Top Barriers to Digital Transformation: Part 2

In our last post, we talked about the slow pace of digital transformation, identified five top barriers to digital transformation, and reviewed the first barrier: the cost of maintaining legacy systems.

Today we’ll continue what we started and look at barriers 2 and 3: organizational silos and lack of effective change management(Edit to add: You can find Part 3 of this series here)

2. Organizational Silos

The term “functional silo syndrome” was first coined in 1988 by Philip Ensor, who worked for Goodyear in organizational development, and has since come to be referred to as “organizational silos”. This highly-descriptive agricultural metaphor refers to the phenomenon of departmental information systems that are incompatible with other organizational subsystems that should be related. Thus, information that should be shared freely across departments remains trapped in their respective systems. Even when a lot of information is accumulated and stored, it is effectively walled off from other parts of the organization like grain in neighboring silos. Organizational silos are one of the primary obstacles to effective data-driven decision making.

Despite the fact that organizational silos have consistently been identified as a top organizational challenge for 30 years, the research shows that little to no progress has been made in eliminating organizational silos from standard business models:

The data is clear. Organizational silos have been a persistent challenge for decades, but many organizations have failed to address them in a substantial way:

  • 70% of companies do not have integrated channels or a complete customer picture, and are not able to speak to customers​ in a single voice across multiple channels
  • 41% of CX professionals identify organizational silos as a significant barrier to seamless customer experience
  • another 34% of CX professionals name difficulty in unifying different sources of customer data as a primary barrier to good customer experience

So what is happening? Why are organizations kicking the same can down the road without ever addressing the problem at hand?

Perhaps one of the reasons for this is a fundamental disconnect between decision-makers and front-line service providers. Most high-level decision makers are simply not aware of the impact that organizational silos have on their customer experience. A provocative study called the Iceberg of Ignorance found that senior executives were aware of only 4% of day-to-day problems, department heads were aware of 9%, employee supervisors 74%, with only front-line employees being aware of 100% of the problems that affected product and service quality.

In other words, the leadership of most organizations is out of touch with the daily reality of customer service and with the barriers to frictionless customer experience; Fundamental decisions about the future of the organization are being made by people who are almost totally unaware of the problems experienced by employees and customers.

But why does this happen? Why are the problems of organizational silos and disconnected leadership so common? Perhaps it’s because most companies still are not making plans for how to manage organization-wide change. There are very few companies who aren’t at least investigating, if not enacting, digital transformation initiatives. But while most companies have at least embarked on their digital transformation journey, most companies have failed to implement comprehensive change management strategies to help them manage that transformation.

3. Lack of (Effective) Change Management

Change management as a management strategy has been around since 80s, yet lack of adoption of change management is still consistently identified as a primary obstacle to digital transformation – despite the fact that there are proven benefits of implementing change management programs:

  • initiatives that with “excellent” change management are six times more likely to meet objectives than those with poor change management (Procsi)
  • simply moving from “poor” to “fair”​ change management increases the likelihood of achieving objectives by a factor of 3. (Procsi)

A proper approach to change management has never been more important; it used to be that large organizations could expect one major change every 36 months. But in the digital era, organizations are facing “faster, more complex, more interdependent, and more cross-functional change than ever before”. (Procsi) So if the benefits of change management are clear, and the need for change management is evident, what is keeping organizations from adopting change management strategies?

There are three primary reasons:

  1. Change is unsettling, and in organizations that struggle with outdated legacy systems and organizational silos, getting all of the parts of the organization to work together in order to enact comprehensive, organization-wide change can feel like herding cats. Getting all of the various departments within an organization to agree on a common course of action can be a challenge, and that challenge is frequently exacerbated by the difficulty of data and systems that are incompatible across departments.

In other words, it becomes a chicken/egg dilemma; the lack of change management is itself a barrier to enacting change management.

  1. Another difficulty is that change management is not a new management strategy, and most change models are rooted in traditional, pre-digital thinking. With change management strategies, it is typical to speak of change initiatives as a fixed period of time or defined set of tasks leading to a fixed outcome. But the state of digital means that it is impossible to predict what an organization’s digital strategy will need to look like even a year or two years from now. The only certainty when looking to the future is more change, because in the digital era change never ends.

That kind of thinking is unfamiliar for many of those versed in old-school change management; change management programs are supposed to have clear end states! But digital is reorganizing the business landscape as we know it. Change management is no longer a road that navigates a set of obstacles between two clear points, because digital transformation is no longer a destination that can be arrived at. It is impossible for an organization to plant their flag in the sand, proclaim that they have transformed, and be “done” with digital transformation.

Digital transformation is a road leading ever toward the horizon. Truly embracing digital transformation means embracing the idea of always being in a state of change.

  1. Change needs to come from the top (with employee involvement)

In order for change to be meaningful and lasting, change initiatives need to start with organization leadership, and need to have the involvement and commitment of executives to seeing change initiatives through. But leadership from the top is nothing without employee engagement and involvement. Executives need to re-engage with front-line members of the organization, listen to their concerns, and empower them to set out key concerns and areas of accountability that need to be recognized in the digital transformation process.

Ineffective change programs that come from leadership will be met with employee resistance and will be either only partially implemented, implemented only for a trial period, or not implemented at all. Even change programs that are strategically sound but are that are made without consideration for how the change process will impact front-line staff are destined to fail, because front-line employees will always need to prioritize their immediate concerns of assisting customers. If your change program is seen as a barrier to providing effective customer service, the overwhelming likelihood is that it will not succeed.

The difficulty with this, of course, is the fact that most change programs do not have the involvement of C-level executives – which is a difficulty we will cover in our next post.

You May Also Like

About the Author: Anna Kreider