Digital Transformation in the Business World: Opportunities and Risks

With smartphones, plenty of connected devices, and the new generation of technology-native consumers who no longer separate online and offline worlds, it should be clear by now that digital transformation is already upon us. For businesses, it’s no longer a matter of choice — it is a change one must adjust to, regardless of the industry. Even industries like construction and manufacturing have to embrace the change now. They may have to do it differently from software development companies, but after all, no one canceled business specifics yet.

Of course, launching a process of digital transformation in a company is always associated with risks. According to a study from McKinsey and Company, 70% of the companies that initiate this process fail. On the upside, digital transformation offers a lot of opportunities today’s businesses simply cannot afford to miss on any longer. So, it goes down to acknowledging the associated risks and understanding how to minimize those to reap the most benefits for your business — something we’ll discuss now in more detail.

Increased Efficiency vs Security Risks

One of the primary benefits of digital transformation is a chance to automate some of your company’s routine processes, making overall operations more efficient. The associated risk of relying on technology, and especially cloud storage, is a decrease in security. Besides an increase in cyber attacks and the emergence of new malware forms, businesses observe a rise in phishing and social engineering attacks — especially when mobile devices are concerned.

A potential solution is implementing employee training programs and teaching staff members to identify potential security risks. You do not necessarily have to hire a digital transformation manager (even though it is not such a bad idea). Still, an investment in increased security and employee awareness programs is something that must be done — especially if many team members on your staff are not a part of the digital native generation.

Besides educating employees, hiring security specialists for regular software assessment, network monitoring, and, if necessary, incident response is essential. This should be done as soon as possible because, according to Thales 2023 report, almost half of surveyed employees have already noticed a significant increase in cyber attacks.

Employee Productivity vs. Cultural Resistance

Another benefit of digital transformation is a chance to boost employee productivity — as long as it is not met with too much cultural resistance. But even if it is not, technologies change rapidly these days, so it is, once again, essential to invest in staff education and up-skilling.

The shift in digital tech and automation concerns most team members in your company — it is as vital for the role of social media manager as it is to that of a sales rep or software developer. So, besides educating team members about relevant technologies, creating an innovation-friendly environment in your company is crucial. Here, a lot will depend on effective communication strategies within a business — it is vital to convey why the new tools are helpful and how everyone can benefit from using them.

In turn, the success of this shift, along with the communication efficiency, will heavily rely on leadership support. Any organizational changes should happen from the top down, so all the chief executives must actively engage in this process.

Data Transparency vs Data Privacy

Digitalizing most paperwork in the company ensures greater data transparency and easier access for all team members. On the other hand, this process has additional data privacy risks — not only regarding security breaches, even though they constitute the most significant part of this problem. Information leaks can lead to severe disruptions in company operations and even damage its reputation.

Of course, the most obvious solution is to start embracing this shift in data transparency. For example, many major corporations are making their employee salary ranges public to fight potential discrimination in the workplace. Publishing the company’s annual sustainability reports is also a common practice today.

There are many benefits to such open, transparent business operations — for one, it boosts the company’s accountability and, if everything is handled right, builds a trustworthy brand image. On the other hand, your employee data also becomes public, which is often an invitation for competitor businesses to recruit your current employees — among other things.

It’s possible to eliminate high employee turnover by creating a safe, friendly environment for all your team members. But you must remember that increased business transparency means your staff has easier access to information about other businesses and, as a result, more employment options — something people might consider if they are not entirely happy with your work environment.

Increased Vendor Pool vs Challenges of Finding Reliable Partners

Another benefit mixed with a potential drawback is the vast vendor selection in the corporate digitalizing tech. Choosing a reliable partner can be overwhelming because a suitable vendor(s) should have what it takes to streamline company operations, enhance user experience, reduce costs, and fulfill the company’s strategic intentions. On the other hand, going with unreliable vendors can result in too many associated problems.

So, before starting a digitalization journey, companies should consider their technology providers carefully. No matter if you are looking for a cloud storage service or a customer relationship management system, the developer should have enough software expertise to meet your current business demands. It is also essential to consider the pricing model because, with today’s choice of software, there is always a risk of encountering some subpar products or services that operate on a hidden costs model.

Before making any decisions about contracting a technology provider, do careful background checks. Search for customer reviews and testimonials, and properly research the tool’s functionality. Pay particular attention to support plans and any associated further maintenance.

Increased Value vs Growing Complexity

Digitalization and globalization add value to most partnerships and open up new business development opportunities. However, these global partnerships, while highly lucrative at their start, can be, at any moment, affected by many social and political factors.

Think about global trade and supply chain disruption during the COVID-19 pandemic or the consequences of Western sanctions on Russian goods after Russia’s military invasion of Ukraine. Even now, it’s hard to predict or fully estimate the consequences of Russia’s aggression on the EU and US markets because these political processes are still in development.

No doubt, not every company is directly dependent on global supply chains — but in today’s economy, even businesses that do not have any direct ties to these systems are still affected indirectly. So, it is also important to be constantly prepared for any social and political changes. 

Acknowledging these risks and initiating all relevant processes to minimize them are the surest path to a true digital transformation of the company, along with the benefits this transformation brings. The last advice is to see digital transformation as something other than a single, one-time process. It is a constantly evolving mechanism, with new technologies and opportunities arising on the go.

Still, understanding the risks and potential benefits we face now and implementing relevant security measures should already help with the initial stages of up-scaling your company and its team; the rest should happen more or less naturally as new technologies emerge.

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