As the potential of technology becomes more obvious in business, a growing number of them keep seeking ways to digitally enhance their processes. This digital transformation process is now an important trend. It refers to using digital technologies to modify current customer, culture, or business processes or create new ones.
Digital transformation goes beyond doing things the old manual way. Instead, it involves re-imagining business efficiency to accommodate changing business and market resources.
As such, digital transformation isn’t merely customer service, marketing, and sales. It eclipses those roles to address key customer-related questions. You’ll have witnessed the transition from paper to spreadsheets.
While high-value businesses appear to be at the forefront of digital transformation, your small business can leverage it for accelerated growth. In simpler terms, building tomorrow’s business requires a high level of awareness of digital integration. That’s the new method of building a sustainable organization resilient enough to face modern challenges.
A digital transformation strategy offers you a way to ramp up business results and impact through digital technology. Digital should be the backbone of your thinking, planning, and building when putting up an agile and flexible business primed for growth.
This guide will consider everything a business needs to know to integrate digital technology across its operations.
What Really is Digital Transformation?
Business leaders are inclined to think that digital transformation deals with migrating operations to the cloud. You probably do too. But there are a few things you need to know.
There’s no single definition to capture what digital transformation means for every company. Generally speaking, it is the integration of digital technology into obvious and non-obvious business areas that fundamentally disrupt how businesses approach and deliver value to customers.
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Digital Transformation Strategy
According to Jay Ferro, Clario’s Chief Information and Technology Officer, the essentials of a digital transformation strategy include a problem statement, a clear opportunity, or an aspirational goal. Let’s describe what he means.
A business or organization’s reason or “why” for toeing the path of digital transformation might be to provide a better customer experience, raise productivity, minimize friction, or grow profitability.
However, in terms of an aspirational statement, it might consider becoming the best to do business with by taking advantage of emerging digital resources.
Your goal in digital transformation is to find ways to articulate it within your company’s context. Digital means different things to different people.
Therefore a robust digital transformation strategy begins with defining “digital transformation in your company.”
In light of this, Johnson & Johnson CIO and Monsanto alumnus Jim Swanson reveals that customer centricity was the crux of digital transformation at the latter company. As a result, Monsanto’s strategy focused on automated operations, people, and new models.
Furthermore, the way to achieve this included data analytics, software, and technologies.
A robust digital transformation strategy is thoughtful work that it’s probably best not to delegate or outsource to anyone without a comprehensive knowledge or interest in your business.
Digital Transformation Areas
True digital transformation is difficult, and it takes more than a few salient factors to succeed. The sad reality is that many transformation efforts have failed. Therefore, success demands pooling and coordinating more than most leaders are willing to.
Experts and thought leaders typically consider 4 primary areas that digital transformation models should address. There’s no hard and fast rule to this. Some models take care of 3 areas, while others take up to 9.
Your organization needs to be strong in the inter-related domains of technology, data, process, and organizational change capacity. Otherwise, a well-conceived transformation could end up failing.
Therefore, before you even set out to implement any transformation, it’s advisable to do the following first:
- Create and communicate a compelling vision.
- Make a flexible and adaptable plan.
- Fine-tune the details of your plan.
These three steps are about people. First, you need the right talent for technology, data, and process. You also need them to be able to work together, meaning you need a strong leader to make it happen. This is where your digital transformation takes off or breaks.
Microsoft prescribes a digital transformation model that deals with the following areas.
Organizational transformation works best when employees are motivated and have the right skills to ensure the success of the process.
When you start digital transformation at your business, you will need certain factors to ensure success. These include courage, teamwork, leadership, and emotional intelligence. Other key change management factors are also necessary.
You need to engage your customers as you engage employees. Therefore, as customers evolve, you need to discover and meet the evolving expectations of the modern customer.
Modernizing your IT infrastructure is one of the most rewarding ways digital transformation can help create a more effective organization.
Service and products
Are you innovating enough? Digital transformation usually looks at how to bolster success in the modern era.
When you innovate, you prepare your company to improve its market position, get more revenue, and remain relevant.
Transformation Myths And Realities
As with any essential business paradigm, digital transformation myths and realities exist. What does “digital transformation” really mean?
Mercer’s US Transformational Leader, Melissa Swift, points out that “digital” means different things to different people. Naturally, there are problems in precisely communicating what it means. She’s quite right.
While some think “digital” means going paperless, others think it’s data analytics and artificial intelligence. Still, others might consider agile teams and another group, open-plan offices.
This multiplicity in definition leads to confusion in organizations and produces undesirable results. Therefore, leaders must be fully cognizant of this reality as they build conversations on digital transformation.
However, an interesting scenario could develop. First, C-suite executives may sell the organization hierarchy on how digital transformation can help to grow revenue and profits. Then, technical people become eager to hop on next-gen tech stacks. Even CFOs may see investment in digital transformation as the ultimate solution to the organization’s revenue challenges.
These hopes seem to be where the party stops, however.
To be clear, digital transformation is merely a catalyst for economic, technological, social, or even political change. But unfortunately, there’s an ample dose of myths baked in with these high expectations.
Myth #1 – Digital transformation is only about technology
Reality: While technology is critical in digital transformation, it’s only one component in effecting organizational change to positively impact business and clients.
Digital transformation includes changing mindsets, processes, and stereotypes. It can prove to be a significant challenge on any level.
Technology enables faster, better, and probably cheaper growth for an organization undergoing digital transformation.
Myth #2 – Digital always improves things
Reality: Digital technologies continue to impact humankind positively. But in the context of business, data, cloud, IoT, and so forth need to be aligned with people’s tangible aspirations and needs. “Change” isn’t a good enough solo reason to embark on a digital transformation journey.
Therefore, every step of digital transformation should begin with asking how it improves the customer’s life. You also need to find out if you’ll be creating any problems, such as privacy issues.
Digital transformation is really about understanding customer needs, motivation, and behaviors. Any contrary approach will create inevitable companies that may hamper organizational growth.
Myth #3 – “We’re paperless. This is digital transformation!”
Reality: It’s absolutely possible to adopt digital technology without doing digital transformation. That’s what most businesses achieve when they begin to use a computer program to capture customer information. However, it’s really digitization and not digital transformation.
Digitization converts analog information into a digital format. Still, it doesn’t transform your business and its outcomes like digital transformation.
Myth #4 – Every company needs digital transformation
Reality: Not every organization or process requires digital transformation. The process is more than buying the latest software or improving the supply chain. It literally upends an otherwise optimally functioning organizational system – a deliberate digital shock – if you will.
To digitally transform your organization’s business processes, for instance, it’s necessary to purposefully model them using tools that make creative and empirical simulations possible.
Therefore, an honest assessment is the first step in the digital transformation of your processes. This way, your team can tell if it’s capable of creating digital models that simulate all aspects of your procedures.
Without this ability to model processes, digital transformation may be more challenging than you anticipate.
Myth #5 – Digital transformation means using more technology
Reality: Some organizations might be misled to view the digital transformation process as requiring more technology to be effective. But, that position isn’t as true as it might appear.
Common definitions of digital transformation describe it as the novel use of digital technology to “solve traditional problems.” These digital solutions enable new frontiers of creativity and innovation instead of merely supporting and enhancing traditional methods.
Therefore, digital transformation has more to do with using digital technology than using more or newer technology. The idea is to make digital the crux of operations and leverage it to improve individual things.
We need to highlight digital adoption at this point. Even if your business uses a small array of digital tools, the key metric is user adoption of those tech platforms. You’re quite successful at digital transformation if they do so in high numbers.
Myth #6 – Digital transformation always employs emerging technology
Reality: It’s common to hear people say that digital transformation is all about emerging technology. That’s easy to assume, but there’s more myth in it than could ever become fact.
Airbnb and Uber are two digitally-forward businesses that rely on mainstream technology to provide indispensable value to consumers. They leveraged mobile phones, apps, and websites built to manage lightning-fast transactions and location tracking.
Trying to always leverage emerging tech can be difficult since it’s usually hard to say if it’ll have a major market impact.
Myth #7 – Investing in digital transformation always brings profitability
Reality: According to McKinsey, organizations report a clear, positive ROI and positive revenue correlation with digital investment.
However, investment works best when there’s a clear and workable strategy. Your organization needs to prioritize digital adoption to guarantee a safe return on implementation.
Myth #8 – Your CEO or CTO is responsible for driving digital transformation
Reality: Everyone seems to say CEOs should be primarily responsible for drilling in an organization’s digital transformation culture. However, empirical evidence shows that it’s best for someone other than the CEO (but in senior management) to do this.
Similarly, the CTO shouldn’t be the go-to figure championing digital transformation concerning implementation. That’s because digitalization encompasses every department in a company and goes beyond tech enthusiasm.
Your CIO is a more preferable choice for leading digital transformation than the CEO or CMO.
However, digital transformation is a team effort and requires all hands on deck to be successful.
Myth #9 – Digital transformation only works for B2C companies
Reality: This myth thrives because digital transformation aims to position the customer as the focus of the business.
However, the process also benefits the company by optimizing processes and increasing efficiency. These two points are evident in both B2B and B2C scenarios.
Myth #10 – Digital transformation is expensive
Reality: It’s easy to focus on the huge budget outlay that digital transformation involves. It’s important to view the process not as an expense but as a key investment intended to achieve multiplied returns. Allocating resources to digital transformation is proven to bring about immediate returns.
While technological change is the starting point of digital transformation, its effects resound across the entire organization, affecting its structure and culture.
The Benefits of Digital Transformation
Digital transformation can help your organization become a better service provider. Who will you be serving better? This includes customers, employees, partners, and shareholders.
As you weave modern computer-based solutions into operations across your business enterprise, here are a few inevitable benefits:
- First, you’ll be quicker to market with new product and service offerings.
- You’ll improve employee productivity to various degrees.
- Finally, your customer experience teams will have more positive outcomes with clients.
- You’ll have more insight into each customer’s specifics, helping your organization personalize products and services.
- You will offer better customer service in a more intuitive and engaging way.
As businesses grapple with survival in the aftermath of the pandemic, digital transformation takes on a primal role. It’s a proven means to bolster its ability to quickly adapt to supply chain disruptions, time-to-market pressures, and evolving customer expectations.
Examples of Digital Transformation
The form and shape of digital transformation ultimately depend on your organization, specific industry, current challenges, and goals. However, there are only a few broad categories for it.
The categories include monitoring and improving the customer experience with digital technology and accessing new market opportunities, making room for innovation, and improving the overall efficiency of your operations.
Since digital transformation is the new buzzword in business, it’s only fitting to provide real-world examples of digital transformation success in business. You know these companies, of course, but have probably wondered what makes them tick and why they seem to be a topic in every conversation.
Capital One Financial Corp.
Digital innovation has helped Capital One to become a top financial institution in the US. As a result, its assets continue to grow to unprecedented levels.
In a November 2018 article, Chief Technical Officer George Brady provided glimpses into what he called the company’s “four-year journey of disruptive change.” He clarified the company’s stance to use only the latest technologies, creating them where necessary and using them in the tiniest bits of their operation.
Another thing that counts is Capital One’s perception of what it does and what it brings to the table. The organization prides itself on being first a customer-centric tech company that offers innovative financial services. However, results would clearly be different if its focus had been to offer financial services and put a layer of decent customer experience.
This shows that it’s one thing to adopt and innovate digital transformation. Still, it must derive from battle-tested business virtues such as customer service.
How does a 60-year-old pizza giant remain relevant in the digital era? Domino’s Pizza says the answer lies in pushing the digital envelope.
The company is at the forefront of launching innovative test-powered services. Its Pizza Tracker and mobile applications have helped it grow in fame and fortune over the past ten years.
This subsidiary of Switzerland’s Nestlé Group cares about more than providing you with your daily mug of coffee. They offer specialty coffee machines that sync with your taste buds. However, Nespresso’s deployment of a cloud-based CRM (customer relationship management) system gives customers omnichannel access to customer service and shopping (much like Capital One).
While a Nespresso customer can go to a store, they can also reach the company through several means, including a website or mobile device. The single 360-degree view of its customers has given the company the upper hand in engaging new markets and improving sales.
Everyone knows Netflix, right? Yet, not everyone knows how that happened. The simple explanation is that a mail-based DVD rental company reinvented itself to become today’s premier video streaming service.
Netflix sensed the difference between 1997 and the 2000s and built a business offering content through media the customers had evolved to become accustomed to. So again, we see that lesson in focusing first on the customer and bringing in the technology to enable that.
The result? Netflix is now a full-service video streaming platform where a customer’s preferences determine the customer’s offerings.
While the company’s mail-order service for video rentals had already disrupted the industry in 1997, the times and customer needs had changed. Digital technologies had made it possible to stream videos online, and Netflix promptly purchased a ticket to a highly profitable future (less than one decade later). They developed a streaming platform that’s now the gold standard for video content delivery and consumption worldwide.
Netflix users can directly stream video content, and the platform’s AI engine makes recommendations based on the user’s preferences. Besides, Netflix is giving traditional broadcast channels, cable TV networks, and production studios a good run for your money by developing a library of on-demand content at consumer-friendly prices.
We point to Netflix as an excellent example of digital transformation because the organization leveraged ubiquitous technologies to guide its business development and growth.
Digital Transformation Trends
Modern digital strategy is about learning all you can about the latest digital transformation trends. However, you’re not just doing it to stay competitive. Instead, your aim is to empower your business for evolution, innovation, and growth.
We can borrow a leaf from Steve Maraboli, the author and behavioral scientist. He urges us to observe how everything on earth is continuously “evolving, refining, improving, adapting, and enhancing….” In other words, they are changing.
Being deliberate about change can ensure positive transformation. Despite focusing on personal development, Mr. Maraboli’s words apply well to the field of business and organizational growth.
Remember how COVID both rocked and reshaped our entire world? Even businesses have been forced to upend their processes as even recently adopted structures have suddenly become obsolete. Knowing new digital transformation trends will help you discover how to improve how you use technology in your own business.
Wise business owners use their transformation trends to guide and achieve yearly transformation goals and as a basis to build out their digital transformation strategy despite significant challenges.
Here’s a round-up of digital transformation trends to pay urgent attention to:
- Digital adoption platforms to make digital transformation easier.
- The use of visual search for online sales.
- Employee engagement with robotic process automation (RPA).
- The use of artificial intelligence in employee development and training.
- The growing adoption of AI-powered assistants and big data.
- The finance industry’s increasing reliance on self-service banking.
- Mobile healthcare applications for better healthcare.
What is the Difference Between Digitization, Digitalization, and Digital Transformation?
A critical aspect of discussions around digital transformation is communication. This is because it’s important to be consistent and never ambiguous, especially with definitions.
“Digital transformation” is often used as a synonym for digitization and digitalization. In truth, this is sometimes deliberate but eventually leads to confusion. That’s what happens whenever you call different things by the same name.
It’s important to clarify these seemingly interchangeable terms to communicate in the most effective way possible.
Digital transformation is not digitization, as some people say. The label is calculated to appeal to management, win project approval, or close a sale. But, what is digitization?
Digitization simply means the creation of a digital representation of physical things and their attributes. So, for example, when you scan a paper document and save it in digital format, that’s digitization. Similarly, you may type out some handwritten content and save it in a file on a computer; that’s digitization too.
So, what does digitization achieve? First, it converts a non-digital object into an equivalent digital representation. Then, computers and computerized systems can put it through various digital use cases once this happens. In manufacturing, for instance, a measurement may be converted from a manual or mechanical reading to an electronic alternative.
Digitization helps to translate physical attributes to a more convenient world involving invisible bits and bytes. Since the 1960s, digitization has enabled processes that provide business value due to rising needs for consumable data.
We now need to consider the concept known as digitalization. This is how you enable processes that make the most of digital technologies and digitized data. Of course, it also helps to improve those processes. How does it relate to digitization, though?
Good examples come from PLC logic or PID control in a system using a microprocessor, sequenced logic for a batch process, automated shutdown, and so forth. Others include a transmitter error generating a work order in an ERP maintenance system.
Digitalization increases productivity and efficiency while simultaneously driving costs down. Its main objective is to improve an existing business process without changing or transforming it. That is, it isolates a process in a human-controlled event(or a series of them) to become reliant on software.
Therefore, whereas digitization is the foundation, digitalization presumes digitization.
Now, you have a clearer understanding of what digitization and digitalization mean and what they achieve. But, neither of them is a digital transformation. So, what then does digital transformation represent, and why would any organization choose to consider developing a digital transformation?
Firstly, digital transformation is a business transformation that leverages digitalization. Therefore, the idea is to focus on and improve the business processes using digitalization technologies.
One way to illustrate this is with IT/OT, where interweaving of IT skills in the OT space has necessitated greater governance due to cybersecurity concerns, data flow needs, and skills.
In another scenario, digital transformation may involve transiting to remotely control and monitor physical processes from local control. How about when you integrate your organization’s customer sales volumes to your raw material vendors and effectively integrate the supply chain to improve efficiency and response?
That’s how what we call Industry 4.0 has come to be. It combines digital transformation and digitalization to help companies drive performance upwards continually.
So now, we have a clearer understanding of digitization, digitalization, and digital transformation concepts.
To summarize, digitization provides a digital representation of physical things and attributes. Then, digitalization deals with the enablement or improvement of processes that leverage digitized data and digital technologies.
However, digital transformation is then a means for transforming your business through digitalization. The final step in the journey is where your organization will realign its business activities, processes, and products to reap the full benefits of modern digital technologies. Therefore, it imbibes both digitization and digitalization.
All this is to ensure that the right term is used within the right context to correctly describe anything. It’s advisable to understand the frame of reference for whoever you’re in conversation with when using these terms. That’ll help you translate your ideas for them if they’ve divergent definitions.
Digital transformation is increasingly important in the modern business playing field. Some end-user professionals have even formed collaborative communities. These exist to trade ideas and share failure and success stories on how digital transformation affects their respective companies.
It’s necessary to highlight the key reasons why organizations may fail at digital transformation. These mistakes are often due to poor planning, weak execution, and a lack of enthusiasm by upper management.
Transformation is standard in business leadership. It’s not just a process for elite companies; any organization can benefit from its advantages. The key is, to begin with, digitalization and pave the path to prosperity that millions of companies worldwide are already enjoying.
It’s easy to fall into the trap of isolating the various aspects of digital transformation. However, it’s important to have a grip on as many parts as possible. Technology is the powerhouse of digital transformation. Data keeps it running, process guides it, and organization change capability is necessary for smooth sailing. All are necessary for lasting and effective digital transformation.
Digital transformation needs to prioritize your organization’s greatest need. The priorities themselves should, in turn, determine the talent you’ll need. The talent should, however, be equipped to handle the technology-backed transformation.