*By Kristina Awwad

Research Methods

Dr. Ariana Cela

Department of Business Administration, University of New York, Tirana, Albania

9 January 2023

* Student in MSc. Business Administration at the University of New York Tirana, Albania.
 EXAMINING THE CHALLENGES OF DIGITAL
TRANSFORMATION
Kristina Awwad
Department of Business Administration, University of New York, Tirana, Albania

Abstract
Purpose – Digital technologies have played a major role in reshaping business models, and many
firms seek digital transformation to retain competitive advantage. However, firms are facing multiple
challenges (barriers, tensions etc..) during digital transformation. This paper focus on identifying
those challenges from a broad variety of firms that underwent thru digital transformation so that to
proactively and effectively counteract them for a successful navigation and achieve the maximum
benefits of the Digital transformation (DT).
Design/methodology/approach – The methodology used across 5 research papers (Brunetti et al.,
2020), (Simbi and Holmstrom, 2022), (Cichosz et al., 2020), (Henriette et al., 2016) and (Ellstrom et
al., 2021) was mainly exploratory research based on qualitative methods and literature review.
Practical implications – The identification of challenges can contribute to other firms in similar
conditions (industry, country, region, business model readiness etc..) emerging field of DT with a
mindset on navigating proactively the transformation process and furthermore successfully.

1. Introduction
Digital transformation (DT) has become an important topic in recent years as organizations seek to
adopt new digital technologies and transform their processes and business models to attain competitive
advantage Liu et al. (2011). DT involves the integration of digital technologies into all areas of an
organization, leading to fundamental changes in how the organization operates and delivers value to
customers. The impact of DT is being felt across a wide range of industries and job roles, and it is
crucial for organizations to understand the challenges and impacts of DT in order to successfully
navigate this process. Despite the growing attention on DT, there is still a need for a better
understanding of the optimal strategies for managing DT processes and for further empirical research
on how DT unfolds hence it is important for stakeholders to approach digital changes in a systematic
manner. The adoption of specific actions for "local intelligent digitalization" through interventions
involving multiple stakeholders and scales of intervention has become increasingly common in regions
and macro-regions (Cooke, 2001; Coenen et al., 2017). In this context, a company or firm faces
specific challenges (e.g. Evangelista et al., 2018) based on the country, region, industry, company size,
business model readiness etc. This entails the need to elaborate suitable place-based strategies to tackle
the idiosyncratic challenges caused by digitalization (e.g. Coenen et al., 2017) according to the
relevant “regional knowledge domain” (Cooke, 2001), industry or company. However, it would be
difficult to thoroughly identify all the challenges on digital transformation to find relevant studies for
our research questions due to the limited amount of literature available hence we are focused only on
the main challenges named as “challenges of digitalization”. Therefore, brings the following research
questions:

- What is Digital Transformation? How do you define it?

- Why do firms undergo Digital Transformation?
- What are the main challenges that firms undergo during Digital Transformation?

The overall research approach for these papers includes a review of relevant literature throughout a
wide range of firms and identify the respective challenges, barriers, tensions and elaborated in the
Methodology section. The aim of this paper research is to contribute to other firms in similar
conditions (industry, country, region, business model readiness etc..) emerging field of DT with a
mindset on navigating the transformation process proactively and successfully. However, there are no
specific challenges per industry, country, region, company size, business model etc. and there are no
strategic actions which can be identified as key areas for future research.

2. Literature Review
2.1 Digital Transformation
Digital transformation (DT) is a process that involves the integration of digital technology into all
areas of an organization, fundamentally changing how it operates and delivers value to customers. DT
has been identified as a key driver of the fourth industrial revolution (Alcacer, 2016; Sommer et al.,
2017) and has been the focus of significant research in recent years in both practice and academia
however, it lacks on the proper definition (Morakanyane et al., 2017; Osmundsen et al., 2018).
Particularly, with an emphasis on the impact of DT on organizations, economies, and societies. DT is a
complex process that is multidimensional and can be driven by a variety of factors, including key
technologies such as social media, mobile devices, analytics, cloud computing, and the Internet of
Things Technologies. There is a lack of consensus in the literature on the definition of DT, with some
scholars viewing it as a strategy, while others view it as a process or a transformation of business
models.
However, the main outcome of DT is to create value including operational efficiencies, improved
customer experiences, enhanced business models, strategic differentiation for remaining competitive
advantage (e.g. Berman and Marshall, 2014; Morakanyane et al., 2017) and is a continuous and
evolving process that varies depending on the digital maturity of the implementing firm. The DT is an
ongoing process that evolves over time (Marakanyane et al., 2017; Cichosz, 2018), and its specifics
will vary based on the digital readiness of the organization implementing it. Digital readiness, also
referred to as "digital maturity," refers to how well an organization has adapted to operating in a digital
business environment (Kane et al., 2017, p. 3). Research by Westerman et al. (2014) suggests that
companies with a higher level of digital maturity tend to perform better financially. The concept of
digital maturity can be divided into two areas: digital capabilities, which measure the extent of an
organization's digital initiatives, and transformation management capabilities, which encompass
managerial elements that drive DT (such as leadership, culture, change management, and governance).
 Companies that have strong digital capabilities, but weak transformation management capabilities are
referred to as "Fashionistas," while those that have strong transformation management capabilities but
weak digital capabilities are known as "Conservatives" (see Figure 1). To achieve a high level of
digital maturity, or "digital mastery," it is necessary to develop both capability dimensions (Cichosz et
al., 2018).

Figure 1.
Digital maturity matrix

However, it is important to note that even within the category of "Digirati," companies can exhibit
different levels of digital mastery. The process of DT is highly context-specific and can take a unique
path (Remane et al., 2017, p. 2). Therefore, it is important for companies to assess their current level
of digital maturity using a framework such as the one proposed by Westerman et al. (2014) or Kane et
al. (2018), understand the nature of digital disruption and its impact on customers, employees, and
other stakeholders, identify any challenges or barriers to progress and drive DT forward through
implementing effective leading practices.

2.2 Challenges
Firms of all sizes and industries, during the implementation of DT due to being a complex process, are
facing what’s named “challenges in digitalization” that might limit or impact the overall business
success. Identifying these challenges or barriers, understanding their nature and causes so that to
effectively address them is crucial, accordingly plan the strategic action for a successful navigation in
Digital Transformation. Fisrtly, we will identify a type of challenge that is considered as “tensions”
that arises during digital transformation initiatives from the contradictions between interdependent
elements (Schad et al., 2016, p. 6), a contextual trigger such as rapid change and scarcity, and the
inherent complexities of the transformation process. These tensions can fall into four categories Smith
and Lewis (2011): learning, belonging, performing, and organizing. Learning tensions are commonly
experienced during periods of change (Jarzabkowskiet al., 2013) during change and involve transitions
from past to new knowledge (Smith and Lewis, 2011) and can involve contradictions between radical
and incremental change (see also Agarwal et al., 2022). Belonging tensions concern issues of identity
and the balance between being distinctive and homogenous (Smith and Lewis, 2011). Performing
tensions arise when there are conflicts between collaboration and competition (Smith and Lewis,
2011). Organizing tensions involves contradictions between different organizational designs and
objectives. During digital transformation, tensions may arise related to the process of learning, sense
of belonging, and organizational structure. These tensions may be caused by the need to adapt to new
knowledge, balancing individuality, and conformity, and managing conflicting goals or approaches.
Secondly, we will emphasize the challenges coming from the “people”, that can hinder the success of
digital transformation (DT) in firms and can pose both challenges and opportunities for the successful
implementation of digital transformation. Prior research has identified issues with changing employee
mindsets and beliefs as well as difficulties in building necessary IT capabilities Vogelsang et al.
(2019a). However, it is also recognized that having a strong digital vision with a strong digital
governance and culture supported by empowered, knowledgeable and collaborative employees is
crucial for the successful implementation of digital transformation initiatives. Third challenge deals
with another type which is on “failing to capture potential in DT” that may delay the success of digital
transformation initiatives, including a lack of understanding or appreciation of the potential benefits of
digitalization Parviainen et al. (2017), difficulties in adapting organizational habits and ways of
working, and a lack of alignment between digital projects and the overall digital strategy of the firm. It
is important to prioritize digital projects based on their alignment with the digital strategy, fully utilize
the tools and systems implemented through digital transformation and establish a unified digital
infrastructure to facilitate better communication and flexibility in the workplace. The fourth challenge
is related to the “difficulties on human factors” that includes employee’s resistance to change which
can trigger a major obstacle to digital transformation. It is crucial to create an environment in which
individuals feel their ideas are valued and encourage collaboration across business units and
departments. Developing a unified digital infrastructure can also help facilitate better communication
and understanding of the entire value chain, allowing for the exploitation and development of
competencies.
Fifth challenge deals with the risk related to “data security breach”. According to Schwertner (2017),
IT and data security risks are often perceived as the main obstacle to digital transformation. Ensuring
that systems integrated into a corporate digital infrastructure meet requirements for IT and data
security is crucial, especially when it comes to handling customer data and protecting personal
information. It is important to continuously develop and regularly evaluate the fulfillment of these
requirements.
Finally, is on identifying the “main challenges of digitalization”. Firstly, we divide them into three
broad categories: (1) market challenges, (2) organizational challenges and (3) economic and societal
challenges. More precisely, market challenges include the transformation of specific businesses
models (Matzleret al., 2018), such as the evolution of servitisation (Coreynen et al., 2017; Paiola,
2018), the impact of digitalization on supply chains (Caputo et al., 2018) and producer–customer
relationships (Fremont et al., 2018) and the potential relocation of firms’ operations in high labor cost
countries (reshoring) made possible by the increased degree of automation of production processes
(Wiesmann et al., 2017). Organizational challenges mainly deal with knowledge management,
grounded in the increasing accessibility of document repositories and information-based platforms
(Yoo et al., 2012). Economic challenges basically refer to the impact of new digital paradigms on
labor demand (Kaivo-Oja et al., 2017; Dengler and Matthes, 2018), while societal challenges deal with
the impact of environmental sustainability, notably resource efficiency (Beieret al., 2017) and energy
consumption (Tiefenbeck et al., 2018).
In brief, this research paper is essentially focused to the challenges & barriers that firms go thru during
DT named “challenges of digitalization”. Given that the academic literature is not specifically focused
on identifying all the challenges that firms are going thru, according to their country, region, maturity,
company size, business model readiness etc.., this can be e limitation hence an opportunity for future
research to further identify additional challenges based on all the variables mentioned above per
country, region, industry, company, business model and maturity level etc. as well as the strategic
actions respectively.

3. Research Methods
According to our literature review on the following research papers (Brunetti et al., 2020), (Simbi and
Holmstrom, 2022), (Cichosz et al., 2020), (Henriette et al., 2016) and (Ellstrom et al., 2021), we
noticed that it was used an exploratory research based on qualitative methods (conducted semi
structured interviews as well as face to face) and literature review, further elaborated below (see Table
1). Table 1 presents challenges encountered by a wide range of firms across different industry sectors,
country, region, company, etc. along with the respondents’ profile and the respective methodology
used in collecting the data. The respondents work in different variety of firms with different domain
and role. The interviews were mainly focused on:

- Introduction - Introducing themselves and their current position.

- Digital Transformation General Questions - What is their experience with Digital Transformation.
- Digital Transformation Identification of Challenges and Barriers – Define the challenge or barrier.

After transcribing the interviews, data analysis was executed respectively.

Methodology Category No# Country/Area Respondents Key challenges
Interviewed
 Qualitative Companies Total 34 Tyrol, South Entrepreneur; CEO; Developing and updating
(Tyrol-9, Tyrol, Veneto chairman; marketing and digital
South Tyrol - export manager; vice- skills within companies,
13, Veneto - president; chief HR officer public
12) and strategic markets officer administration and
- entrepreneur; senior organizations in the
partner; managing director; education industry.
CEO; chief operating officer;
marketing manager and head
of R&D department -
entrepreneur; head of digital
innovation; HR director;
CEO; chief innovation
officer; ICT and strategy
director; marketing manager
and digital manager
    Head of IT department, CEO Continuously adapting to
Public Total Tyrol, South -department director; head new
administration 16=Tyrol(3)- Tyrol, Veneto of IT department; former digital technologies with
South executive director; digital cutting-edge infrastructu
Tyrol(8)-
manager; CEO; coordinator and
Veneto(5)
- chief operating officer; services
energy division director; ICT
director; administrative
officer; HR manager
Education and Total Tyrol, South Professors of innovation Developing synergies of
research 10=Tyrol(3)- Tyrol, Veneto management and innovation medium- to long-term an
industry South economics and scientific innovative technological
Tyrol(4)- director of a university - solutions involving differ
Veneto(3) dean of the school, professor stakeholders of the publi
of ICT, rector and director - and
university manager and private industry
professors in economics, ICT
or math and robotics
Quantitative Based on the 4300 N/S N/S Competency traps, lack o
research made experimentation and
by Kane et al. iteration, dealing with
(2018) ambiguity and constant
change,
buying and implementing
the right technology
and lack of org. support
develop employee’s skills
Qualitative Based on the N/S N/S N/S Missing skills (IT and
research made process knowledge),
by Vogelsang technical barriers,
 et al. (2019a), individual barriers (fear
Vogelsang et job loss, transparency, lo
al. (2019b of control), organization
and cultural barriers
(keeping
traditional roles, no clea
vision, resistance to
change, risk
aversion, lack of financia
resources, lack of time)
and environmental barrie
(no standards and no law
Qualitative Based on the N/S N/S N/S Internal barriers and
research made management practices
by Toytari et (culture,
al. change of mindset, belief
(2017) identity), lack of resource
and
capability gaps to provid
smart services and extern
barriers (industrial buyin
culture and relationships
reputation and brand
image, unwillingness to
outsource, nonmatching
solution visions)
Qualitative CEP Publicly 2 Poland Marketing and IT Directors
owned 8.000
EE Complexity of logistic
network and underlying
processes
Lack of resources
T&L Publicly 2 Worldwide CIO Central and Eastern including skilled resourc
owned Europe Technology adoption
146.000 EE Distribution and Production Resistance to change
Center Manager Data protection and
security breach

T&L Publicly 2 Worldwide Managing Director and

owned Supervisor IT
15.000 EE
 T&L Publicly 1 Worldwide General Manager
owned
100.000 EE

T&L Family 2 Europe Managing Director,

business Innovation Center Manager
10.000 EE

T&L Family 2 Europe Head of Project Management

business Office
1.400 EE CEO Contract Logistics
Domestic Distribution

T&L Family 2 Worldwide Managing Director of

business European Logistics
30.000 EE IT Manager Poland

T&L Publicly 2 Worldwide CIO NE Europe

owned European Head of
72.000 EE Operational Excellence

T&L Publicly 2 Worldwide Head of Innovation Services

owned for Europe and Middle East
47.000 EE Sales and Marketing
Director

Qualitative Forest 9 Sweden respondents with different Knowledge flow,

exploratory Technology
Company
Qualitative Energy Firm & 16
(focus groups) Advisory Firm
level of experience
N/S One corporate manager
Five BU managers
Three department-level
managers - One CEO
One head of consultants
collaboration, competitio
leadership
perspective, asymmetric
dominance and creating
network
Failing to capture potent
in digital transformation
Difficulties regarding
human factors & Risks
related to IT and data
 Five management security
consultants - One CEO
Three management
consultants

* N/S – Not specified

4. Conclusions
Digital transformation initiatives can be influenced by challenges and respectively the overall success
of the firm hence it is crucial to identify and counteract them immediately for a great navigation in DT.
These challenges imposed by digitalization differs from each country, region, industry, company size,
business model readiness etc. therefore each firm is recommended to develop its own original path and Table 1.
Firms’ Challenges
strategic plan to effectively tackle these challenges. Consequently, if the identified challenges& Respondents
detailed profile
in Table 1. are proactively tackled, the firms will be realizing the potential of the digital transformation
and accordingly will achieve the maximum benefits of a digital transformation. The contribution of
this study refers to the identification of challenges that can contribute to other firms in similar
conditions (industry, country, region, business model readiness etc..) where digital innovation is
pursued with a mindset on navigating proactively the transformation process and furthermore
successfully.

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