The term ‘digital transformation’ is today an increasingly used one across business sectors. It refers, broadly, to a company’s adoption of digital technology to enable the improvement of its business processes, innovation, and value for customers – in other words, the digital-led transformation of its operations.

what is digital transformation

Why is digital transformation so important?

By embracing digital transformation, an organisation can help ensure that it keeps up with emerging customer demands. This, in turn, can help maximise its chances of surviving and thriving for many years into the future.

A business that neglects digital transformation is likely to struggle to remain competitive in an economic environment that is undergoing constant change in response to advances in technology.

What are the four main areas of digital transformation?

The four principal areas, or ‘types’, of digital transformation can be summarised as follows:

  • Process transformation. This entails elements of a business’s processes being modified to help it achieve new goals. Such transformations allow a company to modernise its processes, integrate new technology, and achieve financial savings, while better incorporating core systems.
  • Business model transformation. Digital technologies aren’t just a means by which businesses can undertake existing processes better – it can also help them to transform traditional business models. Examples of this kind of innovation include how Apple reinvented music delivery with iTunes, and the way Netflix overhauled how we think about video distribution.
  • Domain transformation. This isn’t an area of digital transformation that has received a huge amount of attention so far, but it has already shown its enormous potential. It refers to how new technology can give businesses the ability to redefine products and services, blur the traditional boundaries between industries, and thrive in domains that they might not have previously been associated with. One great example of this is Amazon’s success in expanding into new market domains, as it did with Amazon Web Services (AWS), which has become the world’s largest cloud computing and infrastructure provider, in a sector previously dominated by such colossal corporate forces as Microsoft and IBM.
  • Cultural/organisational transformation. Successful digital transformation doesn’t just necessitate updates to an organisation’s technology, or even redesign work on its products. That’s because any given firm’s digital transformation work will also need to be well-aligned with its internal values and behaviours. This creates a need for leaders to formulate a clear vision of the transformation that they then effectively communicate to everyone else in the organisation – not just at the start, but on an ongoing basis.

A common mistake made by many corporations is to focus solely on process or organisational transformation. While these aspects of digital transformation are undoubtedly crucial, it is important to ask whether your business is addressing all four of the aforementioned types – because if it isn’t, it might be missing out on significant value.

What are some key examples of digital transformation?

One great example of digital transformation is the introduction of artificial intelligence (AI) to a service organisation. Recent years have seen the ever-more common use of AI-powered chatbots to answer customer queries and generally serve as a welcoming presence on many businesses’ websites, while reducing the length of time customers need to wait to be put in touch with an agent.

Examples of digital transformation naturally differ across different business sectors – and of course, many have been undergoing some forms of digital transformation for a while. Long gone, for instance, are the days when shoppers would have to cut out physical coupons from newspapers and magazines in order to access a discount on something. Today, customers are much likelier to simply show their smartphones at the checkout to activate deals in their favourite stores.

8 steps to begin your digital transformation journey

With many businesses still being far from fully digitised, if this also describes your own organisation, you will probably wish to know how to plan and start out on your digital transformation journey.

The exact journey will – of course – differ from one company to the next. However, it is a safe bet that your own firm’s digital transformation processes are likely to encompass a significant proportion of the below steps.

1. Establish what ‘digital transformation’ means to your organisation

This might be one of the trickiest parts of the entire digital transformation process for many firms, simply because of the lack of a universally accepted definition of what digital transformation is. So, it is important to have those internal conversations about exactly what it will mean for your own company.

Factors like your own organisation’s particular challenges, maturity, industry, customers and competitors will all play a role in determining what you will set out to achieve with your digital transformation strategy.

2. Assess your present capabilities

Once you have established why your buesiness needs to digitally transform, and what this will look like, it will be necessary to consider your organisation’s present digital capabilities. You will need to scrutinise your current technologies and employees, which will help you avoid undergoing too much digital transformation for your firm’s needs, or not digitally transforming to the extent needed.

3. Set out how you will go digital

So, you will now hopefully know your business’s digital transformation objectives, and what it is presently capable of on the digital front. If so, you will be in a strong position to assess the various options for exactly how your company digitally transforms itself.

It might turn out that you only need to implement small changes, or you may decide on a combination of more dramatic transformations to everything from your company’s products and customer experience, right through to backend elements, such as your cloud and IT infrastructure.

The key thing here is to ensure genuine value is being brought to your business and customers through whatever digital transformation solutions you implement, instead of it simply being a case of adding new technology to your business’s operations for the sake of it.

4. Achieve buy-in from company leaders

By this point, you should have carefully thought out a digital strategy, and the solutions that will enable you to make digital transformation a day-by-day reality for your business. Now, you will have to obtain executive buy-in. It can take longer to achieve this than you may think, so it is important to have a solid plan in place to ‘sell’ to your company’s executives before you approach them.

5. Build a roadmap

Having a sound strategy and the right buy-in will enable you to proceed to the creation of an effective roadmap. While you won’t be able to alter everything about your organisation’s digital processes at once, it is important to have a comprehensive plan of how you will instigate the digital transformation. The roadmap needs to set out when everything should happen, how your business will transform itself digitally over time, and what this will look like over a certain time period.

6. Make sure you have the appropriate skills in place

Unfortunately, digital transformation projects can and do fail from time to time – and one of the most frequent reasons for this is a lack of skills.

So, you can help guard against the failure of your company’s digital transformation initiatives by ensuring you hire people with skills in the relevant technologies that will help drive the transformation process – and by extension, your organisation – forward.

7. Prepare the wider company

We touched above on the importance of getting your company’s executives to buy into what you are doing with your digital transformation strategy – but what about the rest of your employees? Yes, this aspect will be important, too, as you seek to get your wider business prepared to initiate the digital transformation process.

Ultimately, digital transformation within an organisation isn’t just about technological change – it is also about cultural change. By clearly communicating your plan and vision to your employees, it will be much easier to get the intrinsic buy-in from them that will be so imperative to making the digital transformation process a success at your company.

8. Get your digital transformation process underway

Finally, with all the above pinned down, you should be ready to start your company’s digital transformation. Not only beginning with this work, but maintaining your business’s commitment to digital transformation in the long run will be crucial to ensuring it fuels the company’s ongoing success and growth.

The above should help make clear the importance of embracing digital transformation at your organisation, in addition to devising and implementing a clear plan, and remaining dedicated to seeing out that plan.

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