Digital Transformation and Its Challenges by Saabsoft — Dubai, UAE

Digital technologies and their tools are fundamentally changing not only the technological order, but also the economic system. Recently, researchers and the business community attention has been focused on digital companies born in the era of the modern Internet and offering value propositions based on digital technologies and their cross-border properties. But how multifaceted and heterogeneous the nature of the technologies is, so complex andmultidimensional is the process of their implementation, which transforms not only the company’s IT environment, but also the whole strategic management system. In the process of this transformation, companies face a range of challenges that can lead to devastating consequences. Understanding the sources and nature of these challenges allows to find ways to overcome them and transform them into competitive advantages.

Digital transformation (DT) is becoming a major topic for companies around the world. Companies that can’t adapt to the digital world are expected to become victims of ‘Digital Darwinism’, where incumbents can disappear and only the most adaptable companies, responding to technological trends, will survive to stay in the market, changing its competitive landscape.

A complete DT usually leads to new and unfamiliar operational processes and can changeentire business models.

McKinsey’s years of research into DT processes have shown that the success rate of theseefforts is consistently low: less than 30% success rate. The results of the pandemic 2020suggest that digital transformation has become even more difficult. Only 16% of respondentssaid that digitalization in their companies has successfully increased productivity andprepared them to support change in the long term. Another 7% say productivity has got better, but these improvements have not been saved. Even digital-oriented industries such as IT, media and telecommunications are having a hard time. Among these industries, the success rate does not exceed 26%. But in more traditional industries such as infrastructure,pharmaceuticals, services, digital transformation is even more difficult: success rates fall from 4% to 11% .

Evolutionary development of digital transformation DT is a rather fragmented field from an academic point of view. It is the resultof numerous and varied research areas such as the digital transformation of societies, industries, economies and individuals. Recent works related to DT have generally focused on studying its problems, driving forces and failures. Although the key role of a specialized transformation strategy has already been highlighted in the literature, it is still in its infancy, requiring deeper study to understand the transformation roadmap. Therefore, studying DT from a strategic point of view should complete the academic literature with valuable ideas, as well as help the top management of companies in understanding both the DT processes themselves and the underlying building blocks of this transformation.

It can be argued that society and the economy have reached the peak of the industrialrevolution, which bases on the experience of previous ones, but uses new digital technologies with ‘full force’, as a result of which both the development and the diffusion of innovations occur much faster than before. The new global world economy is characterized by dynamism, individualization and intensity of competition, and the cornerstone of success in it’s the introduction of knowledge, technology and innovation in products and services. The need for transformation is also a clear business reality that appears across all industries and affects companies of all sizes and types.

It is not surprising that most companies expect IT and digital technologies to contribute more and more to the strategic development of their business in the next decade. The roots ofdigital transformation can be traced back to the 1990s, when ‘transformation’ became a catchphrase for a variety of practices and organizational outcomes.

We can define the concept of ‘transformation’ through four parameters:

- Reengineering: increasing organizational efficiency while simultaneously solving theproblem of partially increasing labor force involvement;

- Restructuring: increasing efficiency without necessarily improving the organizational ability to achieve their long-term goals and seize opportunities;

- Renewal: increasing efficiency, effectiveness and innovation by empowering employeeswithout a clear focus on desired results;

- Regeneration: improving of existing processes and fundamentally revising the portfolio of existing capabilities. Business transformation was first linked to the area of strategic management in the 1990s

Already in the early 2000s, many authors set the rules and criteria for transformation thatcorrespond to IT technologies. believed that information technology is a transformational technology if it fundamentally changes traditional ways of business by redefining capabilities, processes and relationships. They should also include strategic obtaining to develop new opportunities or enter a new market.

Finally, IT usage should fundamentally change the way of performing tasks and enable firmsto operate in different conditions and in different markets, serve different customers, andfinally take a significant competitive advantage.

Like business transformations, F. Julliart and J. Kelly classified IT transformations into four constructs:

- Rethinking the company’s view of itself and the business understanding;

- The company internal configuration restructuring for the company flexibility;

- Activating the company’s activity to bring its value chain-let according to marketopportunities;

- Personnel updating in way to professional development.

In an attempt to combine the work of several authors on IT transformation, R. Morgan and K. Page suggest four stages of companies progress. They build on each other and increase risk and reward as companies move through them.

These stages include:

- Adaptation, when certain types of activities shall be automated;

- Evolution, when ICT alignment shall be created;

- Foresight, when the business network process shall be rebuilt;

- Renewal, when the field of activity shall be reformulated.

Later, numerous ideas about digital transformation began to appear in the literature. Thedigital transformation idea appears from a mixture of personal and corporate IT environmentsand encapsulates the transformational effect of new digital technologies.

Thus, the information revolution has recognized the strategic importance of informationsystems integration in order for companies to obtain and maintain competitive advantages. The internal business environment of the companies has been focused on cost savings, operational efficiencies and strategic differentiation from competitors.

Externally, companies have reaped the benefits of the increased cost and productivity of technology, which has led to the appearance of new products and services based on information technology and systems.

Many aspects of DT are revealed when trying to uncover the context of the cause oftransformation, and the latter can be divided into internal motives and external triggers.

Internally, companies are motivated to transform as a result of reduced sales and financial pressure on the current business. They also try to provide social and economic benefits totheir stakeholders, with a focus on their employees, who actively seek to communicate andcollaborate more effectively with the customers they serve. Today, employees want to work in digital companies and demand better IT technologies and more flexibility in their workenvironment. Operational factors are also linked with the digital transformation urge against the backdrop of expected efficiency gains (or closely related productivity gains).

Externally, digital technology plays a key role as a trigger for transformation. In particular, their speed of development, their marketing changes and the destructive potential of the industry, require companies quickly reaction and accumulation their digital resources. Due to the emerging integration of mobility and socialmedia, tech-savvy clients have completely changed their behavior and expectations of thecompanies they interact. More importantly, they expect that companies not only respond totheir requirements but also anticipate their future needs before customers define them.

Besides the customers, the general pressure is also coming from increased digital competition in a highly globalized world, which is another reason for companies to accelerate their transformation efforts.

Saabsoft has always been innovative and creative when it comes to making businesses digitally transformed.

By: Saabsoft