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What is digital transformation?

16-02-2022 16 min read

What is digital transformation?

What's not clear to many business leaders is what digital transformation means. The digital transformation uses digital technologies to alter traditional and non-digital business processes and services, or create new ones, to satisfy changing market and customer demands. It also completely transforms how businesses are run and managed and how clients supply value.

A business or industry's cultural, organizational, and operational transformation through an innovative and streamlined digital transformation process is defined as a digital revolution. Digital Transformation, often known as DX or DDT, uses technology to create value for many stakeholders (clients in general) by allowing them to adapt quickly to changing circumstances.

Digital transformation refers to the industrial revolution of digitization in business, which has enabled companies to serve their clients better. It allows organizations to make processes more agile and efficient with digital technology by automating manual tasks, enhancing organizational structure, optimizing internal operations, raising employee productivity, and improving decision-making speeds.

Digital transformation can be seen as a strategic survival imperative for businesses in an increasingly digital economy where the value of products or services is subject to disruption from new competitors. It is regarded as both an opportunity and a risk for businesses that enable change using new technologies.

In this article, we will explore the topic of Digital Transformation and the reasons why businesses should go through that process.

Your Digital Transformation journey starts here!

Digital transformation happens everywhere

At the beginning of the article, we said that Digital Transformation happens everywhere. With digital transformation, any company can benefit by transforming digitally.

Any activity within a business – regardless of sector – must therefore be adapted to this new reality.

It can be seen as a strategic opportunity for businesses to take advantage of the opportunities that come from the emergence of a variety of new technologies and engage with them in a way that makes their business more efficient and competitive.

The result means increasing revenue, reducing costs, increasing customer satisfaction, and improving employee engagement through increased productivity - all while doing better for society today and protecting against future risk at the same time.

The shift is affecting all sectors. However, it influences the entire company's operations and activities as a whole. In recent years, there has been a lot of buzz around the term "digital transformation," but this was also true in the late 1990s and mid-2000s.

Over 30 years ago, we began using computers to automate procedures, and today our organizations have already integrated many automated processes. The Internet allowed companies to reach out directly to their customers, who were previously only accessible through physical locations.

Websites then evolved to assist with customer service. As the digital goals of businesses increased, technology departments had to deal with the newest social and Internet platforms.

It led several firms to utilize digital data for their unique company events and experiences. Companies now understand that they exist in networks linked to clients, vendors, and other participants.

Digital platforms have also quickly evolved to help businesses construct customer support contact centers, improve productivity, and enhance collaboration.

To make the most of this wealth of data, firms began integrating all their functions and equipment into these networks. Companies utilized digital platforms to link all network participants instead of using the old business model with layered systems to connect them.

Organizations are experimenting with various digital techniques to produce better use of data, greater flexibility, and remain competitive.

Although digitization broadens our range of possibilities, it necessitates new thinking and acceptance of the change. Digital transformations provide new business models and business innovation in general.

It offers a business-wide range of possibilities, such as improving the customer experience and delivering it through new digital channels. The digital transformation adds value to every customer interaction.

What are digital transformation drivers?

What are drivers to digital transformation success

In a survey conducted by Statista in 2020, the main factors influencing the implementation of Digital Transformation in the organization were: Customer Demand, Competition offering a digital experience, Improved earnings, To disrupt the market, New entrants, and Board of directors demands.

Generalizing, we can point out such Key Drivers of Digital Transformation:

  • Survival,
  • Customer Expectations,
  • Role of AI,
  • The Emergence of Infrastructure Automation Software,
  • Acceleration of change.

Survival

Due to huge corporations like Alphabet, Meta (Facebook), Amazon, SpaceX, or software/AI startups. As a result, companies must change with the new game's rules to survive. Suppose we add, for example, to this the BRAIN program introduced by Barack Obama and other government programs. In that case, the development will not be stopped.

Customer Expectations

With a click of a button, you can now get access to anything and everything. The barriers between countries such as distance are no longer an issue for someone from Asia who wants to buy goods from North America. Customers nowadays expect a reduced delivery time when purchasing anything online, owing to the big players' standards. Furthermore, the time it took for an item to be delivered was previously several months; now, it's only one or two weeks. This improvement inconvenience has allowed Amazon and other large players to take the lead.

Businesses must continuously improve their procedures to provide their consumers with the best possible experience by utilizing digital technologies. It's also possible through digital methods for a business to communicate with its end-users to gain important information and comments.

Role of AI

Artificial Intelligence (AI) is another crucial force encouraging organizations to go digital. To be successful at any given time in the world, information must be gathered, captured, analyzed, and shared rapidly. Information processing has been significantly improved through artificial intelligence and cloud technologies. Introducing this new technology on the market has revolutionized consumer demands for goods. Businesses can track, analyze, and predict customer behavior with new technologies for improved business insights.

AI in the business setting refers to practical systems that automate jobs that people previously performed. AI enables the digital enterprise to optimize operations by learning from user interactions over time. The technology looks at historical data and makes real-time predictions about future events based on current performance indicators. It then uses this information to "tell" what customers want before asking. This way, AI enables an accurate projection of sales figures used in product development. Moreover, AI helps organizations communicate more efficiently with customers by targeting and personalizing marketing messages while anticipating further service needs or problems after a sale.

The Emergence of Infrastructure Automation

Software

With digital transformation in the limelight, a niche was created, and firms that could better transition to digitization emerged. These businesses produce software that automates parts of an organization's processes to aid it to move more quickly into the future. Businesses rely on infrastructure automation software because time is of the essence for them, and adopting digitalization as fast as possible provides them a competitive edge. That is why Business Process Automation and Robotic Process Automation have grown in popularity over the years.

Acceleration of change

In some industries, the focus has shifted from "big beating little" to "quick over slow." Technological changes will continue to emerge, and it is up to the company whether or not to change and develop or wait and possibly lose to those who were quicker to act.

What are the benefits of digital transformation?

Benefits of digital innovation

Drives innovation, keeping you ahead of your competition

Regardless of whether or not you embrace digital transformation, your competition is. Choosing to avoid digital transformation is essentially acknowledging that you don't want to be left behind. Investing in your company's long-term success opens the door for it to succeed in the future.

Improves customer experience

The digital transformation may help your teams achieve more efficiency and provide a seamless and intuitive customer experience. It includes everything from email communications to user interfaces, digital goods, and even the tempo at which you reach out to new prospects. Customers have high expectations for online experiences. Consumers are accustomed to having a lot of options, low prices, and rapid delivery. The new front on which corporations fight is Customer Experience (CX).

Increased data collection efficiency

However, the real benefit is to use this data to create insights that can propel the company forward. The goal of digital transformation is to establish a mechanism for obtaining the correct data and integrating it entirely to provide improved business intelligence at a system level.

It provides a mechanism for different functional units to combine raw data into insights that multiple touchpoints can use. As a result, it generates a single perspective of the client journey, operations, production, finance, and business prospects.

Increased profits

Digital transformation improves efficiency and profitability for businesses. Data from the Deloitte survey shows that Digital Transformation is the key to increasing profits. Thanks to the successful digital transformation strategy, business transformation increased its market share.

Customer insights

Data might be a key to unlocking customer insights. You may build a business plan that is more client-centric by better comprehending your consumer and their requirements. Based on structured and unstructured data like social media analytics, these insights can help businesses expand. Business intelligence software may analyze the data and discover patterns that can help you generate more relevant, personal, and agile content.

Better resource management

Information and resources are consolidated into a set of tools for business through digital transformation. Rather than having various software and databases, it combines company assets and reduces vendor overlap. The growth rate in the number of applications used by large corporations is accelerating. Digital transformation may connect apps, databases, and software to provide a centralized knowledge repository for businesses.

Increased agility

Organizational agility is enhanced with digital transformation. It allows for faster creation and adaptation while also providing a route to improvement. With digital transformation, organizations can improve their speed-to-market and embrace Continuous Improvement (CI) methods by adopting some of the principles that software developers utilize to enhance their agility.

Improved productivity while reducing labor costs

The wrong tech tools that don't work together can slow down the process and lower productivity. It enhances team members' ability to function faster by automating many manual activities and integrating data throughout the company.

The most important aspects of digital transformation

To achieve a successful transformation, you need constant momentum to achieve the desired business outcome. To achieve this, constantly consider the critical drivers of digitalization: digital twins, privacy, culture, artificial intelligence, and digital products management. Chief Information Officers (CIO) or Chief Digital Officers (CDO) should focus on the above five areas to ensure the company's digital transformation. The chief executive officer (CEO) usually appoints the person in charge of the digital transformation initiative that can be a chief digital officer.

Digital transformation leaders must take a holistic view of digital change efforts. To achieve effective change, you must clearly define your desired outcome from digital transformation initiatives for transformation based on your corporate strategy and approach, user requirements, integration needs, and environmental factors (e.g., regulations). Once you define this vision, start planning for transition with the help of different stakeholders, clearly communicating your plans (including budget) and setting short-term milestones.

Many digital transformation projects take mobility as a central theme. Next, you need to consider all the digital factors that could hinder or drive transformation in your business. A Digital Impact Analysis can help you identify these factors and their impact on business strategy, including business case development. This analysis will provide insight into how technologies such as big data analytics, artificial intelligence (AI), Internet of Things (IoT), blockchain technology, collaborative robots, 3D printing, virtual reality (VR), augmented reality (AR), etc., will affect the achievement of your desired outcomes for transformation.

Once you have identified these factors, continue planning with detailed action plans for IT infrastructure transition along with supporting tools. The supporting tools you choose can make your life less chaotic and enable better management of the transformation process. Your IT team will have a significant role in ensuring that technology is used and implemented as planned and on time.

Digital transformation roles and skills

Having the right talents on staff is critical to any digital transformation, whether it's implementing emerging technologies or changing procedures. The need for qualified web application developers, cloud computing experts, and digital product managers has never been greater. DevOps executives bring together software development and operations to enable companies to refine their products rapidly.

Data scientists and data architects are in particularly high demand. Organizations want to extract insights from large stockpiles of data and algorithms, relying more heavily on machine learning and artificial intelligence.

Most talent requirements are UX designers, digital trainers, writers, conversational brand strategists, legal experts, and compliance managers. The talents sought include digital trainers, instructional designers, and writers who specialize in AI/ML (artificial intelligence/machine learning), data management specialists with experience managing AI/ML projects, conversational brand strategists certified by NLP (neuro-linguistic programming), legal experts with expertise in ethics and self-regulation issues related to AI/ML technologies. Professional cybersecurity specialists round out the list.

Of course, leadership is essential. Many CIOs have added the title of chief digital officer to their job description, while others are rebranded as CDOs. Occasionally, the responsibilities of the CIO and CDO are separated. The CEO typically runs these meetings. However, it doesn't matter who has control over the digital imperative since long-term revenue growth will be driven by technology regardless of who holds that responsibility.

What are digital transformation challenges?

Digital transformation challenges

Although most businesses recognize the need for a digital transformation plan, many struggle with scaling their efforts. In fact, over two-thirds of all business digital projects fail due to a lack of a clear business case or strategy. An organization must first devise a clear strategy that describes specific actions and major milestones—and then stick to it.

Digital Transformation Is Not "One Size Fits All."

A one-size-fits-all approach will not work when developing an effective digital transformation strategy. A one-size-fits-all approach will not work. While some organizations may benefit from concentrating on automated client service processes or minimizing back-office activities, others will see more significant results from the application of advanced analytics to gather consumer insights. It's all about figuring out where your firm can benefit from digital technologies and creating a roadmap that leads you there.

Lack of Dedicated IT Skills

One of the biggest challenges is finding the right talent to make digital transformation a reality. According to the KPMG poll from 2020, 54 percent of businesses said skill shortages prevented them from achieving their transformation goals.

Ineffective Data Management

One of the essential elements of digital transformation is consumer data. With it, you may obtain detailed insights into your customers' preferences, activities, and potential future decisions. It's easy to see why how you collect and manage this information matters. Suppose you're still using segmented systems to store this information. In that case, it might not be easy to combine it all for centralized access. Everything stored in one data center may also be true. It's critical to take a step back and clean up the mess. What do you need to know about your clients to serve them well? Please make a list and refer to it when developing your data strategy.

Evolving Customer Needs and Preferences

Digital transformation is about more than process and structure; it's also about improving customer experience and optimizing business results. While many large enterprises have long-established relationships with their existing customers, digital transformation efforts might help provide a competitive edge in new markets for small and mid-sized organizations. Adding this to the mix requires understanding customer needs that can evolve rapidly. Organizations need to be nimble to meet these ever-changing demands.

Budget Concerns and Constraints

Another difficulty that arises when you don't have a clear-cut approach is keeping to a budget or establishing a schedule. It's all too easy to face scope creep as you respond to customer requests for modification and changing demands. You'll end up making choices that provide little to no value but consume more money and extend your deadline if you don't have one.

A Lack of Organizational Change Management

It's difficult enough to navigate new technologies; when change resistance is added, prospects for transformation seem bleak. Organizational structures, unhelpful workflows, and autocratic leadership methods might all stymie digital transformation progress. It was never more obvious than during Covid-19 when enterprises struggled to convert to a remote business model quickly.

Digital transformation examples

Nike

Nike is a giant in the sports footwear industry based in the United States. They realized that while they were one of the most recognized brands worldwide, their brand image had deteriorated — they were seen as simply another sportswear company.

Given all this information, Nike applied a digital transformation strategy to improve brand image and customer experience. Nike initially made more effective analytics by focusing on digital consumer data with this knowledge in hand. It uses sophisticated technologies based on recommendation algorithms and machine learning to deliver personalized content. They improved their e-commerce approach, including better UX (user experience) and tailored membership alternatives. Their offline efforts are tracked with their online marketing plan. Nike concentrated on providing a different experience to people who visited their physical locations, especially the flagship stores.

The firm has also developed a mobile app that utilizes a leg scan to determine the best sort of shoe for you. The application transforms a map of your feet based on 13 data points by scanning them. Furthermore, the firm gains essential knowledge for future footwear development efforts thanks to the tool.

Nike's digital transformation has included several initiatives, but they all have focused on the brand and customer experience. It enabled Nike to flourish during several lockouts in 2020 and 2021. Since the change began, Nike's stock price has increased from $52 to almost $88 in two years.

IKEA

Ikea, a multinational corporation that creates and sells ready-to-assemble home furnishings and accessories, is one of the world's largest furniture retailers. In 2018, after almost 80 years in the business and becoming one of the world's most recognized trademarks, Ikea decided to undertake a digital transformation.

However, in 2017, the firm acquired TaskRabbit. This website lets you locate individuals to assist with the assembling or delivering furniture bought at IKEA to your apartment. Customers who can't manage these activities on their own are more inclined to use the company's services due to this.

Ikea prioritized e-commerce development to transition from a manufacturer to a retail company. The distinction between running an online store and a physical location is significant. Ikea's management wanted to adapt the company to the new business model by remodeling their stores and using them as fulfillment centers. They implemented algorithms to manage the supply chain to run two businesses from one location (from hundreds of places - Ikea shops and distribution centers). Furthermore, they prioritized developing analytics and taking advantage of data analysis in decision-making.

The consumers were buying both online and in-store. The firm chose to link in-store and online consumer interactions to improve client experience while also maintaining brand consistency across all channels. For example, IKEA has announced the start of a smart home initiative. It includes intelligent kitchen appliances and lighting. The firm also makes extensive use of Augmented Reality in the IKEA Place app to help customers select furniture and virtually "furnish" their apartment before visiting the store.

Conclusion

Digital transformation is the process of transforming your business so that it better serves you and your customers. It necessitates a significant paradigm shift to operate successfully, but there aren't many alternatives. Clients are already using digital technologies, and going digital isn't only about obtaining an advantage. It's also a must-have for survival.

Are you ready for your digital transformation?

Given the preceding digital transformation instances, it's clear that a successful shift is not only possible but also lucrative. Of course, it necessitates a good sense of market demands, imagination, and a systematic approach to bring new ideas to life.

If you want to talk about how your company's transformation can be planned, make an appointment with us.

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