Digital Transformation Guide: Everything You Need To Know
Even before the COVID-19 pandemic, technology was becoming a more and more critical part of the workforce. Companies saw technology as a useful means of interacting with clients, providing some flexibility in the workplace, as well as a way to automate and accelerate processes. Nevertheless, the spread of COVID-19 and the end of face-to-face meetings for inessential industries have significantly sped up these adoptions. This has led businesses to start a digital transformation in organizations, so they can continue to work remotely and serve their client base.
This shift to digital operations has required both client interactions and a behind-the-scenes role in many companies. The absence of opportunities to hold meetings has required many companies, universities, and schools to find new ways for people to contact, cooperate, and perform work or school tasks while being away from each other. At the same time, clients expressed their interest in services with little or no contact with people, as well as applying for remote or at least limited contacts from a client-oriented direction.
These have collectively helped drive a digital business transformation that has influenced businesses across all segments. Companies have been forced to admit that it doesn't take perfection to embed technology into their work systems. Organizations across different sectors have been able to adapt to these changes much faster than they were originally supposed to.
According to Mckinsey’s research, respondents indicated that their companies were able to embrace the digital transformation process 20 to 25 times faster than expected. Particularly in the area of telecommuting, these respondents believed their companies could implement solutions 40 times faster than they expected in the pre-pandemic environment. What people expected to take a year for companies to implement took about 11 days. Businesses have been able to build efficient solutions that allow employees to continue their work remotely.
In this article, we’ll discuss digital transformation, its use cases, areas, key elements, benefits & drawbacks, digital transformation services & technologies. So, let’s dive deeper into the topic!
What Is Digital Transformation?
Definitions vary, but for this article, we will define digital transformation as a holistic process that helps organizations redefine and improve themselves using digital technologies that are transforming business and society as a whole. Moreover, it is a cultural change that requires businesses to constantly challenge the status quo, experiment frequently, and adapt to collapse. Sometimes, it means abandoning long-standing business processes on which companies were built and adopt new practices that have not yet been defined.
5 Steps to Digital Transformation
As soon as you get what a digital transformation strategy is and why it is important, you can start developing a plan. Let's take a closer look at the five steps you can take to achieve success through digital transformation.
Define Your Vision
Having a clear understanding of what you want to accomplish and what your goals are will help you get on the road toward a successful digital transformation strategy. However, you also need to think about how digital transformation will affect your customers.
It is imperative that your leaders are involved in planning and driving change. This may be the difference between the failure and success of these initiatives.
Focus on Culture
If you want to build a successful strategy, you need to create a culture that supports digital innovation. The next step consists of making sure everyone in your organization understands this vision. In this way, you can be sure that everyone on your team knows why this effort is important.
Collect Resources and Experience
You can select people from the company, outsource, or work with a technology partner. Nevertheless, there are certain qualities that you should look for in the people you want to work with. They must be willing to learn about new technologies, be open to ideas, and be willing to adapt as the business continues to grow.
Choose the Right Technology
Before adding any new technology, ask yourself: Does technology aligns with your digital transformation strategy? Does it fill in the gaps in your organization? If you can answer yes to both of these questions, this technology is an important part of your digital transformation strategy.
Now, it’s time to get familiar with examples of digital transformation.
Examples of Digital Transformation
- IT modernization, such as cloud computing;
- Retraining of staff;
- Introducing digital tools like artificial intelligence (AI) to allow staff to concentrate on tasks that require creativity, problem-solving, and social skills;
- Using design thinking to identify and eliminate pain points along the customer’s journey;
- Modernizing processes to adapt to clients’ needs;
- Releasing your data and share intelligence across the entire business;
- Encouraging separate groups like marketing, sales, and services to cooperate;
- Moving to a remote workspace.
Thus, digital transformation is certainly not only about revolutionary change or technology. It's not even just about transforming the digital age. If it were the latter, you would need to understand that the digital age has been around for quite some time and is relatively vague.
Digital Transformation Use Cases
Below, you will find examples of successful digital transformation across various industries. The following companies have satisfyingly digitized their traditional business models to remain competitive in the modern world.
Believe it or not, but there was a time when Netflix wasn't a household name. Netflix's original business model, founded in 1997, was a pay-per-lease model that included DVD sales and mail-order rentals. It wasn't until 2007 that Netflix completely changed the way people consume media at home. Netflix's ability to leverage digital transformation to innovate its business model is exactly what saved it from extinction - and destroyed Blockbuster.
In 2007, Netflix launched a video-on-demand streaming service to complement its DVD rental service at no additional cost for its subscriber base. Today, Netflix is by far the most popular provider of digital video content, with other tech heavyweights like Amazon, Hulu, and YouTube lagging in demand.
In the case of Domino’s, the transformation efforts have been multifaceted and spread out over the years. It all started in 2008 when the pizza chain plummeted and focused on modernizing its technology infrastructure and leveraging artificial intelligence and machine learning to improve its product’s quality. The journey toward the network’s digital transformation not only improved the usability of higher quality products but also provoked the rapid increase of the company's stock prices by 2,000%.
Under Armour desired to become more than just a sportswear company when it introduced "connected fitness," a platform to track, analyze, and transmit personal health data directly to its clients' smartphones. This new app provides a stream of information that allows you to immediately spot fitness and health trends. For instance, Baltimore-based Under Armour was able to immediately recognize the walking trend that originated in Australia. This allowed the company to deploy localized marketing and distribution before its competitors even knew what was happening.
Amazon Business served as an example of the transition of expectations of "digital customers" to the world of B2B. The features include free two-day shipping for orders of $49 and more, exclusive discounts, hundreds of millions of items, purchasing system integration, tax-free purchases for qualified customers, common payment methods, order approval workflows, and advanced order reporting, among others. Amazon Business was launched in April 2015 with over 250 million items and a more holistic marketplace for B2B firms.
COO Kevin Johnson perhaps sums it up best: "Where others are trying to create a mobile app, Starbucks has developed an end-to-end client platform based on loyalty." The main innovation is the Mobile Order and Pay application. It is inherently a customer-centric strategy as it addresses the basic needs of the consumer: comfort, avoidance of queues, and more. Combined with a vast loyalty program, the app gives Starbucks an ideal place to promote additional sales and marketing to its consumers. In addition, the app feeds huge amounts of user data to the company, giving it a better understanding of the habits and desires of its customers.
What Are The Main Areas Of Digital Transformation?
With innovations’ implementation, organizations have the opportunity to rethink the way they conduct business. This will open the door to significant growth and enable them to dramatically improve their customer experience and move into industries that were previously unachievable. If an organization plans to introduce a digital transformation practice, there are four main areas to review:
Process transformation supposes changing the elements of business processes to meet new purposes. Most companies start thinking about transforming business processes when they need radical improvements. Such a transformation will upgrade organizational processes, integrate new technologies, save them money, and better integrate entire systems.
Process automation is one of the most critical business transformation steps. The adoption and expansion of automation throughout the business means that not only IT departments but entire teams benefit from a new efficient workflow. Automating your daily workflow is at the heart of a successful digital transformation. If your organization does not yet have a simple workflow automation solution, we recommend you explore it now. By using such a platform, you can digitize forms for employees and customers, automate routine processes, and measure their effectiveness.
Digital Visualization & Analytics
Data visualization & analytics tools are constantly evolving, offering more powerful features, and improving accessibility and usability. With an increasing number of work roles requiring us to provide data to support decision-making, visualization tools are becoming an increasingly important tool in our work lives.
Digital operations involve converting interactions, communications, business functions, and business models to (more) digital, which often boils down to a mix of digital and physical, as in omnichannel customer service, integrated marketing, or smart manufacturing with a mix of autonomous, semi-autonomous, and manual operations.
Digital Strategy Development
Digitalization is one of the most prevalent digital transformation trends today, and the race for early digital transformation has already begun. However, it is not easy to do since digital transformation involves well-defined planning and strategy. So, start by creating an effective digital strategy that will help you transform easily.
Applications have become key drivers of growth as a means of rapid market penetration, better services, faster service delivery, and higher productivity. As a result, the application-centric transformation has become the key to a digital future. Digital transformation requires a change in the operating infrastructures, applications, and all of the assets of an organization. The introduction of digital techniques into the application life cycle is one of the main factors in this process.
Modernization is essential for any industry. While infrastructure modernization is at the heart of any organizational development, it is just as important as building a digital strategy in a successful digital transformation journey. Companies can start with a holistic approach to establishing a link between digital capabilities and existing corporate infrastructures, built for regular updates.
Business Model Transformation
Plenty of businesses are using digital technology to transform their traditional business models. There are many examples of this kind of innovation in today's business world, from Netflix’s reinvention of video distribution to Apple's redesigning of music delivery (through iTunes) to Uber’s revolution of the taxi industry. These big names aren't the only ones to have made such big changes to their business models. Insurance companies such as Allstate and Metromile are using data and analytics to separate insurance contracts and charge customers per mile — a massive change in the auto insurance business model. By reinventing and complementing their current successful model, corporations can achieve renewal that leads to significant new growth opportunities. That is why more companies should be trying to follow the same path.
Transformation of Organizations’ Culture
A prosperous digital transformation requires more than just upgrading technology or redesigning products. If an organization fails to align its digital transformation with its intrinsic values and behavior, it can have a decisive impact on its culture. The negative impacts range from the slow adoption of digital technologies to the loss of competitiveness in the market and the inevitable failure of the initiative, as well as the loss of productivity and income. On the other hand, complex collaborative efforts can help change the culture of understanding, accepting, and driving digital transformation. Leaders must articulate a clear vision for transformation and effectively communicate it to the entire organization on an ongoing basis. They must clearly understand what the reasonable risks are and why they are worth it.
Transformation of Business Directions
A great example of how domain conversion works is the case of an Amazon online store that expanded into a new market domain with the launch of Amazon Web Services (AWS). AWS is currently the world's largest cloud computing/infrastructure service provider in a sector previously dominated by high-profile giants Microsoft and IBM.
While it may not have looked like an obvious game for Amazon, its move to cloud-based delivery has resulted in the online retailer taking advantage of opportunities and services it was already using. For example, the company had already developed tremendous storage capabilities as it sought to support its global business while providing key computing services to startups and other growing businesses that were part of the Amazon family. In the end, all the possibilities were there, and Amazon just took vision and confidence to go into cloudy space. All businesses undergoing digital transformation should be mindful of the new domain transformation opportunities that emerge with the introduction of new technologies.
Key Components & Pillars Of Digital Transformation Strategy
McKinsey’s research points to several factors that can increase the chances of transformation success. Here are the most prominent:
- Having the right digital-savvy leaders;
- creating opportunities for the (future) workforce;
- Employees’ engagement with integrator roles;
- Empowering staff to work in new ways;
- The digital renewal of everyday tools;
- Frequent communication using traditional and digital methods;
- Modifying standard operating procedures to involve new digital technologies;
- A clear change of story for the digital transformation’s establishment.
Digital Transformation Key Elements
Now that you know the factors that influence digital transformation the most, it’s time to move on to the pillars of digital transformation. The six pillars of digital transformation are experience, people, change, innovation, leadership, and culture. Let's take a look at each of them.
As research conducted by IBM states, 68% of the 12,800 chief executive officers surveyed across 20 segments said they expect organizations to concentrate on customer products over their items in the future. Why? Before investing in technology, your business needs to grasp the customer journey, behavior, and anticipations. These anticipations should be the base of any investment, rather than asking your clients to change with new processes, perhaps losing them entirely in the process. The only way to do this is to focus on the customer experience. That is why companies like Netflix, Apple, Starbucks, and Adidas have become leaders in their segments. They have experience and have forged deep connections with their clients that go far beyond a product or service.
Without the right talent or without focusing on employees, your company will struggle. This goes back to CX and EX because it's critical to underline caring for people as well as their experience with you. Businesses that invest in their staff, strive for their development and respect their ideas generate loyalty that greatly simplifies change management within the walls of the company.
People need to support a change to make it happen. You cannot force it, and if you do, the results will be short-lasting at best. You should embark on transformation without the first-hand understanding that change is inevitable — and it can be challenging. Communicate your expectations to your employees. Explain to them why digital transformation is important, and develop a strategy to encourage change and counter it at the same time. Give people the tools and environment they need to embrace change and succeed.
Transformation and innovation are not the same things. To transform, you need innovation. The simplest definition of innovation is the sudden spark of creativity that leads to the creation of something that changes the face of a company. These sparks can either be sudden or escalating. Some of these innovations are massive and disrupt entire business models, while others make small and significant changes that increase client satisfaction or differentiate the marketplace. However, embedding innovative thinking throughout a company is essential.
Leadership can come in various forms, but if you desire to change your business, it must come from the top. You have certainly heard this a million times: you must be an example. Leaders need to be proactive and keep a close eye on what will happen in the future. As technology advances rapidly, there is no time to wait. As a leader, you also need to clean up and not go with the flow. Although technology may seem like the perfect blueprint, take your time to scrutinize all of your options. Think differently from others and encourage people within your company to do the same. Don't just follow the digital transformation crowd; become its leader.
All five of the last pillars can be folded into one bag, tied with a beautiful bow, and shape your culture. Digital transformation requires a suitable business culture. By creating an open space where staff and client experience is at the forefront, where people matter the most, where change is planned, and where innovation is central, you will lead your business to a culture that easily transforms on its own.
These six pillars are the foundation of success. Concentrating on these digital transformation guiding principles, in addition to technology, will help your business stay ahead of the competition and avoid collapsing. Lay the foundation first, and you will quickly become a leader in your industry.
Key Challenges & Benefits Of Digital Transformation
As already mentioned, digital transformation is not about digital tools and technology. It's not about introducing new solutions to your company either. Rather, it is about creating a digital transformation strategy that changes corporate culture and allows companies to experiment, challenge the status quo, and become more flexible and more responsive to ever-changing people's needs.
To help you understand how your business will benefit from digital transformation and what challenges you may face along the way, let's take a closer look at the most critical digital transformation details.
An efficient digital workplace and culture
Inelastic app development processes
Reliability and safety
No data management strategy
Greater agility, flexibility, and scalability
Absence of a clear vision and strategy
Better decision-making due to data
Faster business processes through automation
Digital transformation benefits both small and large companies and is inevitable for businesses looking to survive in the marketplace over the next decades. You can only optimize internal processes and provide high-quality customer service with modern digital tools that work seamlessly together — and with your employees. This synchronization is at the heart of digital transformation.
Pros & Cons of Digital Transformation
This new digital generation expects to be able to work from any device and anywhere. Employees need everything in one place, faster connections, instant messages, and instant replies. Nevertheless, digital transformation presents its challenges. Do these outweigh the rewards? Here, we discuss some of the pros and cons of digital transformation to show you digital transformation's impact on the organization.
- Increasing Competitiveness of the Business
As the 2018 IDG Digital Business Survey states, 44% of firms are already pursuing a digital business strategy. It means that your rivals have probably already adopted innovations. Besides, every new player in the market is focused on the prosperous adoption of digital technologies to bring their startup to the forefront in their niche. More conservative competitors will be left behind. Well-suited technology allows your business to be more agile, efficient, and productive, ultimately increasing your ROI.
- Improving Employees’ Productivity
Digital transformation begins with your people. Thus, if their performance improves through the efficient use of technology, the performance of the entire enterprise improves along with it. Modern technologies are designed to optimize office processes. For instance, CRMs were originally designed to combine and facilitate accounting and customer management while minimizing repetitive tasks in marketing and sales. These accelerators exist to empower employees to reach their full potential. Even simple programs, like instant messengers or cloud services, can improve employees’ productivity by simply facilitating access to information. In fact, according to the McKinsey Global Institute, the average employee productivity increases by 25%.
- Improving Customer Experience
One of the potential benefits of enterprise digital transformation is a better customer experience. The average US citizen spends about 12 hours a day on the internet. Extraction of information, entertainment, and waste of money are just some of their pursuits. The obvious answer is to be in this space for your customers, making it easier for them to purchase with the seamless user experience of your digital platforms. Digital transformation enables organizations to better meet their customers’ needs through the intelligent use of technology. Whether it's a better website, a new app, or another digital offering, smart technology, coupled with fast customer adoption, is the key to CX's success.
- Endless Change
Technological progress seems to be endless in the foreseeable future. This means your digital transformation must be an ongoing process as the digital market is developing rapidly. According to Forbes, the dominant trend is the explosive growth of the IT industry. This should not surprise anyone. When new solutions based on scientific discoveries enter the market, you need to be ready quickly for further digital product transformation.
- Long-term Process
The Telegraph reports that one of the most pressing challenges for entrepreneurs is to find the right technology. Indeed, implementing too many optimizing platforms can lead to chaos. Finding the most suitable tools for your business takes time to research and test. It also takes time to train employees to use them effectively. To do this, it is highly recommended to use a Digital Adoption Platform (DAP) to speed up the time needed to reach full competency.
- It’s Difficult for Employees
The burden of constant digital change falls on the shoulders of your employees. While 87% of employees say they are willing to learn new skills, each person experiences stress differently. That is why a personalized approach is required when teaching employees how to use digital tools. With traditional teaching methods, it is prohibitively expensive and becomes a logistics nightmare. However, due to digital transformation, employees can receive personalized training in real-time without leaving the system they are using. In this age of constant digital turmoil, it is important to provide workers with the support they need to make them feel 100% motivated and secure in their jobs.
Digital Transformation Technologies & Services
The digital experience platform and related services are critical to successful transformation projects. The digital engagement platform at the heart of your digital transformation should enable you to collect data at every touchpoint along the journey to purchase and use it to create a rewarding customer experience. The result will be better engagement, stronger connections, increased revenue, and higher loyalty.
Digital Transformation Technologies
A hybrid cloud is a cloud computing infrastructure that connects on-premises IT resources, public and private cloud resources, providing application orchestration, management, and portability. By creating a single, flexible, optimal cloud to run every workload, without tying an organization to a single platform or vendor, the hybrid cloud delivers the flexibility, scalability, and resiliency needed for sustainable digital transformation success. Hybrid cloud solutions combine public cloud hosting from an IaaS (infrastructure as a service) provider such as Amazon Web Services (AWS), Microsoft Azure, or Google Cloud Platform (GCP) with an internal private cloud.
The combination of cloud technologies and these platforms enables you to harness digital marketing power at the speed and scale of the cloud. Choose the right mix of cloud infrastructure and marketing tools to accelerate time-to-market while lowering your total cost of ownership. Some examples of cloud solutions are Google Apps, Dropbox, BigCommerce, and Hubspot, to name a few.
Digital Experience Platform
It is a united kit of technologies based on a common platform that provides a wide range of audiences with consecutive, safe, and personalized access to information and applications across various digital touchpoints. Businesses use digital experience platforms to create, deploy, and permanently improve websites, portals, mobile applications, and other digital technologies. Digital experience platforms manage the presentation layer based on a person's role, security privileges, and preferences. They integrate and coordinate applications, including content management, search and navigation, personalization, integration, and aggregation, cooperation, working processes, analytics, mobile and omnichannel support. According to Gartner, the most prominent examples of digital experience platforms include Adobe Experience Manager, Salesforce Experience Cloud, Sitecore Experience Platform (XP), and Bloomreach Experience, to name a few.
Digital Customer Experience
It combines the digital interactions between the client and the firm and the resulting customer experience. Despite its terminology, the digital customer experience is not exclusive to customer-facing businesses. It applies to all industries that provide services to external customers (patients, students, citizens, etc.), as well as employees, partners, and other users who interact with the company internally. They are united by the use of digital technologies to simplify interactions.
Now that you’re familiar with the basic digital transformation technologies, it’s time to move on to digital transformation services.
Digital Consulting & Transformation Services
Digital transformation consulting firms offer business consulting and transformation services, which help businesses unlock new value through the technologies.
But what do digital organizations require from consulting exactly?
One of the common reasons organizations seek digital transformation consulting is to get products and services to market faster and with fewer risks. Improving the customer experience, whether the customer is external to the organization or an internal user, should be the ultimate goal of a digital transformation strategy. It can be achieved by accelerating the adoption of technologies within an organization and maximizing their impact. Digital transformation consulting services are successful when they deal with how people, processes, and technologies align to influence business outcomes such as customer experience. With this holistic approach, organizations can successfully manage technology disruption by providing teams across the business with processes to evaluate new technologies and manage rapid change.
Digital Business Analysis & Design
Business analysis digital transformation is required to identify and articulate the importance of changes in the way organizations work and to facilitate those changes. In this way, business analysts identify and define solutions that increase the value an organization provides to its stakeholders. They will work at all levels of the organization and can participate in everything, from defining a strategy to building an enterprise architecture, to taking a leadership role, defining goals and requirements for programs and projects, or supporting the continuous improvement of technologies and processes.
Digital transformation design is a significant part of the introduction of your digital transformation strategy as it helps it become client-centric. Digital transformation is not only about making your life easier but also about improving the way you deliver services and products to your customers, and the best way to ensure that your digital transformation meets your customers’ needs and increases your performance is to invest time and resources in its design.
Up-to-date technologies allow enterprises to continuously progress and undergo digital transformations. It helps improve their performance and competitiveness in the market. Besides, digital transformation is not limited to the introduction of new technologies. Indeed, for the right digital transformation, entrepreneurs should think beyond technology. Only after a complete restructuring of their organizations do business owners realize the advantages of digitalization, including the improvement of their operations, opportunities for collaborations, the expansion of their service offerings, and a revolutionary approach to customer service.
Thinking about how to lead a digital transformation? Get in touch with us. We are always ready to help you.