“Many organizations are struggling with the digital transformation efforts that they have begun,” says David Rogers, author of The Digital Transformation Playbook and professor at Columbia Business School, in the latest Harvard Business Review Analytic Services report sponsored by Red Hat.

The fourth annual report to look at digital transformation, Digital Transformation Refocused: New Goals Require New Strategies surveyed 727 executives around the world in January 2022. The executives were mostly in senior business roles rather than being technology specialists. But the report reflects business imperatives broadly.

Why are they struggling?

Talent shortages challenge digital transformation

The reasons vary, but most of the challenges emphasize cross-organizational alignment and buy-in rather than technology. However, one reason appears high on the list of top digital transformation challenges again and again: some variant of talent and skill shortages.

[ Also read 3 IT talent shortage challenges and how to solve them. ]

In the report, “finding/securing top talent to support our digital initiatives” was the number four top digital transformation challenge, just edged out by cultural and process challenges such as “embracing digital transformation across our entire organization.” The report notes that “Organizations are also stymied by personnel challenges, both in finding and securing talent to support new digital initiatives and in creating a culture of continuous learning.”

This probably isn’t a big surprise to anyone. Whether it goes by “The Great Resignation” or some other term, shortages of the right people for all manner of jobs have become as much of a cliché as supply chain disruptions. There’s also a need for new skills to deal with technologies such as machine learning, cloud, and containers.

Certainly, this survey result is not an outlier. In Red Hat’s 2022 Global Tech Outlook report, “skill-set or talent gaps” took the lead as the top barrier for preventing a company from being successful in digital transformation. (This was an uptick from the prior year’s survey, in which integration issues took the lead.)

Given data like that, you might reasonably assume that companies are prioritizing finding solutions to that challenge.

Companies aren’t upskilling their own employees

But when organizations were asked about the primary business goals for their digital transformation efforts over the past 12 months, “upskill/train employees” was near the bottom of the list. Furthermore, even fewer respondents cited it as a primary goal this year than in last year’s survey.

We saw something similar with respect to security in the 2022 Global Tech Outlook report. IT security was the top IT funding priority. But when we drilled down on the funding priorities within security, hiring security or compliance staff was near the bottom.

It’s hard not to conclude that, while talent and skills are a challenge, many companies aren’t prioritizing people. In “Digital Transformation Refocused,” Charlene Li, chief research officer at London-based global innovation and transformation consultancy PA Consulting, notes, “Not enough businesses focus on the transformation part of digital transformation, and the transformation part has always been about people. This has been the blind spot for so many digital transformation efforts – it’s what a lot of companies are missing.”

[ Learn how CIOs are speeding toward goals while preventing employee burnout in this report from Harvard Business Review Analytic Services: Maintaining Momentum on Digital Transformation. ]

Companies even admit this, at least to a certain degree. While 43 percent selected finding/securing top talent as a top challenge, only 32 percent said it was a challenge being actively addressed right now.

What’s going on?

The great uncertainty

Part of it is that there are uncertainties around plans.

Melissa Swift, U.S. and Canada transformation leader at asset management consultancy Mercer, says that organizations aren’t fully tackling this issue because they haven’t yet determined what talent they actually need to support their new technologies and business initiatives. This view is bolstered by a finding that effectively allocating resources to the right transformational areas was as big a challenge as finding the right people. “Do we need this many data scientists? Have we uncovered yawning gaps in our basic data management?” Swift asks.

Many companies are also still hesitant to make firm commitments to remote and work-from-home policies. In fact, some companies are finding themselves having to roll back or soften return-to-office policies in the face of employee opposition. Tom Davenport, professor of IT and management at Babson College, says, “I think a lot of people are still quite confused about how you attract talent when geography doesn’t matter so much anymore. Companies have also been slow to make decisions about whether people can live anywhere and their policies around that. That slows down your talent recruiting process because you don’t really know yet what you want to say to those potential employees that you’re trying to bring in.”

Companies mostly look to the outside

Uncertainties aside, what can companies do? At the MIT Sloan CIO Symposium in May 2022, a Mastering Talent and Learning in Today’s Digital Ecosystems panel was broadly critical of the degree to which companies focus on hiring new people rather than understanding the skills their employees already possess and developing them. George Westerman, a senior lecturer at MIT who moderated the panel, observed that “we’re digitally transforming everything in organizations except, it seems, the learning and development processes.”

This view is echoed in “Digital Transformation Refocused.” PA Consulting’s Li observes, “The reality is that organizations won’t often invest in training their people because they figure that eventually, they’re just going to leave. Investing early in their careers and developing not only their hard skills but also their soft skills as members of teams and as leaders will serve them so well both immediately and into the future – but a lot of organizations are just too shortsighted.”

It’s not all bleak: 52 percent of respondents say their commitment to education support is much higher in 2022 than it was a year ago, even if it’s not a top priority. However, Mercer’s Swift says that reassessing hiring strategies and increasing employee education opportunities should be a top priority for 2022.

“You can have the best technology in the world, but if your employees are not mobilized or you don’t have the right folks, business mysteriously slows down in a way that companies won’t be prepared for. To retain a competitive advantage, organizations need to move fast to address this problem,” Swift concludes.

[ Where is your team’s digital transformation work stalling? Get the eBook: What’s slowing down your Digital Transformation? 8 questions to ask. ]