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Digital Transformation in Depth: A Savvy Leader’s GuideReading time 22 minutes
Over the past decade, the term digital transformation has become a familiar buzzword, especially for “traditional” businesses. With cutthroat disruption from new technologies-based start-ups, businesses have been looking at digital transformation as some sort of panacea. The late adopters and the skeptics often pose the dilemma of deploying digital transformation to drive their business strategies and functions. However, most of us understand very little about what it really entails when it comes to revolutionizing the way businesses and industries work. According to McKinsey, only 16 percent of respondents said that their digital transformation efforts had sustainably improved performance!
Thus, this guide aims to clarify what digital transformation is and what it isn’t. Why does it matter for your business? We’ll also look into how to plan and execute digital transformation at your organization.
Part 1: What Is Digital Transformation?
Digital transformation is the process of executing digital technologies to redefine how an organization does business. It can be used to optimize work culture, expand revenue channels, create delightful customer experiences, become a data-driven organization, reach new markets, increase product and service offerings, and drive faster growth. These critical parameters will impact profits and help the business become a forerunner in their space. It aims to explore ways to leverage digital technologies to create new business models or improve existing ones.
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However, it’s not fair to claim that there’s one single definition that can encompass the full gamut of digital transformation. This is primarily owing to the reason that the process that each organization implements to bring about digital transformation varies distinctively. There’s no one way to go about it. Hence, digital transformation can be a single tool or a multitude of operational changes that involve the integration of digital technologies.
Not only does digital transformation ensure a higher return on investment (ROI) for a business, but it also transforms the company culture and the way the organization, as well as the workforce, functions and ensures an amplified customer experience by continually challenging the status quo. It requires and involves a culture that promotes experimentation and endures the process and results. In layperson’s terms, digital transformation is all about improving your business by integrating smart digital tools to augment conventional functions like marketing, customer engagement, and sales. Ultimately, the aim is to provide more business value.
Digital Transformation: SMEs vs. Large Enterprise
In today’s digital age, it has become almost imperative to embrace digital transformation for businesses irrespective of how much business they do. However, the implications vary for different businesses. It differs depending on a wide range of parameters including the size of the organization both in terms of the business it does and the workforce strength, the industry, the geographic location(s) the organization has its footprints in, and the market and target group it caters to, to name a few.
Small and Medium Enterprises (SMEs)
SMEs or start-ups find it easier to get digitized as it involves less risk assessment and areas to be covered. This is true not just for digital transformation, but for any sort of change management. Thus, they can take on more ambitious digital transformation projects and set them up much faster. In fact, for SMEs that are just starting up, they can start off as a digitized company instead of going through an elaborate digital transformation process down the line. Deploying technology-driven operating mechanisms and tools for accounting to marketing right from day one will ensure your voyage is digitally equipped.
Additionally, enhancing the processes by deploying emerging technologies like artificial intelligence (AI), internet of things (IoT), cybersecurity systems, cloud technology, etc. can help SMEs have a competitive advantage. Because of their nimbleness, they can afford to experiment with new technologies more regularly. If things go south, they can quickly respond as well.
Owing to the immensity of large organizations in terms of both turnover and workforce, the digital transformation journey may be a tad intricate and involve a longer turnaround time. As was the case for small start-ups, this is true for adopting any sort of change. The bigger firms find it challenging to keep pace with transforming the wide array of functional teams, upgrading hundreds of systems and processes to a “digital-first” approach, and integrating digitized processes at all levels and across every team and facility. Enterprise software development and management are notoriously hard. However, most large organizations are battling their way through the bumps in the road and swiftly treading toward becoming a digital-first company.
There are various ways to simplify this transformation process. To start with, they’re evolving their leadership to a team of technology-driven think tanks. They’re also upskilling their workforce to match the need of the hour so that the transformation is easier. Many of them also use tools such as Plutora to simplify their enterprise software delivery.
Thus, the digital transformation process and impact is different for SMEs from their larger counterparts. However, the goal for both of them is to ultimately create a data- and technology-driven company that is ready to endure the tests that the future holds and serve a larger consumer base.
Digital Transformation Can Impact Every Aspect of Your Organization
In today’s digital-savvy world, every function and department of a business has been disrupted by technology. Due to the meteoric rise of software as a service (SaaS) tools, every small aspect of running a business has become digital. From your sales teams to factory workers, these tools are helping to make lives easier for everyone while also improving business outcomes. Thus, businesses are looking to transform multiple areas of their organization. According to the MIT-Capgemini digital transformation framework, these can be broken down into three key areas:
- Customer experience: Firms are investing to understand their customer better through data collection and analytics. Another aspect to target is increased sales through digital marketing, customer segmentation and targeting, and predictive marketing. Finally, digitizing customer touchpoints through chatbots and apps can also improve the customer experience.
- Operational process: Businesses regularly leverage digital transformation to optimize their internal operations. They can digitize various processes using new digital tools. They can also empower their workforce through broader and faster communication solutions to enable easy knowledge and information sharing. Digital processes also make it easier to track their performance, collect key data points, and enable data-driven decision-making.
- Business model: Businesses also leverage digital transformation to evolve their business models. They can offer new digital products. Digital technologies also allow product or service augmentation through new features. In addition, they can try out new revenue channels such as subscriptions for digital services.
Part 2: Why Care About Digital Transformation?
Digital transformation does matter in this digital age! You may not realize why in the short term, but it can make or break businesses in the long run. Our society has undergone a huge digital disruption, and this has impacted businesses and all their areas and functions. We’ve shifted most of our lives to digital, and this revolution continues to evolve with each passing day. From handwritten papers and faxes to software where we can fetch data and facts with just a click of the button, we have indeed come a long way from how we did business some years ago. And as they say, “change is the only constant.”
There are many prominent reasons why digital transformation is the need of the hour for your organization.
Increases Operational Efficiency
Digital transformation helps in optimizing the work at hand. We can bring changes and overcome challenges by harnessing the powers of smart technologies like data analytics, AI, machine learning, robotics, process automation, etc. Digital tools can automate a lot of manual tasks. This helps to increase the efficiency of these processes and enable faster time to completion. Adding digital innovations in the business reduces the workload, trims the budget, minimizes the risks involved, and impacts strategic decision-making. All of these help to increase operational efficiency and business agility. It also helps in being sustainable and becoming more energy-efficient.
Improves Client Experience
Customer experience is determined by a broad category of business operations. It can include everything from the onboarding process and customer service to the digital interface and ease of use. Most customers, especially the younger generations, almost demand a digital customer experience. Thus, it’s becoming critical for B2C businesses to digitize their customer experience. Digital transformation can address any issue pertaining to customers and their user experience in a jiffy, all thanks to technology. A swifter way of engaging with customers can actually provide that extra edge to your business. By creating a more streamlined channel for customer and client engagement, digital transformation helps in scaling up sales, creating better brand value, and building a loyal customer base.
Provides a Competitive Advantage
We’re no longer in the days where marketers follow archaic methods. Scenarios are changing faster than business honchos and marketers can imagine, and digital transformation is the key to keep pace with the changing dynamics by unlocking new business models, welcoming new revenue channels, reaching new audiences, and seizing opportunities. It doesn’t just swap old technologies for new ones but adapts new processes by using cutting-edge technology. These new business models and processes can provide an unassailable competitive advantage to businesses.
Let’s take, for example, firms like Amazon Prime, Spotify, PayPal, Robinhood, etc. These companies thrive not only on the conversion of manual business models to digital, but they have converted their businesses’ processes and culture around an entirely novel digital model. They have uniquely addressed the customers’ needs by delivering their products and services more promptly and effectively at a competitive cost and have succeeded wildly.
Fosters a Digital Culture
When it comes to skill set improvement of the workforce, the digital surroundings always encourage continuous learning among employees. Digital culture is lean, which makes it perfect for the current dynamic environment. Companies that experiment, try new things, and learn from quick feedback have higher chances of success. As going digital makes it easy for your employees to regularly experiment with new ideas and keep up to date with the required skills, your organizational operations are consistently improved. Your employees are more productive, and the business is more agile. A digital culture also enables easy collaboration between teams and better communication among all the departments in the company. The decision-making and key performances are also more transparent so that the employees feel like an empowered part of your business.
Helps Embrace Globalization
Trade was once confined to big businesses, industries, and multinational corporations. When we see the world now, it’s more connected than ever in a fundamental way. Young start-ups and businesses can sell their products and services to any corner of the world. Businesses can hire talent from all parts of the globe. Digital transformation has given birth to multiple start-ups and midsize companies. The newly incepted companies are selling their products in the markets more efficiently and fiercely by using digital technologies while keeping their virtual teams connected in real time.
Thus, this is a moment for all companies to rethink their organizational structures, products, and assets and assess their competitors. Companies that don’t embrace the global nature of today’s trade will lag behind. Especially those who are still clinging to the conventional business rules. It’s time to spread your wings and go global seamlessly. Digital transformation is one of the best ways to embrace this globalization.
Leverages Data-Driven Strategies
The importance of data has been drilled into every business leader by now. Leveraging your data is a critical component of digital transformation. There are various tools and solutions to make sure that your business collects tons of data about its operations and its customers. Digitizing your operations, marketing, product development, etc. ensures that you have key data for each of these processes. However, it isn’t just about collecting loads of data. You need to be able to derive maximum value out of it. Digital transformation also aims to create processes that collect, store, and analyze data across your various channels to help you make data-driven decisions. You can understand your customer better, measure your performance, gain real-time feedback, and learn key insights.
Thus, there are various reasons to consider digital transformation at your organization.
Part 3: Planning and Executing the Digital Transformation Process
Digital transformation is not a one-size-fits-all process. As we discussed earlier, it’s a broad term that encapsulates a wide variety of strategies. How to best leverage it will change depending on the company, its current situation, its industry, market forces, etc. However, there’s a high-level framework that an organization can follow.
Framework to Digital Transformation
Step 1: Define the Goals for Your Digital Transformation Process
A key mistake many traditional businesses make is trying to undergo digital transformation just for the sake of it. Maybe because it’s trending or a buzzword. However, digital transformation is only a means to an end. Thus, businesses must always start by clearly identifying what they wish to achieve. They must define their targets and objectives. The digital transformation process should align with your core value proposition and long-term vision. Are you trying to increase operational efficiency? Are you trying to improve customer acquisition? Customers don’t care about a “digitally transformed supply chain”; they just want faster and more reliable deliveries.
Therefore, you must focus on value stream management to make “value delivered to the customer” the cornerstone of software product development. All stakeholders of your digital transformation process should be on the same page regarding why this change is important.
Step 2: Identify Areas of Improvements and Design the New Digital Process
You cannot improve something until you know what isn’t working. Too often, businesses start from a fresh canvas and absolutely scrap their current processes. While it may make sense for a few situations, implementing completely new processes are more resource intensive and harder to adapt across the organization. However, if you identify the key areas where you’re lagging behind, then you can focus on transforming those areas. This will also help businesses prioritize their digital transformation objectives to achieve their targets. Why spend thousands of dollars on building an app when none of your customers are asking for it?
Thus, businesses should first analyze their current business processes and operations. They should map the entire value streams of people, processes, and technology. Then they can identify the right targets to optimize and improve. Next, they can design the new digital process and how it fits with their current organization.
Step 3: Explore New Technologies and Solutions
Once you understand your business objectives and have the blueprint for the digital processes, you can explore how to achieve them. You can examine case studies, look for current trends in your industry, or consult experts in the field. The idea is to understand what technologies, vendors, platforms, and tools are available that will help you achieve your objectives. You need to choose the solutions that generate the best value for you or your customers.
There’s a lot of hype around technologies such as IoT, machine learning, AI, edge computing, cloud, etc. However, it’s critical to start with what you wish to achieve first and then look at implementing these fancy new technologies. How will the technology align with your digital transformation objectives? “We want to be data driven” is very different from “we want to be data driven to understand our customers better.” This will help you not only in choosing the right tools, but also in using them to create maximum value. In this case, businesses will have a better idea of what data they have to collect and what analysis they need to perform on this data.
Step 4: Run Proofs of Concept (POCs)
Change isn’t easy for any organization or even individuals. Thus, it’s always better to run pilot tests with your new digital processes on a small sample. You can validate the new process, test vendors and tools, and gain feedback very quickly. Any executive worth their salt will tell you that shiny plans on paper seldom turn out perfect on implementation. Introducing new technology can cause various issues and challenges that are difficult to predict. Thus, running small POCs will help you tweak the right solution faster. Moreover, the transition won’t affect your business as sometimes new tools may severely disrupt operations.
Step 5: Integrate New Solutions With Existing Infrastructure
Once you’ve validated the new digital processes, you can implement them at scale. However, it’s critical to make sure that the new platforms seamlessly integrate with the existing infrastructure as well as your organizational culture. So many times, businesses introduce new tools and technologies that remain isolated from their legacy systems. There’s no clear integration of data or information. The extra burden of making everything work is on the confused employees. Thus, they aren’t able to utilize these new solutions to the fullest. Businesses need to have a future vision for their fully digital platforms as well as have a proper integration roadmap while in transition.
And it’s not just technology infrastructure that the new solution needs to integrate with. It’s critical that your employees can also interact smoothly with these new processes.
Think About Your People
You can choose the shiniest new technologies and spend millions of dollars, but it’s impossible to have a successful digital transformation effort without having your employees on board. People should buy into the process and understand its importance. They also need to have the expertise and skills to effectively leverage these new technologies. You need to mold the organizational culture at your business to become more digital savvy. This can include hiring new employees, leaders, and teams. For example, many conventional businesses now have separate teams for cloud management, data analysis, and digital marketing. These positions need new skills, and you have to figure out if you need to hire someone or can upskill someone in-house. But without the right set of skills and expertise, the digital transformation effort will fail.
Apart from new talent, you also need to ensure old employees feel comfortable in their new roles. Show them that you still appreciate their experience and give them confidence that they can quickly adapt to the new digital ways of doing work. This is especially true for older employees who may feel intimidated while using new tools and technologies. Help them realize that the new technologies will augment them. Involve them right from the planning stage to make sure you have their vote of trust. Even a digitally transformed business is run by humans with emotions and feelings. Thus, you must make sure to think about your people throughout the digital transformation process.
Measuring Digital Transformation Metrics
How do you know if your digital transformation process is a success? It’s impossible to know unless you’re constantly “measuring” the impacts. Therefore, businesses need to define KPIs and metrics for the goals that they defined in step 1. For example, some metrics for your digital marketing efforts can be “customer acquisition costs,” “website traffic,” “click-through rate,” etc. The KPIs will be different for each digital transformation process depending on your objectives. That’s why defining your goals at the start is so important. Once you identify the metrics, you need to constantly track them to make sure that the digital transformation process is adding real value to your business.
Creating such software that can measure these value-creation metrics is really tricky. However, businesses can leverage various tools such as Plutora that provide metrics to evaluate the progress of your digital transformation. You can track, analyze, and visualize your complete software delivery process. You can also map your business value flow, keep track of KPIs, and speed up your digital transformation.
5 Tips to Get Digital Transformation Right at Your Organization
So many firms are scrambling to undergo digital transformation to reshape their business and give them a more agile direction. However, it simply doesn’t come that easy. According to a study, 73 percent of enterprises failed to provide any business value whatsoever from their digital transformation efforts. Digital transformation is complicated and hard. There are various reasons why these efforts fail such as lack of long-term coherent vision, lack of expertise, resistance from employees, or failure to understand customer needs. However, there are a few things businesses can do to improve the chances of a successful digital transformation effort. Let us quickly look at some tips to get digital transformation right at your organization.
Invest and Engage in Digital-Minded Leadership
It’s very essential that the leadership is in sync with the idea of giving the company a digital makeover. For this, you’d need a few strong technology-driven personalities on board who can captain the ship and steer it in the right direction. It’s only when the think tank comes up with an exceptional digitization plan that the task force can put it into action. Striking a balance between the directors and executioners is of utmost priority. Thus, you may even need to hire new faces with digital expertise while upskilling some old faces.
Devise a Comprehensive Roadmap
Just the decision and wish to give the company a digital transformation will never suffice to achieve that mission. With the right people in leadership who have a grasp of how the digital world is evolving, it’s imperative that a comprehensive plan is devised. From setting the vision and mission statements to identifying which routes to tread, everything must be preplanned and executed accordingly. Like every other plan, extensive research of the market, existing technologies, peer study, etc. must never be neglected while devising the plan for the digital transformation of your company. As mentioned earlier, the first step always has to be to define the goals of your digital transformation process and then create a roadmap to plan it out.
Create an All-Inclusive Team to Support Multiple Functionalities
Like every project and mission, digital transformation needs a task force as well. It’s wise to involve people coming from every functional background to ensure a turnkey execution of the digitization mission. Whether you decide to go for a one-shot-for-all approach or a one-department-after-another approach, make sure you encompass all the operational departments. Leaving one or more functions behind in digitally transforming your organization may still keep you a laggard in the race. It’s important to involve everyone in the process so that your employees feel like a part of this transformation. Moreover, plans drawn on paper to optimize tasks require insights from hands-on experience, which only people working in those tasks can provide.
Switch to Data-Driven Mechanisms
Data is the key to smart decision-making. You can’t make the correct decisions if you don’t have enough information to understand what’s working and what isn’t. Thus it’s advisable to switch to data-driven decision-making. The secret lies in collecting, analyzing, and leveraging data to make data-backed decisions. This can include which products to put on sale, how much discount to offer, which products and services to ramp up for which market region, or even which candidate to hire. Digitization allows you to parse through and analyze millions of pieces of data within seconds. Harness the power of digital technologies to make data-driven decisions. The time is ripe to invest in cloud-based data storage if you are dealing with large data volumes. This will not only reduce the infrastructure costs, but also let you access data from anywhere anytime.
Thus, investing in technologies that analyze data to provide actionable business intelligence is useful not only for a successful digital transformation, but also for improving your overall business.
Diversify Offerings and Strengthen Customer Engagement
Digital transformation allows you to take that leap to diversify the product offerings you’ve been stalling for ages. Diversification is a key strategy to leverage the digital transformation cycle in style. Design a diversification plan to cater to a larger customer base and market. You can do this by launching digital products or extending your reach through digital marketing. Last but not least, focus on strengthening customer engagement and experience. Customers are king, and this will always hold true. Hence, allotting significant attention to amplifying customer experience is a no-brainer. And digital transformation will help you immensely in this regard. It can help to create a more user-friendly interface, prompter response system, and better customer journey. These initiatives will increase the odds of success for your digital transformation process.
Digital Transformation Is a Process of Continuous Improvement
Digital transformation is a never-ending process. There will always be new technologies, new solutions in the market, or new customer demands. Thus, businesses need to continuously transform their processes to leverage the digital revolution. Tracking key data points and metrics plays a big part in this as well. As you track and analyze your key metrics, you’ll gain feedback on your previous digital transformation efforts. Thus, it’s a constant process of improving older solutions while actively looking for new tools to further improve your business KPIs.
All of this means that you’ll have multiple projects releasing across your organization throughout the year. You would need a dashboard that pulls data from all these projects to give you a global overview of your digital transformation. Thus, investing in value stream management tools such as Plutora will help you along your digital transformation journey. A journey that is arduous but promises rich rewards.