What is Digital Transformation? Posted at: 17/02/2021 Posted in: Simple Progression Digital transformation is very much a buzzword, but it’s increasingly widespread use may lead to misunderstandings about what it actually is. As an experienced business analyst, I’ll explain what digital transformation means, and why it can apply to a broad range of enterprises, from SMEs to large organisations. Essentially, it is a modern business strategy and, if you get it right, it can transform your business, making it ready to embrace new challenges and thrive. Defining Digital Transformation Digital transformation is a broad term, broad enough to potentially cause confusion when trying to pin its meaning down. One issue is that digital transformation will look different for each company that takes it on. It is by no means a one-size-fits-all business strategy. What is the reason for these differences? Each company will have its own, main reasons for digital transformation. These can include: Improving the customer experience Increasing productivity Reducing friction in the workplace Streamlining processes. A business might have one or more of these reasons for looking at digital transformation, and each business may prioritise them differently. But effective digital transformation involves bringing technology into every aspect of a business. One clear thing to note though is that digital transformation is a cultural change, not simply a technological one. And to be clear, when starting your digital transformation, the culture must come first, before the technology. Digital transformation is, therefore, a mindset first and foremost. Here’s a quote from Jeff Bezos, the founder of Amazon: “In today’s era of volatility, there is no other way but to re-invent. The only sustainable advantage you can have over others is agility… because nothing else is sustainable, everything else you create, somebody else will replicate.” You can focus on the technology, but that puts you in race where others will soon catch up. Digital transformation is really about your willingness to keep changing and adapting, and to integrate digital solutions to enable change to happen. To be clear, here’s a concise definition of digital transformation: It is the integration of digital technology into all areas of a business, which will bring about fundamental changes to how it operates and delivers value to its customers. But why are these fundamental changes important? Why is Digital Transformation Important? There may be several reasons for you to take on digital transformation, but the key issue is survival. Digital transformation, ultimately, may not be optional at all, but something you will need to do if your business is going to continue to compete in the marketplace. Take the current Covid-19 pandemic. It has seen huge shifts in how consumers shop, in how employees work, and in how people prioritise their needs. It has impacted on key business areas such as supply chain management. Covid-19 has created a forced test environment for many enterprises, to which they are having to adapt. Where does digital transformation sit in all this? I’ve talked about mindset, about how it is linked to a cultural shift. This willingness to adapt to change, and to make it work, will be critical for a great many businesses in the months, if not years, to come. One example of the importance of digital transformation is in the customer experience. Addressing this is key to a company’s adaptability, and customer experience drives digital transformation. The Importance of Customer Experience Notice that I said customer experience drives digital transformation, and not the other way around? It’s important to understand that digital transformation is NOT the aim in itself. It is a means of delivering change. In the case of customer experience, digital transformation enables companies to better meet customers’ needs and add value to them. Modern customers expect to be easily digitally connected, to have open, responsive and rapid channels of communication. More than this, smart businesses are using data to anticipate their customers’ needs, rather than simply react to them. Digital transformation can change how you interact with your customers, giving them a consistent experience that helps you retain existing customers, and win new ones. Customers you offer this consistency to are likely to be more engaged, and therefore more willing to buy from you, whether this is a product or a service. Research indicates that the engaged customer’s happiness depends as much on the quality of engagement as the quality of the actual product or service they are buying. This is reflected in a willingness of customers to have companies try out new technologies when engaging with them. Engagement is increasingly a part of customers’ expectations, as is being able to interact with companies at their own convenience. You need to meet these standards and, if you want to compete successfully, aim to exceed them. More than an Upgrade The mistakes many enterprises and organisations make about digital transformation is to ignore the important cultural and mindset aspects at the core of it and go straight to the technology. They equate digital transformation with upgrading or updating their technology. But digital transformation means a lot more than adapting to new technologies. It means understanding and adapting to customer expectations, to shifts in society, and to disruptions in industry. Going back to the Jeff Bezos quote, you need to be agile, customer-focused and willing to adapt to new opportunities. You use digital transformation to scale your transformation to stay competitive. Digital Transformation and Problem-solving There is a strong problem-solving focus to digital transformation. This can be about improving the employee experience, or the customer experience, or both. But it can also be about much more than improvement. With so many employees currently working from home, digital technology is not simply an enhancement but absolutely central to effective working practices. In the same way, where customers are working from home, they expect rapid and responsive digital service from the businesses they are dealing with. What Covid-19 has done is accelerate a process of adaptation and adoption that was already in motion. Businesses can no longer afford to be stragglers in the race to digital transformation. What is the Framework for Digital Transformation? At the start of this blog I said that companies have different reasons for taking on digital transformation, and some would be higher priorities than others. But, regardless of your primary objective, digital transformation will have multiple elements, if it is truly going to become a part of your transformed culture. These various elements can include: Customer experience Operational agility Enabling the workforce Company culture. There are also these aspects: Integrating digital technology Digital and tech strategies. While it is important to think of digital transformation as being part of a mindset, it does also involve technology as an essential component. In most businesses, digital technology can optimise efficiency but you shouldn’t be innovating for the sake of it. Always be clear about your intended outcomes. Which ties in with strategy. Digital transformation requires that you build strategies that are more digitally-focused. In this, you must be aware of what your competitors are doing as well as what your customers’ expectations are. You should also have an ongoing awareness of what is happening in the digital landscape around you, and how these developments and innovations might apply to your business and customers and benefit them. When considering the framework for your digital transformation, look for common themes that unite the different aspects of it, and how you can make them work together. What are the Key Digital Transformation Trends? It’s important to see digital transformation as a given, rather than something which may or may not affect your industry. The pandemic has already increased the rate of change, and more enterprises are now scaling up their digital initiatives. Trends in digital transformation include: Rapid adoption of digital models for operations, including plenty of cross-functionality between teams Businesses that have already integrated big data into their strategies making significant advances More digital consultancy partnerships Better metrics for measuring the success of digital transformation A stronger focus on the long-term value of digital initiatives. Taking the importance of the customer experience into account, there are also social trends that are driving digital transformation: Most shoppers are looking online for purchases Most people using online services want instant gratification Brands with an online presence are the brands that show the most value Much of the work that everyone does is now online. Big shifts in technology have made changes in how we live and work. Now the impact of Covid-19 has accelerated these changes. You cannot afford to be left behind. Are You Ready for Digital Transformation? If you want to know more about the benefits of digital transformation, agile working, and how to transform your company mindset, then please contact Simple Progression.