The Ultimate Guide to Digital Transformation
The Ultimate Guide to Digital Transformation
In this comprehensive guide, you’ll learn all about
One of the biggest digital transformation successes has been Domino’s Pizza. Their digital transformation game is so innovative that you can order your favorite pizza just by sending an emoji. How’s that for innovation? You can place an order for your pizza from any computing device. Walmart is another name worth a mention. The retail giant has introduced its own search engine and works with a bunch of cloud applications to improve its efficiency. If not for digital transformation, even with a Prime subscription, you might have to wait for a week to get the latest iPhone delivered to you.
The complete overhaul of its digital assets has resulted in immense benefits to these organizations. There are many more examples of companies investing in digital transformation to improve their efficiency, and more importantly- their bottomline. No wonder 70% of organizations have a digital transformation strategy in place or are already working on one.
What is Digital Transformation?
It is the system of using digital technologies to create or improve existing business processes to meet fast-changing market requirements. With a multitude of technologies available at our disposal, it would be unwise to not use them to elevate the incumbent standards of doing business. Each and every aspect of the digital transformation process is done by keeping the customer in mind.
Companies that want to change their present systems would like to do so because the way they do business is rigid. It might take months to implement a process or to make a decision due to internal bureaucracy. Those that have undergone a complete digital transformation will be able to make quick decisions, be agile and are on their fast track to growth. It is expected that worldwide DX spending will cross $2 trillion in 2022, a 60% increase since 2016.
History of digital transformation
Today, digitization has changed our lives in ways that would have been unimaginable 20 years back. Well, even the last 10 years have brought about a sea change. Who thought we could book a cab with a few clicks on a device that we carry in our pockets? While computers have been a part of our lives for quite some time now, the concept of digital transformation started with the arrival of the internet, especially when it became mainstream.
The advent of new technologies led to the birth of new business models, revenue streams and even industries. Especially the last decade, the rise of mobile devices, faster internet speeds and social media platforms led to a huge change in the methods used by businesses to communicate with customers. With it, the expectations of the customer in terms of response time rose and they also wanted businesses to respond to their queries from multiple channels.
Here is a timeline of DX history:
2010s – Digitization of analog and manual systems paves the way for digital transformation.
2014 – There are successful digital transformation projects that are underway. At the same period, there is a deeper understanding of how such transformations will work as it changed from a one-off infrastructure project to a technology-first strategic approach.
2015 – Various research papers from MIT and Deloitte say that digital transformation is not tech, but the driving force is strategy instead. Industries like consumer financial services, media, telecom, retail, and technology are immensely benefited by digital transformation programs.
2016 – A Forrester’s report says that DX should not be a one-time thing but a strategic process that happens regularly.
2017 – There is an increase in budgets for digital transformation.
2018 & 2019 – DX has become one of the main drivers for growth in many organizations. The focus is on improving customer experiences by refining the process as much as possible.
At the current rate of digital transformation, companies that do not invest in it will definitely find themselves in an unfavorable position in a few years.
Why does digital transformation matter?
Digital transformation means adopting digital technology that is slated to change the existing mechanisms of any department in the business. It is all about how it can affect the employees and the customers in a positive way. It requires a complete mindset-shift to arrive at that decision. For big businesses that have been thinking in a certain way with their legacy tools and methods, it takes a lot of courage and enterprising spirit to knock all the issues down to embrace technology that is alien to them.
The change should start from the leadership, otherwise it is difficult to convince the employees to adopt new processes. While the benefits to the organization that indulges in digital transformation can be immense, it will be difficult at first to adapt to the changes.
Thanks to mind-boggling internet speeds, digitization plays an important role in adding business value. If you are yet to think of digitization for your business, then you will be missing out on a lot of benefits. Especially since you will find your competitors spending its resources on transforming their business with digital solutions exclusive for them.
Why do businesses think of digital transformation?
Businesses that are looking to embrace digital transformation often do it because of the urge to get better and move faster. In this age, agility matters. Execution matters. All of this is totally dependent on technology tools. No company that is heading towards the top keeps clutching on to its legacy systems. Even startups that are already using the latest tools are looking for more ways to make their system efficient. The strive to improve is one of the top reasons why businesses invest in digital marketing. If not, they will be left out.
For example, AirBnB is an excellent example of a business that embraced digital tools to create a parallel industry in the hospitality sector. Who would have ever thought that we could sublet our place for a fee? Add technology on top of this simple idea, and your average customer can house anyone from anywhere in the world. It worked because the entire process was simple.
How do you define digital maturity for your business?
Every business might be at different levels of digital maturity based on existing processes and activities, local market conditions, and their strategic objectives. Based on which processes have been digitized, and to what extent, the digital maturity of your organization can be classified as:
- Early Stage Digital
- Halfway Digital
- Advanced Digital
Check out this Digital Maturity Matrix.
Covid-19 has accelerated digital transformation
The pandemic has changed our lives, and more importantly, our thinking, forever. It will take a lot of time to get accustomed to the new normal even though all of us are cooped up in our homes now. But businesses need to start thinking on their feet at this time as their entire sustenance depends on crossing this uncertain time with ease.
The rapid shift that organizations had to make to ensure that they could operate remotely with little to no warning is digital transformation at its best. Thanks to the technologies and tools that are available, it looks like most of them were able to make the changes with relative ease. This is also a great time for businesses to invest in digital transformation. Why? Because there is no other option here.
Here’s how digital transformation can help if we have to see another disaster like this in the future
Most of the big organizations have manuals for business continuity. It was not useful during this pandemic because of the sheer uncertainty of it. Instead of creating a rigid BCP plan, businesses should have an agile BCP plan that can be implemented with ease.
Securing organizational data was one of the biggest worries of businesses during this time as lockdown rules meant that employees could not work from the office. Company information could be compromised in such a scenario as it would be impossible for businesses to protect it without a plan in place. Companies need to account for securing their information even if their entire workforce works from home.
One of the biggest reasons why the shift to remote was possible for most of the businesses was because of online collaboration tools. Businesses need to identify the tools that can be used by both employees and partners when working remotely. There are a lot of niche tools available, you might want to choose those that match your budget and specific needs.
B2B businesses usually had a long sales cycle which entails a lot of face to face meetings. Given the Covid situation, it is impossible to see any of that happen in the immediate future, at least in most parts of the world. It means shifting to an online strategy is the only option now. There needs to be energy channelised into this area to ensure that you have a fool-proof sales method.
The immediate future, although is looking bleak, it will surely get better. Businesses need to survive this phase by testing the best digital tools available. These are unprecedented times, but with the right mix of tools and thinking, you can always be a step ahead.
What does a digital transformation framework look like?
A digital transformation framework is a blueprint for a business that is going through a period of change. It guides all the stakeholders on how business will continue at all levels during this transition. Using a framework like this allows organizations of all sizes to adjust to the changes without difficulty.
While all the departments work as separate functions, the business functions only because everyone involved gets their job done. The right digital transformation work will guide the organization during the transition phase. For a digital transformation framework to work, it should be adaptable for the organization. It should be a plug-and-play operation in terms of its adaptability.
One of the most important things when it comes to making the digital transformation a success is the mindset. All the stakeholders involved should be ready to face the changes and mentally prepared for the new way in which things will get done.
The right digital transformation framework can be divided into logical steps that will show progress.
1. Be clear about the ‘why’:
Digital transformation involves a lot of time, effort, resources and money. You cannot be indulging in it just because it is fashionable. The organization should have a vision with regards to the entire change. It should be able to imagine the future with all the changes and how it will affect everyone involved- employees, staff, customers, etc.
2. Prepare roadmap:
To lead the digital transformation, usually a solitary head is appointed since it involves multivariate factors in it. It is best to have one experienced head taking care of the entire framework. Get a detailed assessment of the current state of the organization, where you want to go, the metrics that will determine when you reach the next stage, and how it will happen.
As we have time and again spelt out for you, technology is as important to this transformation as is the mindset to accept it. There is a need to educate your stakeholders, especially employees who will be the ones asked to adapt to the new changes. There should be workshops, town halls, and webinars to make this happen.
4. Measure but pivot when necessary:
You need to thoroughly evaluate the progress that is being made. The same should be communicated to the communications team so that it can be relayed to the employees. Establish benchmarks so that you know how effective are the new ways of doing things. If you think there should be a change in plans based on the progress made, then pivot keeping the end goal in mind.
Things to avoid when undertaking a digital transformation program
When you are investing in a digital transformation process for your business, it is possible to get overwhelmed by all the changes after and during the transition. It is a must that you need to be aware of what will happen, how much will be affected, and so on. While this guide will act as a primer in helping you understand what to do, here is what you should avoid when undertaking a digital transformation program
If all the teams do not work together, your digital transformation program will come a cropper. Do not work in silos. When the work is done in silos, even if the end goal is the same, personal insights will not reach everyone and there might be duplication.
We understand that a digital transformation project is a gargantuan task that needs immaculate focus. But being cooped up in separate departments is not going to help you accomplish the task.
Ensure that there is fair communication across everyone in the team. The magnitude of what is being worked on is huge and it needs thorough participation from all the stakeholders. A smooth transition from legacy systems to the latest system with the help of digital transformation will not work out if there is no collaboration.
It is more than just technology:
One mistake that most organizations end up committing is that they think technology is the main driving force behind digital transformation. While technology is one of the main factors, do not ignore the other components.
We cannot stress enough on this factor as your people need to be included when you expect them to work in a totally different method. There will be fear and anxiety amongst them as they are not familiar with the workings and it is beyond their imagination. You need to communicate and create a culture of belongingness amongst each other. They might be of the impression that if they are not able to handle the newly transformed processes, they might be let go. Having a dedicated team to help the employees understand that they will not be thrown out. They need to be told that while there will be a learning curve to get a grip on the new process, it will only help their work.
What drives digital transformation?
Digital transformations help companies improve their efficiency, improve their processes, increase productivity of the employees, shorten GTM, and so on. But what exactly drives digital transformation. The answer to that from most lips would be “Technology”. If you take a look at the companies whose digital transformation program was a failure, then you will notice that the failures were not due to technology, but because of organizational and cultural challenges.
Most big organizations would have invested in AI, ML, and so on, so the failure is never for the lack of technological know-how or understanding. The success of a digital transformation program depends on strategy, not technology.
Apart from strategy, if there is another factor that has almost the same bearing on the success of a digital transformation, if not more, is the leadership. It all boils down to culture and communication. The program’s success depends on how companies work together to adopt the changes and work accordingly.
What are the key trends in digital transformation?
Business leaders need to have their ears on the ground, otherwise they will be caught unawares when the next big thing arrives. Because many new technologies will arrive that will drive transformation, and you need to be sure if it is something that will benefit your business or should you give it a pass. Here are some of the key trends in digital transformation:
Genpact believes that AI-driven businesses will be 10 times more efficient and have twice as much market share than those that haven’t adopted it. So it is more of a matter of survival than just to thrive. Pre-trained AI accelerators will enable businesses to separately automate and optimize tasks so that it can save time. It will help in building applications rapidly.
No matter how much technology develops, it can never completely replace the effect of human beings. Humans will have to work in tandem with machines and deliver solutions with the help of their creativity, empathy, and other emotions.
The value proposition for digital transformation would be how well does it serve the end customer and the employee. The objective should be to reduce as much friction as possible. Netflix’s recommendation engine which saves them more than $1 billion every year is an example of creating experiences through digital transformation.
Abbreviated as Transformation as a Service will soon be a reality where organizations will want to transform their processes and experiences. The only challenge is in finding out how to perform it at scale and speed. The pre-trained AI accelerators we mentioned earlier will be able to help with faster adoption of AI. It can help scale solutions and at a faster speed too.
We can create digital representations of real-world objects, or digital twins, by using sensors embedded in physical objects to collect data that are processed. The concept of digital twins saves millions of dollars for businesses in the supply chain and manufacturing sector. Companies like Twin Health use this technology to reverse diabetes.
The ability to create applications without having to write millions of lines of coding. Organizations are looking for faster ways to build applications that can be quickly setup and deployed.
Some of the job roles might not be present in the next few years and new skills might not be present in the organization. We will soon see job roles such as VP of Innovation or a CCO (Chief Customer Officer).
How to measure digital transformation ROI?
Measuring the ROI of anything is difficult, even more so when it is digital. Here is how you can create an ROI model:
Step 1: Be clear about your objectives
What would you like to do with the help of digital transformation? Only when you clearly state out where you want to see the difference in your business will you be able to find the ROI of it. Do you want to create better customer experiences? Are you looking for more employee engagement? Infrastructure to implement new assets? Digitizing business?
Step 2: Estimate the costs involved:
Once your digital transformation is over, there might be other costs that are involved which you need to take into consideration. It could be the new hires for your IT team or anything else that might have triggered a new position because of the new system. Incorporate the new costs that might happen from all areas of business.
Step 3: Measure widely:
The change in your digital infrastructure might result in a lot of new factors that might be beneficial to the business. From a decrease in churn rate to reduction in GTM, it could be anything. You need to consider all the possibilities. Some of the metrics that you can consider could be the following:
- Number of social media mentions
- Engagement scores
- Digital adoption
- Response time to solve issues
These are just a few, you need to check out the ones that you want to measure and are impactful for your business.
Step 4: Set timelines:
You need to consider the time period for which you are going to measure the metrics for the success of your digital transformation. Some of the KPIs can be easily realized while others will take time, you need to be cognizant of this.
Step 5: Keep measuring
Let’s say you are satisfied with the performance of the KPIs, but is it alright to stop measuring? Absolutely not. You need to keep measuring them, it will help you see if there are any issues in any of the areas. Even a small dip might have a significant effect on the performance.
Steps to get started on your digital transformation
1. What do you want to solve?
When the thought of digital transformation came to you, what were the areas you thought needed a paradigm shift? What does digital transformation mean to you? As we have been telling you time and again, the solutions that you want for your business are completely different from what some other business might want from digital transformation. You need to be aware of the challenges that your company faces and determine the solutions that will fit your business.
2. What is the extent of your digital transformation objective?
Are you looking for a complete overhaul of your legacy systems or is it just one part where you require a solution. You might want a system to make customer ordering easier or you want a complete back-end transformation where your entire IT infrastructure setup will be changed. For this, you need to be in tune with what your business needs and the challenges that it is presently facing.
3. Include your employees and executives:
Digital transformation can significantly affect the working culture and methodology of your entire workforce. You need to tell your employees and executives that this exercise is critical to the well-being of the company. Communicate your vision for the company after the digital transformation. Tell them how they are a part of your vision and promise them that they will be given adequate training to prepare for the changes.
4. Find a digital transformation partner:
Unless you have a technical team that has the requisite skills to make something like this happen, you will not be able to do it on your own. Partners are critical towards the success of your digital transformation efforts. Your partner should be able to share successful approaches and best practices that are to be followed to make this a success. They should have the capabilities to help you with the transformation.
5. Begin your transformation:
Now that you know your goals, have a partner and educate your employees and executives about the importance of digital transformation for the organization, the next step is to execute the plan.
Before you get started with digital transformation, you need to consider the following factors:
1. Are your employees open to change?
If not, then the road ahead for you is long because you need to educate them about the benefits of the transformation. Only when you explain the underlying reasons behind choosing to change the existing systems to create a more modern workflow would they be able to relate to it.
2. Do you have the resources to make the transformation a success?
Your employees are your biggest assets. If you have the right resources taking care of things, then the entire digital transformation process would be a breeze.
3. Are you ready to invest the money for transformation?
Digital transformation can be the push that businesses need. It can alter their prospects, and innovation comes with a hefty price tag. But the entire process is worth it. You just need to have the necessary cash flow to keep continuing to innovate.
4. Can you stay put during the long journey?
Change is transformational and can take up a lot of time, but you need to be fully invested in it to make it a success. You cannot quit mid-way citing too much time or resources as a reason, then the entire exercise will be waste.
Difference between digitization, digitalization, and digital transformation
Fret not if you feel all the three look and sound similar. People often assume that digitalization is a misnomer of digitization. We are here to rest all the doubts.
According to Gartner-“the use of digital technologies to change a business model and provide new revenue and value-producing opportunities; it is the process of moving to a digital business” is called digitalization.
Digitization, on the other hand, to put it in simple words, is the conversion of analog to digital. For e.g., it could be the automation of processes. These processes could have been done manually, but digitization makes it possible to automate the process. Digitalization is a bit more than that, it is a strategy that goes beyond mere implementation of technology, it vows to transform the entire business.
Digital transformation requires adoption of digital technology as well as a cultural change, without which the entire exercise will be a failure. The changes that digital transformation brings about are usually customer-centric, and makes use of technologies to empower and help employees.
When there are rapid strides in technology, terminology changes faster., which is why differentiating the terms matter. Misunderstanding the terms can mean missing out on opportunities or end up making wrong decisions.
Leveraging digital transformation for your business
1. Use digital tools:
Address the needs or pain points in your organization that can be solved by digital transformation. Make use of cloud-based applications to provide enough flexibility and scalability for your business. Try to incorporate as many tools as possible that will fix some pain point or the other that you are facing.
2. Attract top employees:
Leverage digital transformation to attract exciting talent who will be interested about the changes that you have brought in your business. The cream of the talent will want to work in an organization which values technology and the advantages that it brings. When news spreads that your organization has done a complete overhaul of your legacy systems, candidates will be more keen to be a part of your organization.
3. Scale quickly:
If there is one power that digital transformation gives you, it is the ability to scale quickly with the help of digital tools. What took months to process might be something that takes a few minutes to get done with.
4. Make mistakes faster:
The ability to make mistakes faster and get closer to what you want to achieve is only possible if you have the infrastructure to make that happen. With digital transformation, that is possible. You can try a variety of experiments when you have the leverage of digital tools.
What is possible with digital transformation?
With the help of big data analytics, enterprises get real-time information about its day-to-day operations and how it affects other areas. There is greater understanding of how its people and systems operate which increases the transparency. When there is access to information for all the stakeholders involved, it becomes easy to keep everyone in the loop about the changes that are being made. It also helps in effective collaboration.
Gone are the days when businesses wanted different departments to work in silos. Based on the advancements in technology and how businesses operate these days, working in silos seems like a primitive concept. When there is greater collaboration amongst everyone, the efficiency of work improves. It fosters trust and creates an atmosphere of helpfulness. For example, the sales and marketing team can work in tandem with the leads they have. The sales team can tell the marketing team about the type of leads they are getting right now and how it can be improved. Salespeople will be able to give more information about the ideal prospect which will help the marketing team to make its targeting more effective.
A tool like CRM helps you to take care of all your prospects and customers. It has all the information about them including old conversations and other aspects readily available. Pulling out their data takes mere seconds which means you can come up with answers for your customers or provide better offerings for your prospects immediately.
Being able to quickly adapt to changing conditions is the hallmark of top companies. With regards to digital processes, it is a bonus if you are equipped to do that. As we said earlier, even the ability to shift to a completely remote work environment was possible only because of digital tools.
Imagine if there were no collaboration or project management tools at all. We would be CCing everybody and find ourselves scrolling through email threads that have 100 messages each.
Can you imagine how mind-numbingly tedious that would be?
Creates a digital culture:
Merely having technologies in place doesn’t give you results. There should be a culture in place to accept these digital changes. To embrace all the benefits of digital transformation, the staff should be mentally prepared to make the changes associated with it. But it is expected that with digital transformation and the small changes that it brings in the way they work, the employees will slowly be opening up to accept it.
Updates skill sets:
With big changes like digital transformation, the demand for niche skills will skyrocket. Skills like artificial intelligence, machine learning, cloud computing, augmented reality, data analytics, etc., will be highly revered. Many companies do not have skilled personnel to deal in these areas. Businesses can allow its employees to develop these skills so that it can be useful when they are investing in digital transformation.
If your business has bottlenecks in its operation, you would find that most of it can be solved with the help of technology. Isn’t it? Does it take a lot of time from an order being placed to it reaching the customer? Here’s how digital transformation can help improve this process. After the order is placed, you can have systems to identify the product that needs to be sent to the customer, inform the systems so that packaging happens immediately, assign the package to the nearest delivery person or courier option, keep the customer informed about the whereabouts of the product, and ensure that they have a smooth experience when receiving the package.
Better decision making:
There are tonnes of data about their own businesses which are available. But most of them do not leverage this data which can be used for creating strategies. A data-driven company that has a digital-first mindset will use this data to find insights about what can be done. It will use BI (Business Intelligence) tools to find out what those data mean.
With more and more technological advancements, the expectations of customers have skyrocketed. They want simple solutions in the fastest time possible. Customers will not take it lightly if they are being made to wait for a long time. For example, there was a time when most businesses could respond that they will get back to an issue in 2 or 3 days. Nowadays, not all businesses can afford to do that. Customers want instant replies. A chatbot can provide instant results for customer queries, it can even save the cost of hiring customer service executives.
Challenges of Digital transformation
Lack of vision:
When the leadership cannot think of the long term and lack a vision for the company, it can be a hindrance for a digital transformation process. For example, Nokia didn’t embrace the Android OS, had management issues and internal rivalries which made them fall from its previous glory. If the leadership could envision that one day phones will be a lifestyle choice and not just to make calls, it might still be one of the most popular mobile brands.
Following old processes and outdated legacy systems can hinder organizations from working in the agile methodology. These legacy processes might be ingrained into the DNA of the company. It is a must that processes and systems be evaluated on a regular basis.
Not using big data:
Businesses generate millions of data sets. These can be used to take strategic business decisions which will put you ahead of your competitors. By focusing on the right KPIs, the business will be able to garner data that will help the business.
Resistance to change:
It is one of the most important aspects when it comes to digital transformation. Culture is the deciding factor on the success of a DX program. For a DX program to be successful, there should be changes at the basic level. It starts with the ability to accept change and understanding that the changes are made for the greater good- for providing a great experience to the customer. For people who have been working in a particular style for a long time, they might be accustomed to it, so a change can be scary for them.
Why do digital transformations fail?
There is a lot of investment that is being poured into creating digital transformations. According to an IDC report, the spending on digital transformation technologies in 2020 was supposed to be $1.3 trillion. The numbers might be different in reality due to the unprecedented event namely Covid-19. Despite the influx of funding into these programs, many of them fail. Here are the reasons why:
- Lack of clarity about what a digital transformation means
- The management is not convinced about the utility of the program
- Starting the program without a roadmap in place
- No clarity about the enormity of the transformation
- Not having enough resources
- Not focusing on change management
- Lack of focus on the culture aspect
- Irregular cash flow
Why a holistic digital transformation picture matters
A digital transformation by itself is holistic. Its objective is to ensure that the end customer is delighted, it is only possible if all the systems are working like a charm. If there is no holistic approach for digital transformation, here’s how the scenario will be. The customer will have a superb experience while placing the order but there will be issues with invoicing because of which the wrong item gets billed. How will the customer feel now? The goodness of one process cannot make up for a faulty system at a different touchpoint.
The solution that the digital transformation provides should be consistent. The digital systems should have a common vision. The leadership team should take the responsibility of building the digital system holistically. If there are redundant roles, then they need to be changed and new roles should be created.
Digital transformation: Myths and Realities
There is no doubt about the fact that digital transformation is one of the most popular buzzwords during these times. With its popularity, you can certainly expect a lot of opinions about it, some of which may not even be true. We will discuss some of the popular myths here along with what in fact is the reality.
Myth: It is expensive.
If an organization’s plan is to save money as opposed to making money, then digital transformation is surely expensive. IT is the driving force behind businesses these days, and without using digital tools, it is impossible to make a sale online.
With the right digital transformation goals, you will be minting money. It doesn’t stop there, you will create clever processes that save the time of your customers and employees. All of this will result in happy customers who will refer you, which means more money. Does that sound too good to be true? In this case, if your digital transformation program is implemented correctly, then it is too good and true too.
Myth: Involves a lot of training
When you are integrating a new technology, there is always a learning curve attached to it. Employees will have to spend time to understand it. Thankfully, the learning curve is short and the systems are user-friendly enough to master it after using it for a few days. Digital transformation is about making things easy.
Myth: Involves too much work
First of all, digital transformation happens in phases, it does not make you abandon all the other projects that are going on. The organization can work on fixing a few touchpoints and gradually redo the entire legacy system. In fact, digital transformation will make everyone’s work easier. Mundane tasks will be automated, for example.
Myth: We already have a digital strategy in place
More often than not, this occurs because leaders are not aware what exactly is digital transformation. It is the complete overhaul of your existing legacy systems to create a new system to meet customer’s expectations. Companies that believe they have a digital strategy in place, might actually be referring to being present on social media.
The evolution of digital transformation: Moving towards a DX economy
IDC predicted the dawn of a digital transformation economy in its global IT industry predictions for 2016 and beyond. IDC coined another term, the third platform, stating that the technological pillars like mobile devices, cloud computing, big data, analytics, and social networking, would drive the future and innovation in the world. This was way back in 2007, and prophetic as it might be, has become true.
The impact of digital transformation will be felt in every industry, especially for those who are yet to adopt it. IDC says that a layer of innovation and transformation on top of ‘the third platform’ technologies is the reason behind the DX economy.
Customer experience and service excellence, IDC predicts, is going to be the objective behind most digital transformations. The ability to personalize customer service several times is going to be the cornerstone of the DX economy.
What is digital business transformation?
Digital transformation and digital business transformation might seem like two peas in a pod. But there is a small difference which means everything. Did you notice that we have been saying from the beginning that digital transformation is as much about people as it is about technologies being used to improve processes? That’s exactly what digital business transformation is.
Think of business transformation as a change management. It serves to make process, people and technology in alignment with the overall strategy of a business and where it can reach from that particular point. Innovation is the bedrock of business transformation, and without it, everything will crumble down.
The digital transformation journey is long, arduous and the objective is to create a dramatic impact by changing the incumbent systems. Businesses hope that digital transformation will bring more revenue, increase the sales pipeline, better customer satisfaction scores- in short, a fat bottom line.
Since there is so much focus on technology, there is one aspect that businesses miss. If you look at businesses that did digital transformation programs but failed miserably, more often than not, the only reason would be this- not focusing on the people. You cannot make changes to the business and then check if those changes were necessary or welcome in the first place.
When there is a change of such proportions in the organization, it requires an understanding of how other channels, touchpoints, and processes are connected to this. The transformation is not just digital, but it affects each part of the business.
What is included in a digital business transformation project?
In a digital business transformation project, the objective is to ensure that it achieves its objectives by supporting individual changes required. No matter what you do, installing a new technology or implementing a new process, the employees are the ones who need to make sense of it and deliver value.
Here is how you can have a successful digital business transformation project:
1. Start from the management:
A digital business transformation project affects the basic operations of a business. During such changes, the role of the management team is pivotal. When leaders are more active during this phase, then there is acceptance from everyone else and it creates a conducive work environment.
The leadership should be invested in the program, only then will they be able to promote the culture that is needed to accept the change.
2. How much change is necessary?
If you are aiming for a complete business overhaul, then it can backfire if you do it all at once. You need to take baby steps when implementing digital transformation to your business. Also, businesses are not aware of how much change is needed and the impact it will have on their business.
The business needs to audit the scope of the project. How much resources are being spent for this? What are the costs that will be incurred? What is the scope of the training that should be given to the employees? How fast can we get to see an ROI? What are the kind of results that we can expect?
3. Keep the people informed:
While bringing in change is necessary, employees may be anxious about the change which will bring in technologies and processes. For example, while business owners might feel excited about the prospect of cutting down on redundant tasks with the help of automation, employees may be wary of it since it means that their job responsibilities will be reduced significantly.
A complete digital business transformation can also result in restructuring of work and even departments. This creates a lot of unpredictability which might leave many of them confused and afraid about their future. All of this will lead to poor performance and a lower morale.
Here is how you can mitigate the confusion:
- Start talking about the transformation even before it is underway
- Keep them in the loop about most of the happenings
- Create a culture which supports transformation
- Make them feel secure about their jobs despite the transformation
- Ensure that there is a support system available to address their issues
- Make sure that the IT department will help them through any issues that they might be facing because of the transition.
- Talk openly about the changes that will happen
- Encourage employees to ask questions to the leadership
4. Find partners to advocate the journey:
While most of the employees will be wary of the change, you will find some who have the charisma, energy and skills to help the company push the agenda. Train these people who are embracing the change, provide them with the right strategy so that they can pass the same to the others so that their fear is alleviated. Ensure that the strategy focuses on how it will benefit the customer immensely.
5. Make the change tangible:
You can showcase the change that the digital transformation will bring in tangible terms. Conduct workshops and programmes where people who are a part of the transformation strategy will take questions, pass information and educate the employees about it. These people will tell them how their work is going to be affected because of this. Print posters, pass pamphlets, talk about it in your internal messaging tools, conduct contests, etc., to create engagement around this.
6. Technology and change:
The development cycle and the action plan for change should be aligned. When only one is successful, the entire program is a failure. Unless both are equally effective, there will be no results from it.
The success of a digital business transformation depends on the technology, mindset shift, processes created, and the training. Businesses need to understand that while technology delivers value, the employees are the ones who are really driving it. It is exactly why you should put more effort into engaging the people who can actually drive digital transformation success.
Digital Transformation examples
When done strategically, your business will be able to reap benefits like the success stories that we have mentioned below:
This billion dollar giant needed a rejig of its digital presence. They introduced online ordering, made more content on social media, and took the help of other new technology. The new store’s changes and its focus on direct customer sales has enabled customers to experience Target’s offering fully. It was responsible for Target’s stock value to rise from $53 to $88 in 2016.
With Monopoly and Play-Doh to its name, iconic toy maker Hasbro is one of the biggest toy brands in the world. After leveraging segments of data, Hasbro realized that they had been wrongly focusing on children in its targeting instead of the people who actually buy the products- parents.
They customized the ad to meet the needs of its target consumers. Hasbro ran ads while focusing on multiple marketing channels to increase its user base. It targets parents with relative ads of products, a tactic that has given many dividends to the company.
Hasbro increased its ad spend by 1,100% which grew its sales to $1 billion, hitting $5 billion in 2016, their highest ever.
Lego’s iconic pieces are unmistakable and immensely popular, but the company went through a rough patch, especially in 2004 when it was on the verge of bankruptcy. Only a company restructuring and digital transformation could bring them out of this tragedy. They diversified their business and focused in the digital world with video games, mobile apps, movies, apps, etc.
Lego even developed an app called Lego Digital Designer, using which people can draw Lego structures and share it to anyone. By steps like this, they were able to go beyond just entertainment and become a brand that is also recognized for learning and education.
For its huge digital strategy, Subway hired a bunch of technology, marketing and operational professionals. These people will be responsible for taking care of core capabilities like websites, mobile apps, payment systems and loyalty programs. A complete overhaul of the mobile app, redesigning the stores for the future, including self-service kiosks, and other capabilities is what the digital transformation program for Subway will entail.
The American pharmaceutical company Pfizer collaborated with IBM to work on a project that was about Parkinson’s disease. With the help of IBM’s machine learning capabilities, Pfizer is in plans to roll out a system of sensors and mobile devices to give doctors and researchers disease symptom information in real-time to see the connection between symports as well as other clinical data.
The apparel company’s stock price grew from $52 to $88 in two years since the transformation began. Nike’s leadership thought that the company had become laidback and outdated as a brand. They immediately did a digital transformation of the company’s mindset, culture, supply chain, to better connect with its customer base.
It created stronger digital marketing campaigns, updated its e-commerce store, focused on data analytics, and added strength to its direct selling employees. The digital consumer data-led Nike to open unique concept-type stores, create membership communities, improving the UI and UX for a greater online experience and for its app. All of this has resulted in a faster product development cycle, and more.
One of the earliest unicorns from the Silicon Valley, Microsoft is popular for a lot of innovative products over the last few decades. Microsoft saw its stock price diminishing thanks to tough competition from the likes of Apple, Amazon and other companies. The folks at Microsoft decided to re-think their strategy and they created a cloud networking system. It has moved from a traditional software to the cloud as it is useful for both personal and enterprise-level use. This had a dramatic effect on its share prices which resulted in a market cap of $1 billion. If they had not changed their strategy, they would never have achieved this position.
What’s the difference between digital transformation and business transformation?
Let’s go over the meaning of digital transformation again. Digital transformation uses a variety of technologies to create processes, customer experiences, etc., to meet the changing needs of the market.
Digital business transformation strives to align people and processes with the business’ strategy and vision.
Only when both of them combine, do we get the required results from it.
Unfortunately, these words have been wrongly used with many businesses considering digital business transformation as digital transformation itself.
If you are still not clear with the difference in between the two, let’s try explaining in different words.
Business transformation focuses on creating the cultural shift to get the business to meet existing market demands.
Digital transformation, on the other hand, focuses on using the latest tools and technologies to drive change in an organization, by creating processes.
A meaningful transformation should be able to create exciting processes that will drive the business to profit while including all the stakeholders in it by creating a cultural change. It cannot be mutually exclusive.
What does digital transformation mean for legacy systems?
Digital transformation is ushering a rapid change in every industry that you can possibly imagine. DX is more than just a fancy upgrade, it is the complete overhaul. When coupled with a cultural change, digital transformation makes the business more flexible, stronger and adaptive. So when the transformation is made, it affects all the touchpoints.
Businesses these days are spending on software applications that bring in revenue. These software apps drive revenue from digital channels and are usually on the cloud, like SaaS (software as a service), iPaaS (integration platform as a service), aPaaS (application platform as a service), and more.
Waste of money – Legacy IT systems, unfortunately, are a burden as a lot of money is spent on just operating and maintaining it. Every new technology that is coming up is built in the cloud using cloud architecture and approaches.
Can’t leverage the latest technologies : Deloitte, in its report ‘Legacy systems and modernization’ says “Legacy solutions lack flexibility and carry a significant technology debt due to dated languages, databases (and) architectures. This liability prevents many organizations from advancing and supporting analytics, real-time transactions, and a digital experience.”
Talent : It is difficult to find talent who are experts in legacy systems. Who takes the time to be familiar with COBOL or Fortran anymore? What is the ROI for them to do it? Keeping your legacy systems intact will only turn away talent.
GTM : The time taken to go to market is much faster when there is a digital transformation program implemented. In fact, in a survey taken by Deloitte, businesses said that one of the reasons why they implemented IT upgrades was to decrease the go-to market time.
Security : Legacy systems are a playground for hackers as they are difficult to secure and monitor. Even though cloud applications are not out of danger, the onus is on the business to protect it with strategies that work usually.
New markets : When you are using outdated legacy systems, it is difficult to embrace new markets and create new strategies through digital tools and platforms.
It is time you leave the burden of legacy systems and develop a model to retire them.
For larger businesses, digital transformation is a massive exercise. When everything works out right, you will be able to deliver immense value to your customers by being in alignment with their demands in this fast-changing digital world. No matter how you choose to approach digital transformation, you need to have a solid strategy in place that you can follow through.
Businesses that want to transform are the ones that will add value to the end customer. They do so by adding more opportunities for the customer. The folks at Zuci Systems can help you meet the expectations of your customers. We will help in creating a tectonic shift in your thinking by building processes that will disrupt your business. To discuss how Zuci can help your organization achieve digital transformation, please contact here.
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