017 and 2021. On this projection, the CAGR would be 13.3% from 2021 to 2025, to hit a value of $2.8tn by the middle of the decade.

Cloud computing, AI, data analytics, automation and cybersecurity have emerged as the five essential workplace technologies based on C-suite investment priorities. While each of these technologies is at a different stage of development, the extent to which they complement and enable one another holds possible implications for their ability to attract future investments.

Take for example AI: firms can invest in AI solutions, but they need data to make AI function. Digital data isn’t exactly physical, but it doesn’t exist in the ether either — it needs a physical storage place. For the sake of cost and convenience, most firms have decided that at least some of that storage place should exist in the cloud. So, now the data has a housing place, but of course companies don’t just need raw data, they need data that has been organised, categorised and analysed. And all of this new digital scaffolding needs to be protected. As more and more digital technology is adopted, there will inevitably be greater investment in cybersecurity.

Challenges and opportunities

So, what do organisations hope to gain from all of their digital efforts? A lot of it has to do with improving experiences for employees and customers. But firms also see opportunities to develop new products and services, as well as improve old ones. Happier, more productive employees, better customer experiences, optimised products and services — in the broadest sense, digital transformation is about growing and improving the business.

But of course there are many hurdles on the way to digitalisation. Budget was the biggest barrier to digital transformation in 2021 and firms are likely still facing significant budgetary constraints in 2023 as macro-economic conditions have generally declined.

One last observation about the challenges businesses face in digital transformation is that three of the top five obstacles in the chart above can be thought of as ‘human problems’. Lack of skills, lack of clarity and lack of buy-in roughly translate to gaps in the labour market, a lack of clear communication and therefore effective management, and absence of a company culture that prioritises and embraces digital initiatives. Similarly, two of the top four expected benefits from digital transformation concern employees and customers — again, human issues. 

It should be clear to those in charge that a successful digital transformation requires much more than the right technology, but a little reminder never hurts.