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5 Digital Transformation Challenges: Why SMBs Struggle to Deliver Change and What to Do About It 


According to research, in a post-COVID-19 world, a staggering 87% of digital transformation programs fail to achieve their goals. Does it mean that the majority of such initiatives are doomed to failure?

Digital transformation is a challenging process. Whether it is legacy software modernisation, new technology adoption, or process automation, any digital transformation journey requires a company to rewire how it works. 

The digital transformation journey isn’t easy

For a successful digital transformation, a company needs:

  • A clear strategy focused on business value, guided by a roadmap that details what is needed to deliver a project.
  • Strong talent and culture that fosters collaboration between all team members, including managers.
  • An adaptable operating model capable of scaling to support cross-functional teams that bring together people from across the company and externally.
  • Distributed technology that allows every team to independently access the data, applications, and software development tools they need.
  • Agile approach, enabling a company to efficiently reach its objectives through iterative cycles of design, development, feedback gathering, and solution refinement.
Requirements for a successful digital transformation
Requirements for a successful digital transformation

Acquiring these capabilities to launch a digital transformation process is a challenge in itself. The good news is that businesses can overcome barriers to digital transformation if they examine the experiences of others and learn how to address digital transformation challenges before they encounter them firsthand. 

Read also: How To Improve Customer Experience Through Digital Transformation

In this article, we’ll explore the five main challenges in digital transformation and see how companies can solve them. Let’s start by discussing the main concerns that stop businesses from investing in digital transformation projects. Later, we’ll discover how to overcome digital transformation challenges.

What are the key barriers to digital transformation? 

Digitalisation opens new opportunities, but many companies face significant hurdles in fully embracing them. For SMBs, changes can be particularly daunting. Examples of digital transformation show that companies often find themselves grappling with establishing a solid online presence, navigating through a sea of technology options, and making the most out of their data.

A Sage research reveals the biggest factors that stop SMBs from starting a digital transformation project:

  • Concerns about the return on investment. More specifically, 34% of SMBs in the UK worry about the profitability of investing in digital tools.
  • Lack of awareness about suitable digital solutions. About 41% admit to feeling lost in the maze of technological offerings, unsure about which ones would best suit their unique business needs.
  • Digital skill gap. Nearly a third (30%) of SMBs struggle with breaking old habits and transitioning their staff to embrace new processes, despite acknowledging the potential benefits of doing so.

Many of these barriers stem from knowledge gaps. Whether it’s worrying about cybersecurity or simply not knowing where to start, businesses often find themselves stuck when it comes to digital transformation.

The overview of the main concerns preventing small and medium businesses in the UK from digital transformation. Source

Here’s a closer look at the five main challenges of digital transformation, along with potential solutions drawn from real-life case studies.

Five major digital transformation challenges and solutions

What are the biggest challenges of digital transformation? Here are five transformation challenges SMBs have to overcome when deciding to modernise their core processes. 

1. Limited resources

The first challenge businesses face, especially at the start of their journey, is the lack of resources: they often find themselves balancing tight budgets and limited manpower. 

To tackle this challenge and optimise their operations, SMBs need a comprehensive financial strategy to approach resource allocation with precision. This means identifying their main objectives and addressing priority issues head-on. To ensure smart decision-making, companies can dip their toes into the water by conducting experiments like feasibility studies or pilot programs. This allows them to test new ideas and technologies on a smaller scale before making substantial investments. 

Another strategy is to focus on initiatives that deliver quick wins. By prioritising projects with the potential for early success, such as implementing a loyalty program to boost customer retention, SMBs can maximise their return on investment (ROI) and build momentum for further growth. 

To implement these quick wins, SMBs should consider building Minimum Viable Products. An MVP is a stripped-down version of a product with only essential features for customers’ core needs. This approach allows businesses to save resources while delivering value to their target audience.

How to address the challenges of limited resources for digital transformation
How to address the challenges of limited resources for digital transformation

A case in point: Kittle Group’s MVP initiative to pioneer change in business processes 

Let’s take Kittle Group as an example. It is a bid writing consultancy based in Berkshire. They write bid proposals to help companies in the public sector win tenders. Kittle Group decided to invest in new digital solutions to streamline project management activities related to bid writing, a process that was previously managed manually.

Their primary concern regarding process automation was making sure it fit within their time and budget constraints. To minimise expenses and accelerate implementation, the company chose to develop an MVP that they could seamlessly integrate into their operations. The MVP allowed them to optimise core business processes without requiring substantial investments. Now the company is looking to transform this tool into a SaaS product, to offer a solution to other businesses within the bid writing industry. 

SMBs can embrace the same strategy and start implementing a digital transformation initiative by investing in an MVP. Once this MVP starts providing business value, they can continue scaling the product or turning it into a SaaS solution. 

2. Legacy systems and data migration 

One of the most significant digital transformation challenges involves legacy systems, which can pose difficulties when updating and integrating with modern systems. These outdated systems often operate in silos, making it challenging to streamline processes and leverage data effectively. 

Switching from outdated systems to new digital solutions involves the risk of disrupting core business processes during the transition. Many SMBs rely on these systems for essential functions, such as inventory management, accounting, and customer relationship management. Replacing them with modern alternatives is not always feasible or practical, as it can lead to downtime, data loss, and operational chaos.

To tackle this challenge, SMBs must strategize the transition meticulously. This includes thoroughly evaluating current systems, pinpointing areas for enhancement, outlining a vision for a new solution to support future expansion, planning an effective change management strategy to mitigate disruptions, and ensuring the secure and accurate transfer of valuable data to the new systems.

Legacy software modernization checklist
Legacy software modernization checklist

A case in point: How London Women’s Clinic enhanced operations across 12 branches by transitioning from legacy to a cloud-based system

For a long time, London Women’s Clinic relied on an MS Access-based system to store patient treatment data and manage sample delivery to its branches and partner clinics across the UK. However, the legacy system was too complex and accessible only via an old-fashioned network file-share mechanism, which led to errors, non-compliance, and data losses.

To solve this, the company decided to fully reimagine the solution’s structure and migrate the new system with all the existing data to the cloud. 

We picked a phased approach to implement this project. Here is a quick overview:

  • First, we developed an MVP of the new web solution mirroring the functionality of their legacy system while tailoring it to better suit the company’s business processes.
  • Then we performed the data migration process to efficiently move all the data from the old solution to the new system. 
  • Finally, we introduced the solution to the London Women’s Clinic’s staff. To ensure their acceptance, we tested the concept, measured satisfaction rates, collected valuable feedback, and iteratively improved the solution based on that feedback.

iMatch, the newly developed web-based clinic management solution, enabled London Women’s Clinic to streamline order processing, logistics, and treatment reporting, assisting clinical staff across 12 branches and partner clinics in their daily operations. Every day, it handles hundreds of fertility treatment orders and manages an inventory of over 2,000 sperm bank donors, resulting in significant time savings for clinic staff who would otherwise be engaged in manual tasks. You can read more in our case study.

How iMatch work
London Women’s Clinic removed legacy system limitations by modernising their old system into iMatch and migrating existing data to the cloud.

Transitioning from a legacy solution to a new system can introduce numerous problems and negatively impact client experience. Yet, through a well-executed legacy software modernisation project designed to minimise disruptions, you can safeguard business continuity.

3. Rigid processes

Another common challenge that can hinder business growth is a rigid development process. Inflexible methods can stifle innovation, slow down project delivery, and hinder adaptability in the face of evolving market needs. They can lead to missed opportunities and frustration among customers and stakeholders alike.

To tackle this challenge, businesses should shift towards Agile methodologies, which prioritise collaboration, flexibility, and responsiveness. Embracing Agile methods means empowering cross-functional teams to make decisions independently, enabling faster responses to changes and opportunities.

Implementing Agile can be done through practices like the Agile Software Development Life Cycle (SDLC) that emphasises continuous iteration and customer feedback. Breaking down projects into smaller, manageable chunks allows businesses to deliver value more frequently and adapt to shifting priorities effectively.

Adopting DevOps practices, which emphasise collaboration between development and operations teams, can further enhance agility. DevOps automates tasks, reduces manual errors, and enables faster deployment of updates and features, streamlining the software delivery process.

How agile and devops work together
How Agile and DevOps work together

Let’s see how businesses overcome the rigid process challenge in practice. 

A case in point: Helping GC Business Finance adopt Agile SDLC to maintain adaptability in the face of changes

GC Business Finance, a non-profit loan provider based in Greater Manchester, offers loan options to businesses that traditional lenders have turned down. When the COVID-19 pandemic hit, the UK government introduced the Bounce Back Loan Scheme (BBLS) in response to businesses’ financial struggles. Consequently, lenders such as GCBF had to swiftly assess and distribute loans, offering timely financial assistance to businesses.

To quickly adapt to the new conditions and optimise their business process, the company decided to develop a custom loan management solution that had to be fully operational within a few weeks, given the time-sensitive nature of the newly introduced loan scheme.

By adopting Agile methodology, our team helped GCBF timely automate the entire loan lifecycle with a custom solution. Comprised of a customer-facing web portal and an admin panel, the new system was fully aligned with the BBLS and allowed GCBF to stay relevant in the quickly evolving market. Read more in our case study.

GCBF UI for business loan application
The newly built solution allowed the company to quickly adapt to the COVID-era business landscape and offer lending services to businesses amidst the crisis.

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4. Lack of digital leaders

A leader is a key person in driving change within a company and ensuring that digital projects align with the company’s objectives. It’s not just someone who is formally responsible for the project’s success. Being a leader takes much more than that. 

A leader needs to collaborate closely with both the internal team and external partners, ensuring clear communication and mutual understanding to deliver a change management strategy successfully, all while helping the team overcome all transformation challenges. 

One of the most remarkable examples of a true leader is Satya Nadella. Under his leadership, Microsoft underwent a profound digital transformation that reshaped the company’s strategy, culture, and products. 

But when Nadella assumed the role of CEO in 2014, the future wasn’t so bright. At that time, Microsoft faced significant challenges, including declining relevance in the consumer market and a slow response to the shift toward cloud computing.

Nadella’s role in changing this situation was recognizing the need for digital innovation. One of the key strategies Nadella implemented was a strong focus on cloud computing, particularly with the development of Microsoft Azure, which positioned Microsoft as a leader in the rapidly growing cloud market. 

Microsoft also formed strategic partnerships with other tech companies and embraced open-source technologies to drive innovation and expand its ecosystem. 

During Satya Nadella’s leadership, Microsoft collaborated with industry leaders such as Adobe, SAP, and Salesforce to deliver integrated solutions. These partnerships enabled Microsoft to leverage complementary strengths and provide seamless experiences across different platforms and services. 

Microsoft’s adoption of open-source technologies during Nadella’s tenure, including contributions to projects like Linux and Kubernetes, demonstrated its dedication to fostering collaboration and interoperability across the broader tech community.

Following Nadella’s example, leaders should champion digital transformation initiatives and actively drive cultural change, all while encouraging innovation and close partnership among teams.

5. Difficulty in selecting the right tech

Selecting the appropriate new technologies for digital transformation is a critical decision that will greatly influence the final product. There are three primary options to consider: 

  • Off-the-shelf software 
  • Custom software
  • Low-code platforms
Off the shelf vs custom software vs no-code platforms
Off-the-shelf vs custom software vs no-code platforms

Off-the-shelf solutions are typically faster to implement and more cost-effective, but they may not seamlessly align with specific business needs. Custom software, on the other hand, offers precise alignment that, however, often requires more time and greater financial investment. Low-code platforms serve as a middle ground, enabling rapid development with reduced coding requirements. 

When deciding what technology stack to use, you need to consider both your current and future organisational needs to ensure that the chosen technology can scale alongside your business.

We specialise in custom software development, and usually define the tech stack during a product discovery phase when we elicit business requirements and evaluate possible technology options needed to implement them. We prioritise technologies that can scale with the business and adapt to changing needs and requirements over time. Said that, we often start with a proof of concept before committing to full-scale implementation. A PoC can typically be implemented within a few weeks before we even start coding. Here is one example.

In our partnership with Kittle Group, we developed a mid-fidelity prototype for a future project management tool. It allowed us to test technical feasibility and gather initial user feedback that guided our development efforts. The proof of concept ensured alignment with the technical constraints of the project and allowed us to commit to a full-scale development without costly changes later on. 

Bottom line

Lack of working capital, time, and expertise are holding SMBs back from adopting new technology and modernising their core business processes. However, these transformation challenges all trace back to a common root cause: a knowledge gap.

The journey towards digital future is full of challenges. However, by implementing strategic approaches such as prioritising objectives, embracing experimentation, and cultivating an Agile mindset, organisations can overcome digital transformation challenges more effectively.

We offer digital transformation services to support you at every step. Contact us if you need help implementing your project.

Frequently asked questions

What problem does digital transformation solve? 

Digital transformation efforts address various challenges faced by organizations, including:

  • Inefficiencies in operations
  • Outdated technology 
  • Limited access to data insights
  • Poor customer experiences
  • Difficulty in adapting to changing market needs

Ultimately, digital transformation enables organizations to remain competitive, innovate, optimize performance, and better meet the needs of their customers.

What are the six pillars of transformation? 

  1. Experiences: Delivering exceptional customer experiences builds loyalty.
  2. People: Without the right talent, your organization will struggle.
  3. Change: Change is inevitable – and it might be tough.
  4. Innovation: Innovation propels digital transformation by creating an open environment for problem-solving.
  5. Leadership: Change always comes from the top.
  6. Culture: It takes culture for successful transformation.

What is the biggest enemy of digital transformation? 

The resistance to change within an organization.

What digital solutions do companies use to automate their processes?

The list can be large, but the most common digital technologies include workflow automation platforms, BPM systems, ERP, CRM, web portals, and HRIS. 

Do you provide help implementing digital transformation programs?

We sure do! We help companies develop bespoke software, modernise legacy systemsmigrate to the cloud, build customer-facing portals, and much more. You can learn more about our services here.

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Tags : Digital transformation

The author hareem

Hareem is a freelance writer with 4 years of experience in the tech and SaaS space. She has a knack for turning technical jargon into engaging stories and has helped many companies convey their brand message with clarity and impact. Outside of work, she enjoys spending time with family or trying out new recipes in the kitchen.

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