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PHOTO: Cedric Fox

As part of its year-end predictions, Gartner forecasted that through 2021, digital transformation initiatives will take large traditional enterprises, on average, twice as long and cost twice as much as anticipated.

As CMSWire contributor Lisa Loftis noted, Gartner said large organizations will struggle with digital innovation as they recognize the challenges of technology modernization and the costs of simplifying operational interdependence. Smaller, more agile organizations, by contrast, will have an opportunity to be first to market as larger organizations exhibit lackluster immediate benefits.

“Large organizations will struggle with digital innovation as they recognize the challenges of technology modernization and the costs of simplifying operational interdependence. Smaller, more agile organizations, by contrast, will have an opportunity to be first to market as larger organizations exhibit lackluster immediate benefits,” according to a Gartner blog. So do smaller companies have an advantage in the digital transformation race?

If You Can't Beat 'Em, Buy 'Em

“In the past, emerging disruptors tended to emerge and compete against the large enterprises' R&D department to grab market share and then either die or become the next large enterprise and incumbent,” Mark Campbell, chief innovation officer at Trace3. “Today, we’re seeing large enterprises intentionally scaling back R&D, letting new challengers enter the market, fight it out amongst themselves and then the large enterprise buys the winner. This is so common today, that we dubbed this phenomenon 'outovation' (as opposed to innovation).”

Outovation can be seen in today’s largest traditional tech companies whose fastest growing product lines are almost exclusively from acquisitions, not internal R&D, Campbell added. Unfortunately incumbents who rely on this approach tend to strangle the startups they buy, which keeps the whole cycle going.

Related Article: What You Can Do to Build an Innovative Ecosystem

Legacy Tech Poses a Barrier, But Culture Looms Larger

Legacy technology provides a tremendous hurdle for large organizations seeking digital transformation, said Casey Bankord, managing director at Clareo. “Digital technology is often built on completely different paradigms than installed legacy systems in established companies. Past examples include cloud based versus on-premises, or desktop versus mobile. Adapting to new technological paradigms is a change management effort that is often a daunting, expensive task. In contrast, small companies are starting with a clean slate — which gives them a significant head start."

Another hurdle is that traditional enterprises have much more to lose if things go wrong, resulting in heightened attention to things like cybersecurity protection, flawless integration with a wide myriad of existing systems, and the burden of training the workforce to adapt, Bankord added. 

“Successful implementation of new technologies is not typically a technical challenge as much as it is a social one,” Bankord said. “Having worked with dozens of companies trying to reinvent and transform themselves in a digital age, it is the difficulty of aligning everyone’s interests, incentives and support that proves to be the most difficult challenge of all. Digital innovation is often intellectually and technologically possible but politically and culturally impossible."

Related Article: The Elephant in the Digital Transformation Room: The Long Tail of Legacy Tech

More Mature Organization at Risk

“As we head into 2020, I absolutely see the divide between leaders and laggards growing larger, especially in large, more mature organization,” said Jeff McPherson, chief digital officer at SilverTech. “It’s not because laggards haven’t embraced or adopted digital, it’s because it’s really difficult to drive change that impacts an entire organization and make forward progress quick enough to keep up or close the gap on the leaders with such a fast-changing pace of technology.”

Larger organizations have certainly adopted the ideas and concepts of moving forward digitally and embracing the customer experience priority, McPherson explained. But the issue is that in doing so and in building up to this for a few decades now, organizations have created multiple initiatives in their companies, each with its own systems, data repositories and processes with which individual departments interact with customers.  

“Now that those organizations are attempting to truly adopt a newer version of digital innovation and modernization, they are struggling with not only technology and systems challenges but internal process challenges as well where their own teams need to rebuild and rethink how they interact with customers,” added McPherson, noting that in particular larger utilities, banks and hospitals struggle, especially with getting started.

The delay comes from internal management structures that rely on multiple leaders for different tasks and initiative — a better solution would be to select a central person to head the program and work between teams.

Related Article: 3 Ways to Change Company Culture to Support Digital Transformation

Lack of Digital Transformation Standards

Whether it’s a team or an individual, lack of knowledge is another challenge, said Sri Manchala, founder and CEO of Trasers. “Data shows that over 90% of company leadership don’t understand transformation or its urgency, leading to a lack of prioritization and investment in that area. Misunderstanding its importance, leadership isn’t connecting digital transformation efforts to their key growth initiatives." 

One of the problems is there is no singular definition of digital transformation or standards on how to best achieve it, Manchala added. 

“Understanding where and how to begin the process should be the primary focus of every organization,” Manchala said. “Every day businesses produce a rich amount of unique data across every business unit. Knowing how to harness that data to use as a roadmap in undertaking initiatives is key to digital transformation success.”