Why Do State‑Owned Enterprises Struggle with Digital Transformation? Key Challenges and Solutions

Introduction

The study, commissioned by the State‑owned Assets Supervision and Administration Commission, brings together more than 40 central enterprises, industry associations, research institutes and service firms to develop an index and methodological path for digital‑transformation of state‑owned enterprises.

Problem 0: Unclear Value Goals and Hard‑to‑Show Benefits

Problem Manifestation

State‑owned enterprises, as the core of national economic competitiveness, are expected to innovate and expand into new tracks through digital transformation. However, most focus only on cost reduction and efficiency, leaving a gap between transformation value goals and the enterprises’ strategic missions.

Although about 70% recognize the strategic importance of digital transformation and have related strategies, they set conservative targets and have not yet positioned digital transformation as a driver of innovation and change.

Root Causes

Low strategic status: Digital transformation is not treated as a core strategic element.

Lack of foresight: Half of the enterprises focus merely on process compliance and efficiency, with few accelerating product or service innovation.

Benefits not obvious: Only a small fraction achieve field‑level or platform‑level comprehensive benefits, which limits confidence.

Typical Event

A manufacturing firm tried to build a “small front‑end, large middle‑platform” model by copying internet‑company practices without clarifying strategic value, leading to a one‑year project failure.

Problem 1: Existing Digital Models Cannot Meet Growing Uncertainty

Problem Manifestation

Current digital initiatives are built around existing business architectures, optimizing legacy processes rather than enabling new business models or cross‑organizational collaboration.

Root Causes

Rigid departmental boundaries hinder resource sharing and collaboration.

Technology‑driven and business‑driven approaches rely heavily on packaged software and external vendors, preventing knowledge accumulation.

Lack of experience with new digital business models limits breakthrough potential.

Typical Event

A case study shows that enterprises struggle to integrate data across regions and departments, preventing smart scheduling and decision support.

Problem 2: Insufficient Data‑Element Driving Power

Problem Manifestation

Data collection rates are low, data silos persist, and the ability to develop and apply data is weak.

Root Causes

Incomplete data collection: Few firms achieve automatic, online data capture.

Insufficient data sharing: Standardized enterprise‑level data exchange platforms are rare.

Limited data development: Many only produce simple reports, with few engaging in digital modeling.

Typical Event

An environmental protection SOE needed cross‑regional data for smart water management but could not establish a unified data‑exchange mechanism.

Problem 3: Management Mechanism Optimization Is Not Systematic

Problem Manifestation

Large scale and complex governance structures make systemic digital transformation difficult; strategic planning and coordination are weak, leading to a “two‑skin” phenomenon between technology and management.

Root Causes

Top‑level coordination is lacking; few senior leaders drive digital strategy.

Multi‑factor coordination (data, technology, processes, organization) is insufficient.

Digital transformation is not fully integrated with enterprise reform.

Typical Event

A SOE’s digital supply‑chain project ignored employee interests and failed to align responsibilities, resulting in parallel online and offline processes.

Problem 4: Gaps in Digital Mindset and Capabilities Across Staff

Problem Manifestation

Traditional SOEs face severe shortages of digital talent, insufficient competence, and unbalanced structures, hindering transformation.

Root Causes

Insufficient talent reserves, especially outside telecom and electronics.

Lack of competence in combined business‑digital‑management skills.

High‑end talent is scarce.

Typical Event

A project to build a remote‑maintenance mode for smart equipment failed because the team lacked expertise in equipment operation, digital technology, and business modeling.

Problem 5: Inadequate Digital‑Transformation Technology Supply and Service Ecosystem

Problem Manifestation

Enterprises lack strong disruptive innovation from 0 to 1, depend on foreign high‑end software, and have weak service ecosystems for consulting, solutions, and standards.

Root Causes

High dependence on imported core technologies.

Immature domestic consulting and solution providers.

Weak collaboration among enterprises, academia, and service firms.

Typical Event

Few SOEs can build a comprehensive digital ecosystem or act as key enablers in the value network.