Today, a common challenge for companies executing digital transformation is not the lack of necessary technologies but the shortage of skilled workers who can effectively navigate and utilize them.
This shortage of skilled workers is commonly referred to as the skills gap: workers who have the technology they need but lack the required skills to use it. This gap has been noticeably widening, and since 2022 has reached a record high where 70% of organizations had some level of difficulty in recruiting talent to keep up with the dramatic pace of change.
Globally, 74% of CEOs are worried about the shortage of key skills within their workforce. However, many struggle to identify effective ways to bridge the gap. The impacts of the skills gap are significant, posing high costs to both businesses and employees. To address this challenge, organizations must adopt a multifaceted approach to close the gap.
The Business Impact of the Skills Gap
Increased Costs
Not only does the skills gap hinder digital transformation, but it also imposes significant financial burdens on organizations lacking the right talent to drive these initiatives. By 2026, this shortage could account to $5.5 trillion in global losses due to product delays, and lost business, and if this isn’t addressed by 2030, it will cost global economies over $8.3 trillion.
To address this, organizations must recognize the value in targeted upskilling programs. According to the Society for Human Resource Management, hiring new employees comes at an average cost of $7,400 per hire, whereas upskilling within technical roles typically costs $5,000 per employee - a significantly cheaper and more sustainable approach.
By focusing on redistributing existing talent, identifying untapped skills within their workforce, and implementing reskilling initiatives, organizations can bridge skill gaps while maximizing the potential of their current employees.
Hindered Productivity
When skills are lacking in the digital workforce, bottlenecks arise, disrupting workflows, employee productivity, and organizational efficiency. IDC reports that 60% of IT leaders say the skills shortage is causing delays in hardware and software deployments, up from 57% in 2022. Other ramifications include delays in developing new products and services (62%), and difficulty meeting quality objectives (59%).
While technology alone cannot fully close the digital skills gap, it can be a powerful ally in alleviating some of the challenges. Digital adoption tools are an effective way to empower employees to learn and master new tools and technologies. Employees are met at their individual skill levels, and with the help of real-time guidance, insights and supports, adoption tools can take them to the next level using a learn as you go approach.
Beyond enhancing productivity, these tools also drive significant cost savings – Forrester reports that organizations leveraging adoption tools reduces training costs by 75%, emphasizing their role in replacing costly, time-intensive training with real-time guidance.
Inhibited Innovation
As technology advances at an unprecedented pace, the need for highly skilled professionals to keep up with innovation has never been greater. Without a workforce equipped to embrace and implement technological transformation, the ability to innovate and remain competitive becomes difficult.
A particularly relevant example in the IT industry is the transition to proactive IT. According to our latest research, 35% of respondents see the lack of expertise within the existing IT workforce as an obstacle to achieving this shift. Closing this gap and having the right people in place for IT transformations is more complex than hiring alone, it demands a strategic blend of technology and workforce development.
Despite the benefits of data-driven decision making, it still remains relatively unused in the case of identifying skills shortages, with only 50% of organizations today analysing their skills gap with data. When organizations lack a clear understanding of where the gap in their skill sets actually lie, their innovation suffers.
Organizations must adopt a proactive and structured approach to pinpoint the gaps in their current workforce's skill set. This begins with engaging employees in the process to gather insights into their existing skill sets and identifying areas for improvement. Data-driven methods such as feedback, surveys, and skills assessments can provide valuable insights on where the strengths and weaknesses lie.
Limited Employee Development
Closing the digital skills gap goes beyond what organizations can provide; it’s about empowering employees to unlock their full potential, whether through developing new skills in their current role or exploring new avenues. Many employees are eager to adapt, grow, and stay ahead of change, but are not given the opportunity to do so. Without these growth opportunities, employees may become disengaged, resulting in decreased productivity and, in some cases, higher turnover rates.
Organizations need to encourage employees to want to learn new skills and communicate the benefit for them, not just the business. Adopting a skills-first mindset that places skills at the heart of the organization is a great way to do so.
By focusing on the skills employees need for long-term success, organizations can ensure their workforce remains adaptable and ready to tackle emerging challenges. Research highlights that skills-based organizations are 52% more likely to innovate and 57% more likely to anticipate and adapt to change effectively.
Digital transformation shows no signs of slowing down, addressing the digital skills gap is essential for organizations striving to reduce costs, improve productivity and innovation all whilst future proofing the skills of their employees.
Closing the gap unfortunately won’t happen overnight, it takes commitment, investment and a collaborative effort to succeed. But those who act now will not only stay competitive but also position themselves for long-term success with the necessary skills to thrive in the future.