Digital transformation: Challenges large companies face

The global economic context requires Russia to strive for a new level of technological sovereignty today. The digital transformation of the economy is no longer just a popular concept; it is a necessity in the face of the sanctions pressure.

Since February 2022, the United States and Western European countries have imposed various export controls on Russia, mostly relating to latest equipment and technology. Companies from unfriendly countries began to massively leave Russia, which predictably affected science-intensive and high-tech industries. More problems have been caused by the restricted access to a variety of goods and the ensuing need to substitute them with domestic products.

Interestingly, the idea of digital change was discussed in Russia as far back as the 1950s and 1970s. Anatoly Kitov, an outstanding scientist who is believed to have created Russian cybernetics, computer engineering and informatics, proposed building an electronic computer- based network in the Soviet Union, which would collect, process and analyze all information on important economic processes and generate solutions for various problems. That idea could have pushed our academic community and engineers towards the development of domestic computers; the Soviet Union was already lagging behind the United States in this field. However, Kitov’s ideas were not supported by the country’s leaders. It was not until the late 1970s that the decision was made to develop such a system. But we were too late, because the Americans were already designing their own network, which later became the prototype of the present-day internet.

Even today, many have a rather vague understanding of the digital economy, the digital transformation of industry or technological innovation. Digital tools integrated into most business processes could bring large companies to a more advanced level. Automating specific operations is one thing; transforming all manual or physical processes into digital ones and fundamentally changing workflows is quite another. For an industry or a large company, digital transformation would mean integrating digital technology into all processes, including fully automated production controlled by intelligent systems, which should improve efficiency in workflows, reduce costs and downtime, bolster safety and rule out human error. So, what needs to be done to achieve this level? How do we bolster our technological sovereignty? How do we stay competitive? The answer to these questions is very simple: through implementing new technologies. And the next question is, who should be doing this at a company and what financial investments this would require.

In fact, the digital transformation of Russia’s economy is already in progress. However, various studies show that Russian companies are facing multiple challenges in planning and deploying new digital solutions. They are struggling with a shortage of programmers, network architects, and other necessary specialists; their existing staff may be lacking the skills needed to implement innovations. Insufficient digital literacy and continued use of old systems with obsolete architecture can also pose a problem. Another possibility is a wrong choice of new technologies to implement.

And this is all true, except I would say that insufficient training of IT-specialists (who were never expected to prioritize the company’s profitability and growth) is not the biggest problem after all; the management’s focus on the new technologies and processes proper, rather than on personnel, also plays a role. Their current imperative should be to form innovative teams of specialists with the key competencies needed for this transformation; they need to foster a new employee culture focused on business expansion and improve the overall digital literacy.

Most entrepreneurs and executives want to see tangible effects on their company’s performance too soon. Digital transformation is not only – and not so much – about technology, but about changing the way people are working and thinking, which amounts to a different culture. It is also important to understand that digital technology is only a tool and will not automatically take you to a new level. Everyone will have to change, including the owner, the managers, and the entire team.

Implementing new digital technologies requires an appropriate level of knowledge and competencies from specialists who will deploy the new solutions as well as from those who will be using them. Companies will need to introduce far-reaching policies for training and retraining of their personnel, building motivation, and overcoming resistance to innovation.

The rank and file will be the first to be affected by the change. Not everyone will be ready for the innovations and happy with the new requirements. It depends on many factors such as education, experience, and personal qualities. Certainly, there will always be people who are apprehensive about changes and technological advancements, and such concerns are entirely understandable. Many fear that changes may result in job losses and unemployment, which understandably creates anxiety among workers.

The digital transformation of the economy presents a multifaceted challenge that demands a considerable number of specialists possessing diverse competencies. Companies must undergo internal transformations and cultivate new skill sets. I firmly believe that effective digitalization and the successful execution of new projects, particularly within large enterprises, hinge on collaboration with existing staff.

By Svetlana Zybenko, Ph.D. in Economics, Assistant Professor at the Product Testing and Customs at the Plekhanov Russian University of Economics

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