What is digital transformation?

Digital transformation means integrating digital technology into all areas of a business, transforming the way it operates. It’s a way of operating that allows an organization to continuously improve, experiment and develop itself and it’s services.

Digital transformation (DT or DX) is a broad term covering a concept. In practice, it can mean different things to different organizations. As businesses are varied and their internal processes more so, the digital transformation can be differently achieved. One thing is common: digital transformation is basically the encouragement of innovation and new business models. This is done by means of digitization of assets and increased use of technology in order to improve the experience of all parties involved in an organization, ranging from employees to stakeholders.

WHAT DOES DIGITAL TRANSFORMATION MEAN?

Breaking the term down, digital is a vague and broad term in itself. While it means different things to different people, it always leads towards technology. To some it may mean “going paperless”, while to others it might mean “data analytics” or even “automation”. This is why it is important for organizations and their leaders to properly define what “digital” means to them.

Carrying on, the term transformation is just as broad, narrowing it down just a little: transformation means becoming something you’re not. This word carries some implications: that something has to be disrupted to become something else. Transformation is something that is natural in life. By law of nature, everything has to evolve and adapt to conditions, first and foremost, in order to survive. All this information puts the term in a different perspective: transformation means disrupting old ways in order to be able to evolve and keep up with current conditions.

While digital transformation does mean organizations have to leave their analog ways behind and become digital, disruption is desirable. The new, digital way opens up possibilities that were previously unachievable, therefore organizations have to take this leap in order to not only become better, but actually survive in the digital era.

This is highlighted, for instance, by the average lifetime of US companies on the S&P 500 index. While in 1958 the average was 61 years, it has gradually reduced to 24 years in 2011 and it is forecasted to shrink to 12 years by 2027.

THE ROLE OF CULTURE IN DIGITAL TRANSFORMATION

Attempting to achieve the digital transformation by simply implementing technology is not enough. In order to successfully unlock the power of digital transformation, there are many aspects of a business that have to come together.

In recent years, the role of IT departments has shifted dramatically from administering existing products to finding new ways of improving the business processes. In digital transformation, innovation is a first class citizen. While IT is indeed charged with driving this innovation in any organization, it’s not a one department job to get there. Everyone has to come to the same table and deliver their valuable insight on how digital technology can improve the performance of the organization.

This is why the digital transformation is first and foremost a cultural issue. All the mindsets of the organization have to align and find the best way of transforming the organization in such a way that it can deliver more value to customers.

People and their mindsets are extremely important. The hunger for growth and for innovation has to be part of the core culture of any organization that aims to survive and thrive in the digital era. As such, there is a very important cultural aspect that needs to be addressed.

Organizations that aim to go through the digital transformation (and all organizations should) must engage all groups in their employment to make sure the transformation happens successfully. While we’ve established that transformation is an important part of life, not everybody embraces it. Unless everyone is on the same page, people can slow down the transformation process and can ultimately cause it to fail.

WHAT ARE THE DRIVING FACTORS OF DIGITAL TRANSFORMATION?

Although digital transformation will have different reasons, processes and outcomes based on organization, industry and culture, some of the elements involved seem to remain somewhat constant.

Some of the main driving factors would be Operational Agility, Workforce enablement and Customer experience.

Behind these factors there is a lot to look at. Incorporating digital technology into a business process means more insight into it, immediately highlighting flaws and possible improvements. It enables leaders to develop a data-driven decision making culture, improving the organization immediately.

HOW CAN ROI ON DIGITAL TRANSFORMATION BE QUANTIFIED?

Measuring success of digital transformation is sometimes easier said that done. Given that digital transformation means transforming the way the organization works, thinks and interacts with customers and employees, it might be tricky to correctly quantify the return of investment.

Securing continued investment is crucial for a successful (and complete) transformation and in order to do so, stakeholders need to be presented with metrics that derive from projects.

Due to the nature of digital transformation, some projects may perform better than others. To make sure one project doesn’t affect the big picture, it is perhaps best to take an approach of looking at the entire portfolio rather than examining only one project.

While the complete transformation is desirable, it shouldn’t be done all at once. Taking it step-by-step with projects that can immediately offer a return of investment is a great way of starting and progressing on the digital journey.

Finally, when setting goals, incorporate strategic, operational and cost factors. This offers a broader picture of how the digital transformation impacts the organization.

TYPES OF DIGITAL TRANSFORMATION

BUSINESS PROCESS DIGITAL TRANSFORMATION

Business Process Transformation is all about that: digitally enhancing a business process. Mobile Apps that offer comfort, augmented reality glasses that offer critical information to workers, AI analyzing and making sense of data collected from assembly lines, it’s all part of the process transformation. Here you can find more about business process transformation.

BUSINESS MODEL DIGITAL TRANSFORMATION

Business Model Transformation focuses on completely reimagining the way value is being delivered. A good example of this is Netflix’s video distribution innovation or Uber’s reshaping of the taxi industry.

HOW TO GET STARTED ON DIGITAL TRANSFORMATION

No two business are the same, and applying what works for one may not always work for another.

Whether we’re talking big or small, companies embarking on the digital transformation journey are getting access to a world of possibilities. This is why they have to be able to take risks and reap results.

Perhaps taking such a big step might be overwhelming, but it is also necessary.

The truth is nobody is prepared. Nobody has the right people. Nobody knows exactly what to do. That’s why it’s an exciting journey that leads to innovation.

Taking the first step is to simply gain a bird’s eye view of your organization. Asking questions like How can I get better insight into my processes? or How can I make my business more efficient? should get any organization started on it’s digital journey.