Digital Transformation is more than a catchphrase. It has become a major issue of debate for corporations all across the world.
But what exactly is digital transformation? And why is it so critical for forward-thinking businesses?
For various firms, the phrase “Digital Transformation” or “DT” may signify a variety of things. Before you begin working with DT, you must have a clear goal and purpose that will benefit your customers, partners, and workers.
Organizations that wish to embark on their digital transformation path should be well-versed in DT principles and practices. It will contribute to improved business success.
In this tutorial, we’ll talk about digital transformation and how it affects organizations all around the world.
- What is Digital Transformation?
- Differences between Digitization, Digitalization, and Digital Transformation
- Digital Transformation History
- Benefits of Digital Transformation
- Digital Transformation Framework
- Digital Transformation Strategy
- Digital Transformation Examples
- Key Trends in Digital Transformation in 2022
Let’s dive in.
What is Digital Transformation?
In layman’s terms, digital transformation (DT or DX) refers to the use of technology to streamline business processes in order to generate growth in both new and existing markets.
Because every business is distinct, the definition will be different for each one.
As a result, we’ve gathered a variety of definitions to assist you in finding the one that best fits your needs.
What is Digital Transformation? Definition by Experts
There are several definitions of digital transformation, and here are a few examples:
Brian Solis’s definition of DT is entirely holistic:
[DT implies] the realignment of, or new investment in, technology, business models, and processes to drive new value for customers and employees.
He goes on to say that the realignment can help organizations compete effectively in a rapidly changing digital environment. However, the primary goal of digital transformation should be realignment in order to add value for consumers and staff.
According to the Wikipedia definition, DT refers to the changes brought about by the application of digital technology in all elements of human civilization.
Austria, Municipal Government, states:
DT means modernization or the renewal of business processes and business models supported by IT, so business processes and business models are at the center of attention and not IT.
Peggy Chen, CMO of SDL, says:
At its heart, digital transformation is about connecting better with digital customers.
Paige O’Neill, CMO of Sitecore, says:
It’s important to keep in mind that digital transformation is not a single project or change, but an organization-wide restructure that extends to the people, the operations, and the technology.
Many experts and influencers point to digital transformation as a means of improving consumer and employee experiences via the use of cutting-edge technology.
Organizations should define the goals and results that are most important to them. As Global CEO of Cognizant Softvision Andres Angelani aptly writes:
the right definition [of DT] rests within the organization itself.
Differences between Digitization, Digitalization, and Digital Transformation
You’ll come across digitization, digitalization, and digital transformation quite often. Well, they’re not the same and each one has a different meaning.
Let’s quickly look at the differences between digitization, digitalization, and digital transformation.
Digitization, in a nutshell, it is the process of transforming information stored in physical documents from analog to digital representation.
Digitalization is the process of leveraging digital information to make labor easier and more efficient. And, more than ever before, digitization is becoming increasingly important in business.
Digital transformation is altering the way you do business. It’s about taking a step back and going through everything you do, from internal systems to consumer interactions and everything in between. Understanding the actual potential of your technology is a critical component of DT.
Digital Transformation History—A Sneak Peek
The origins of digital transformation may be traced back to the 1940s. However, with the advent of digital products, services, and mediums in the 1990s and 2000s, people would have had a greater understanding of DT.
Customers’ communication with businesses is changing dramatically as a result of the advent of social media platforms and smart gadgets. It has altered people’s expectations of reaction times and multi-channel availability.
Online commerce and web-based point-of-sale prospects have grown in popularity as online payment methods have grown in prominence. The emphasis is on mobile devices, which have the potential to exploit individualized consumer data on a vast scale.
It is critical to better personalize your goods, interactions, and messages to the individual demands of your clients. It is expected to continue having a significant impact on the global commercial environment for decades to come.
What are the Benefits of Digital Transformation?
You’d see the growing relevance of digital transformation as society digitizes. As an entrepreneur, you may decide to embark on digital transformation for a variety of reasons.
Of obviously, survival is the most likely goal.
According to the IDC Worldwide Semiannual Digital Transformation Guide, global investment on technology and services that allow digital transformation will exceed $1.97 trillion in 2022.
This funding is also predicted to rise between now and 2021. The entire amount spent on digitization globally would exceed $2.1 trillion by 2022.
According to IDC, digital transformation investment will expand gradually over the next five years, with a five-year compound annual growth rate of 16.7 percent between 2017 and 2022.
According to the World Economic Forum, the value of digital transformation for society and industry might exceed $100 trillion by 2025.
However, it is not all good news. Forrester recently revealed that DT attempts were collapsing due to illusion, misunderstanding, and reluctance to change.
Exploring the Benefits of Digital Transformation
1. Transforming Customer Experience
Customer experience is at the core of digital. Many businesses are becoming increasingly conscious of this, with 92 percent of CEOs implementing comprehensive digital transformation plans to improve the customer experience.
2. More Data-based Insights
When you go digital, you can track KPIs and evaluate data collected throughout your digital marketing initiatives.
Using data-driven insights may help you better understand your consumers and rethink your strategy, aiding with improved decision-making and paving the road to a greater ROI.
3. Greater Collaboration Across Departments
As executives construct their organizations around digital congruence, DT provides an exceptional chance for organizational unification.
When everyone is working toward a shared goal, the transition will be smooth and seamless.
4. Improved Agility and Innovation
Businesses expand thanks to DT, which is powered by innovation. When it comes to DT efforts, 68 percent of businesses regard agility as one of the top three factors.
Even with all of the advantages, there are some criticisms of the concept. Let’s go check it out.
Criticisms of Digital Transformation
The digital shift is a great time to rename your offerings. However, as Gartner points out, the concept’s overselling is reaching the abyss of disillusionment. (Source)
Many computer professionals are skeptical about digital communication. DT might be so wide at times that it borders on meaninglessness.
As Gideon Kay, European CIO of advertising firm Dentsu Aegis, puts it:
I just think its two words that people put together. There is a rapid transformation that is driven by technology. Yet all change in society and business these days is impacted by some level of technology.
What are the Digital Transformation Drivers?
Technology is an important component of DT. However, the emphasis is frequently on moving away from antiquated procedures and legacy technology and toward new technologies.
It is no surprise that there is a lot of investment in established IT companies, as Forrester data confirms. According to the survey, CIOs spend an average of 72 percent of their budgets addressing current IT challenges. In comparison, only 28% goes to new projects and innovation.
Many firms begin on DT journeys in order to mitigate the risk of disruption from startups.
Consider Uber‘s entry into the transportation industry, which compelled everyone from vehicle rental businesses to taxi companies to launch comparable projects on ride-sharing and on-demand services, including bikes and scooters. As a result, leaders are always under pressure to rethink and execute.
Today, there is a growing demand for firms to adopt agile concepts and use technology to boost efficiency wherever feasible.
What is a Digital Transformation Framework?
When it comes to digital transformation frameworks, they cannot be general; they must be tailored to the unique difficulties and goals of each firm.
However, there are a few constants that may be extracted from the current frameworks.
Let’s have a look at some of these features from publicly available digital transformation frameworks. They include, among other things, customer experience, culture and leadership, and operational agility.
A short glance at Cognizant’s digital transformation framework demonstrates how the structure may be used to generate a digital vision and new business models.
According to the whitepaper, all parts of the framework should be further examined to ensure that all relevant digital prospects are fully explored.
The authors also advise developing a high degree of digital awareness in order to increase stakeholder acceptability of organizational changes.
They also propose that enterprises rethink how they do business in the digital era, emphasizing the need of developing a digital transformation plan and starting the digital transformation as soon as possible.
Finally, digital transformation frameworks are more about vision, purpose, and commitment than elements and stages. It’s time for a paradigm shift and a new perspective.
What is a Digital Transformation Strategy?
The challenge is how to assemble the crucial pieces of the DT puzzle.
With jigsaw pieces like transforming the IT culture, raising awareness among stakeholders throughout the business, and connecting change to the company’s mission.
A strong digital strategy may help you offer your DT the greatest possible chance of success. Here are some brief pointers for you:
1. Ideate and Create a Compelling Digital Strategy
The first step is to brainstorm ideas, get everyone involved, and learn what DT means for your organization and what it can do for you.
The creation of value lies at the center of the DT journey. Employees who understand the significance of DT may immediately buy in and drive the necessary change.
2. Aligning DT with Business Goals
Once you’ve established your digital strategy story, it’s critical to align it for a successful transition. The strategy is often top-down.
As CEOs, you must convey the move while also outlining the desired results. DT cannot be driven only by IT; it must be fully aligned with an organization’s vision, mission, goals, and values.
3. Document the Risks
There may be hazards associated with DT, and many businesses are aware of this. There may be hazards associated with launching a new internal application.
It is prudent to examine, assess, and document the risks in order to track threats throughout time.
4. Run Pilot Tests
After you’ve developed your story, examined the issues and technology, and recorded the risks, it’s time to put the technology through a pilot test.
Running proof-of-concept and pilot tests can assist you in determining the effects on your organization and culture as you go forward with a sound plan. The tests will guarantee that your stakeholders are prepared for the DT journey and that your company and personnel understand how to properly implement the project.
5. Keep Analyzing the Impact
It is advisable to continue assessing the deployment as part of your digital transformation plan. Artificial Intelligence is a great example (AI).
If a company decides to employ AI as part of their sales process, they may find some benefits, but after additional study, they may discover that they need to automate even more of the sales process.
Similarly, any DT method will be most beneficial when you conduct more research. The initiative will assist you in running your company smoothly.
6. Prepare for Culture Change
The cultural components of transition are the most important. The worst error in a digital transformation journey will be to ignore cultural change. Consider the cultural aspects of transition carefully, because, at its core, it is a people problem.
Preparing for cultural transformation is an essential component of the DT approach. Let’s take a closer look at this aspect.
Digital Transformation and Culture Change
Although technology plays an important part in driving DT strategy, the effort of adopting and responding to big changes rests on everyone. Because of this, DT is a people problem.
As Mattel EVP and CTO Sven Gerjets correctly points out, transformation begins with empathy. When empathy is genuine, [workers] learn to trust one another. It would be difficult to gain buy-in for transformation initiatives and impossible to achieve if everyone was not totally on board.
Swift, who oversees Digital Advisory for North America and Global Accounts at Korn Ferry, proposes categorizing them as old-timers, by-the-book players, and lone wolves. She thinks that, from a change management standpoint, it would be more prudent to intentionally target smaller groups.
According to Swift, businesses should evaluate the digital experience and behavioral preferences of distinct groups inside their company before crafting messages that reach the correct beginning point and realistic finish for each group.
Digital Transformation Examples
Once you’ve established the overall vision of what you want DT to do, technology may help you get there.
It is always beneficial to learn about what firms have done in their DT journeys, and this knowledge base may assist you when you are brainstorming. It also helps to learn from rivals’ and other businesses’ problems, errors, and accomplishments in accelerating innovation.
When looking at insights into digital transformation by industry, you’ll see that every digital transformation begins with a shift from analog to digital, with a focus on the digital domain. And if you’re asking, what are some examples of digital transformation? Let’s take a look at a few.
1. Restaurant Chains Stay Ahead | TGI Fridays and IHOP
TGI Fridays and IHOP are two restaurant chains that are experimenting with virtual assistants to help customers with smartphone ordering. To keep up with and ahead of more tech-savvy boutique companies, restaurant chains launched the transition.
2. Customer Experience at Heart | Porsche
Placing the customer at the core of your DT strategy is a vital takeaway from the DT journey, and Porsche accomplished exactly that—position consumers first. What is the driving force behind Porsche’s digital strategy?
The consumer experience is the answer. Porsche has made significant investments in understanding the Porsche driver. They’ve taken the approach of storing all customer data in a centralized CRM data center and documenting every customer interaction throughout the lifecycle.
The information aids in real-time categorization and predictive intelligence. The end result is brilliant: they can approach just consumers who are interested in buying a car, resulting in a considerable rise in overall sales conversion rate.
3. Competency Centre Supporting Client Base | Deloitte
Deloitte Professional Services established Deloitte Digital Today. The original notion of building the competence center pulls together all technical, creative, and digital capabilities to assist their customer base on their DT journey.
Deloitte’s collaboration with Alcon Labs and doTERRA has also assisted the businesses in modeling real-world solutions and developing their DT strategy.
4. Connected Enterprise | Rockwell Automation
Rockwell Automation‘s executive team anticipates the company being a fully connected business in the future. To reach its aim of the connected enterprise, its present DT journey involves becoming a customer experience organization.
5. Acquiring Other Firms | Disney
To promote their DT, Disney purchased other firms in order to meet customer demand for streaming video provided by technology.
Disney acquired BAMTech in order to have access to streaming technology rather than developing it in-house. Disney also paid $52.4 billion to purchase 21st Century Fox’s assets in order to engage directly with customers.
What are the Key Trends in Digital Transformation in 2022?
In 2022 and beyond, organizations will need to augment digital initiatives.
Some of the key trends to look for in 2022 are:
- 5G connectivity will boost the IoT sector
- Improved data privacy
- Better use of Artificial Intelligence (AI) and Machine Learning (ML).
- Increased digital partnerships, mergers, and acquisition activity.
- Expanding public cloud adoption.
- Improved digital transformation success metrics and more
As senior managers and entrepreneurs, the roadmap to take full advantage of DT’s potential is quite clear.
Here are some digital transformation best practices for you:
- Research DT examples and find out key trends
- Reimagining your business model
- Create a distinct digital transformation strategy story
- Apply trending technologies to optimize your business model
- Create a distinct competitive advantage with DT
Finally, it’s time to investigate the confluence of your business and engaging and meaningful customer experiences enhanced by digital transformation and innovation.
Digital transformation has become a worldwide business movement, and in order to survive in the digital economy in the long run, you must stay connected to the universal paradigm.
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Frequently Asked Questions
1. What Does Digital Transformation Mean?
Austria, Municipal Government, states: “DT means modernization or the renewal of business processes and business models supported by IT, so business processes and business models are at the center of attention and not IT.”
Peggy Chen, CMO of SDL, says: “At its heart, digital transformation is about connecting better with digital customers.”
Paige O’Neill, CMO of Sitecore, says: “It’s important to keep in mind that digital transformation is not a single project or change, but an organization-wide restructure that extends to the people, the operations and the technology.”
2. What are the Key Differences between Digitization, Digitalization, and Digital Transformation?
Digitization, in short, is the process of converting information locked in physical documents from analog to digital.
Digitalization is the process of using digitized information to work more simply and efficiently. And you’ll find increased importance of digitalization in business today more than ever.
Digital transformation is changing the way you conduct your business. It’s about taking a step back and revisiting everything you do, from internal systems to customer interactions, and more. A key element of DT is to understand the true potential of your technology.
3. Benefits of Digital Transformation
- Transforming Customer Experience At the heart of digital is customer experience. Many companies are increasingly aware of this, with 92% of leaders developing sophisticated digital transformation strategies to enhance the consumer experience.
- More Data-based Insights When you go digital, you can track metrics and analyze the data that you capture during your digital marketing efforts.
Using data-driven insights can help to understand customers better, and also rethink business strategies, assisting with better decision-making, paving ways to a higher ROI.
- Greater Collaboration Across Departments DT offers an excellent opportunity for unity throughout the organization as leaders build it on digital congruence.
When you find everyone aligned to a common purpose, you’ll find a smooth and seamless transition.
- Improved Agility and Innovation With DT, businesses proliferate, fuelled with innovation. When it comes to DT initiatives, 68% of companies rank agility among the top three considerations.
4. What is a Digital Transformation Strategy?
- Ideate and Create a Compelling Digital Strategy The first step is ideating, getting everyone involved, and finding out what DT means for your company and what it can do for you.
- Aligning DT with Business Goals Once you have your digital strategy story in place, it is crucial to align it for a successful transformation. The approach is usually a top-down one.
- Document the Risks There could be risks involved with Digital Transformation, and many companies are aware of this. Whenever you roll out a new internal application, there could be risks involved.
- Run Pilot Tests Once you’ve ideated your story, analyzed challenges and the technology, documented the risks, it’s time to run a pilot test with the technology.
- Keep Analyzing the Impact It is prudent that as a part of your DT strategy, you keep analyzing the rollout. An excellent example is Artificial Intelligence (AI).
If an organization devised to use AI as a part of a sales process, they might see some gains, but with further analysis, they may realize the need to automate even more of the sales process.
- Prepare for Culture Change The most critical element is the cultural aspects of transformation. The biggest mistake will be to overlook the cultural change in a digital transformation journey. Give careful consideration to cultural facets of transformation, because at heart, it is a people challenge.
5. Digital Transformation Examples
- Restaurant Chains Stay Ahead | TGI Fridays and IHOP Restaurant chains—TGI Fridays and IHOP are experimenting with virtual assistants, which facilitates customers with mobile ordering. The restaurant chains initiated the change to stay in tune and ahead of more tech-savvy boutique brands.
- Customer Experience at Heart | Porsche A key takeaway of the DT journey is placing the customer at the heart of your DT strategy, and Porsche did precisely this—position customers first. What drives Porsche’s digital strategy?
The answer is the customer experience. Porsche heavily invested in understanding the Porsche driver. They’ve adopted an approach, wherein they place all customer data into a central CRM data center, and in the entire lifecycle, documented every customer interaction.
- Competency Centre Supporting Client Base | Deloitte Deloitte (Professional Services) founded Deloitte Digital Today. This innovative initiative of establishing the competence center brings all technical, creative, and digital competencies together to support their client base on their DT journey.
- Connected Enterprise | Rockwell Automation The leadership team of Rockwell Automation envisions becoming a fully connected enterprise in the future. Their current DT journey includes becoming a customer experience organization to achieve its goal of the connected enterprise.
- Acquiring Other Firms | Disney Disney bought BAMTech so that they could access the streaming technology instead of trying to create it in-house. Disney also spent $52.4 billion to acquire the assets of 21st Century Fox to connect directly with consumers.
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