Digital transformation for business is a disruptive investment for any company. How to make sure you’ll get a good ROI? Are you stuck in the loop?
To describe and understand this practice we must answer three major questions. They are the “what”, “why”, and “how”. This article covers all of these topics in order to help you get a holistic grasp of digital transformation, especially in the business sense.
Broadly speaking, digital transformation (often abbreviated as DX) is a fundamental change involving and introducing technology in all aspects of human life. While it does heavily feature technologies such as artificial intelligence, Big Data, cloud solutions, the internet of things, and many others, it also focuses on changing the culture. This holistic approach is essential for the success of the digital transformation.
Introduction of technology in the form of both software and hardware in all areas of the workflow. It’s supposed to bring substantial changes to the way it operates hence why it’s called transformation. It also involves a degree of cultural change. The status quo will be questioned along with old hierarchies and established traditions. Experimentation is at the core of this practice. It not uncommon to fail at your first attempts to overhaul your company. This experience is sometimes even considered to be a part of the process. However, it doesn’t need to be.
The definition is quite broad however you put it. Even the word “digital” seems to mean different things to different people. For some, it means getting rid of tedious paperwork, for others — eliminating a physical office altogether. As a result, the term is constantly surrounded by misunderstandings and confusion.
Let’s look at the common aspects you can see all implementations of DX focus on:
Since digital transformation implies a holistic approach it is extremely rare for it to work without any one of the mentioned elements successfully. If customer experience is not digitized then you don’t see any response from your innovations. Without operational agility, your processes drag the speed of processes down. The same can be said about the other points but perhaps the most important one is the cultural aspect. Without proper preparation, all of your initiatives will undoubtedly fail. Your employees are the ones that will use new technology first hand. Make sure they are happy to do so.
There are different reasons why companies decide to go the way of digital transformation. Generally, the two of them are the most common, both of which are just as valid as the other. The first is a matter of resilience. Often described as business continuity planning it is a way of future-proofing. For example, Home Depot, once just a chain of hardware stores, has invested over $11 billion in DX. They have introduced an option to shop online and pick up your good at the store blurring the lines between eCommerce and offline shopping. This has resulted in the growth of revenue from $93.3 to $110 billion and the stock prices went up from $135 to $215 according to Forbes.
The other cause is a necessary evolution, without which a company ceases to exist. It’s no secret, that businesses need to keep up to stay relevant in their market. Home Depot didn’t face this problem so let’s look at another example. You’re an owner of a small local pizza chain. All of your peers shift towards providing a better customer experience via easy online ordering. While it is possible to keep your business afloat with a quality product and word-of-mouth, eventually you either hit a glass ceiling of growth or go in the red and close down completely. Examples like this exist in every industry and every vertical.
The size of the company matter too. The statistics show that enterprises are often slower with this shift to digital. Only 38% of companies have any sort of strategy regarding this type of growth. Compare that to the 55% of startups. This makes sense since the smaller the company, the more flexible and fluid it generally is. However, bigger organizations have bigger budgets, which obviously helps.
What’s also important to remember is that digital transformation comes from the top in the vast majority of cases. Be it CTO, CMO, CIO or any other chief officer, they provide the necessary leadership in the period of change. By setting an example and showing genuine interest in the growth of the business you raise the chances of successful change.
We have described the "what" and the "why" of digital transformation. Now let’s look at the "how". DX is different for every company but has the same general principles. Among them are the following characteristics:
The adoption of these principles raises the chances of a successful implementation of this practice. But let’s look at what you actually get. Here are some approaches and benefits of digital transformation:
Automation is probably one of the most disruptive technologies currently in use. Replacing manual labor with streamlined operations is bound to eliminate certain tasks while making others fundamentally easier. It’s important to remember that not all processes actually require automation. Like most things, it has an appropriate and inappropriate implementation. While some people are wary about this practice altogether there is another side to this coin. You shouldn’t rush and be overzealous about it either. Be smart about it.
As we have mentioned earlier, DX is adopted by a large portion of organizations in order to future-proof their business. Having the majority of internal processes be digital makes it easier to scale them up or down depending on the needs of the company. Many operations can often be configured with a push of several buttons or adjustment of some sliders instead of, for example, spending a day physically going to a remote site.
Creating an image of a company that is conscious about the direction of its growth may actually bring you profit. It’s not an obvious benefit and is often left unmentioned, however, engaging with customers (existing and potential), partners and other companies boosts the reputation and the strength of your brand. This is another way DX tangibly helps marketing.
No matter how capable humans are, when discussing data analytics the computers always have the upper hand and it’s not even close. Smart BI systems completely overhaul the way business is done. We have moved on from just illustrative graphs. Nowadays business intelligence software is capable of prediction and even offering you the best options in the decision-making process.
Businesses have been in the process of moving to the cloud for a while now. Different models have emerged to facilitate this shift. SaaS, PaaS, and IaaS have all have become a part of the day-to-day of numerous organizations. Whenever you’re talking about DX cloud services are often implied. It’s hard to imagine digital transformation without them As a result, some have concluded that DX and moving to the cloud are interchangeable synonyms. While there is some truth to that it is a major oversimplification.
This type of orientation on the needs of the customer is at the core of success for any business regardless of the field it’s in. Any industry has somebody they are working for. Sadly, sometimes they become an afterthought. It becomes impossible when you decide to digitally transform your business. While the marketing department is the one who can benefit the most from this. In turn, the profits achieved with this approach trickles down to the rest of the company. Some consider that if implemented technology is not improving the customer experience then it’s not actually needed and its introduction is largely pointless.
Everything changes, especially technology. New more efficient systems are regularly developed and optimized. The same is true for digital transformation. Just like DX promotes change and adaptation, the practice itself is also a subject to it. In order to bring the best results, some trends have emerged. Among them are the following:
As you can see, a lot of the trends are either the continued growth of already established dynamics or the direct result of them. This means that the practice of digital transformation is not a fad that will soon disappear. It is establishing itself as a valid growth target for any existing company out there.
What’s important to note is that it really bears results. Digitized businesses are consistently overtaking their analog competitors and there are no signs of it stopping anytime soon. DX seems to be the next logical step for the growth of any modern and relevant organization rather than just another option. Just like we can’t imagine our daily lives without technology, the same is happening at our workplaces.
Digital transformation for business is a necessary evolutionary step consisting of the integration of technological solutions into the workflow of a company. The cultural shift it involves is just as important. It’s one thing to implement new technology but you also need to get your staff on board. Just like any company-wide changes, digital transformation is not instant. The aforementioned culture of your organization changes along with any disruptive innovations. However, if you succeed on that front you will reap the benefits of DX for years to come.