As the nature of business changes, those who fail to adapt will be left behind. Every business owner or manager knows the importance of evolving to stay ahead of their competitors.
Many organizations, however, are burdened by legacy systems, outdated processes, and old ways of thinking. These deficiencies prevent them from making the changes they need to become more efficient, effective, and competitive.
If you feel like you could be outmatched by a more nimble competitor, or if you think you aren’t serving your customers as well as you could, you need a new way of thinking. You need a digital transformation.
Digital Transformation Explained
Digital transformation is the practice of remaking a business process, model, or workflow with digital technologies. The goal is to become more efficient or effective. It’s using technology to improve something, not just replace it.
Digital transformation represents a radical rethinking of how companies use technology, processes, and people to create big changes in their organization’s performance. It requires cross-departmental collaboration to create sweeping changes that pursue new business models, create new revenue streams, and use tools more efficiently.
The benefits of a digital model are undeniable:
It’s a myth that digital models are only accessible to young and nimble startups. Digital transformation projects are an important way for larger, established companies to compete with their new, flexible competitors. In a survey of executives, 62% say they have a management initiative or program to make their business more digital. 54% say their objective is “transformational.”
Digital Transformation Drivers
Digital transformation is usually driven by changes in customer expectations. Customers have high standards these days; standards that can often only be met with technologies that offer automation and personalization.
Additionally, digital transformations are often driven by competition. Undergoing a digital transformation will make you more competitive, especially if you’re in an industry that’s driven by technological innovations. If you don’t adopt your model, there’s a good chance other companies will pass by.
Amazon’s dominance over ecommerce, for example, is forcing smaller retailers to invest in digital solutions in order to compete. They’re crafting algorithms to refind logistics and streamline their supply chains. They’re using machine learning to facilitate customer service through chatbots. And they’re integrating with shipping carriers to save every last penny on delivery.
Furthermore, 2020 has been a big year for digital transformations. 59% of IT decision makers say their digital transformation efforts have been accelerated by pressures relating to the COVID-19 pandemic. Many companies have realized that implementing a new software tool won't solve all of their problems. They need to take a new approach to technology.
Digital Transformation Roles
You need the right people to undergo a digital transformation. This includes software engineers, data architects and scientists, cloud computing specialists, product managers, UX designers, brand strategists, compliance managers, and experts who understand DevOps, machine learning, artificial intelligence.
CIOs tend to play the largest role in transformation projects. They typically work with other teams to marry purpose with technology. But they aren’t the only ones who play a part. Transformation can come from anywhere within the organization.
In fact, some companies have gone so far as to create a new C-suite position - the chief digital officer (CDO) - to lead the charge. This trend hasn’t caught on yet, but it shows how seriously some organizations want to exploit advanced technology for the business.
Digital Transformation Technologies
Even though digital transformation is more of a mindset than a specific activity, it tends to invoke one of several key technologies, similar to how electronic medical records revolutionized patient care in the late 90s and early 2000s.
"These technologies are not just the latest buzzwords," says Akash Khurana, CIO and CDO at engineering company McDermott International. "We see tangible value coming from these technologies in terms of improving product optimisation, increasing production output, and tacking operational efficiency challenges.
Here are some of the popular technologies organizations are using to digitally transform themselves.
Artificial intelligence (AI) - Organizations are using AI to solve problems, boost productivity, reduce costs, automate processes, and improve the customer experience.
Cloud Computing - It’s no longer necessary to build your own IT infrastructure in order to develop creative products and processes. The work is already done for you and it’s not that expensive. The erosion of this barrier means more companies have access to digital transformations.
Internet of Things (IoT) - IoT is a network of physical objects that exchange data with one another over the Internet. As our devices grow “smarter,” innovative businesses are coming up with smart models to exploit this new age of connectivity.
Blockchain - Blockchains - otherwise known as distributed ledgers - are valuable tools to log and track interactions, finance, and logistics. We’ll need these systems to facilitate complex digital relationships, especially relationships between many partners.
Cybersecurity - As technology becomes a foundation of most businesses, risk will emerge. Security will need to play a critical role in the development of new models and processes.
Digital Transformation Obstacles
Like any change, there will always be challenges. Digital transformations can lag or even fail due to several obstacles:
Poor leadership who doesn’t commit to the transformation.
Poor operations that don’t or can’t adjust to the new paradigm.
A focus on cutting costs in the short term. Digital transformation can lower costs, but not in the same quarter or year.
A need to show big results right away. These things take time.
Low employee engagement, especially if they don’t understand the change.
A failure to marry new technology with the business’ purpose (otherwise you’re just adding tech, not transforming anything).
Disconnects between the IT team (who ushers the transformation) and the rest of the organization.
Furthermore, digital transformations aren’t simple for many companies who are bound to legacy systems. You obviously can’t abandon your existing applications on a whim. In fact, 90% of current applications will still be in use by 2023. Nearly half of CIOs believe legacy systems are the chief barriers to digital transformation.
Examples of Digital Transformations
A genuine digital transformation project requires you to rethink the fundamentals of your business model and process. It isn’t as simple as implementing a new software tool or digitizing something that was once done manually. A digital transformation should create something new.
Anheuser-Busch (AB) InBev is a great example of a digital transformation that focused on serving its customers: retailers. They developed AI technology to redesign how stores replenish their orders. An algorithm makes specific replenishment suggestions to ensure stores are stocked efficiently based on past sales and local trends. This engine also creates opportunities for salespeople to talk to staff about new products.
AB InBev’s is using technology to completely renovate the way they communicate and operate with distributors and retailers. Their AI can comb through vast amounts of data to identify patterns and opportunities to sell more products. Combined with a layer of ordering automation and customer service, they’ve streamlined one of the most complex and tedious parts of their business.
NHS Blood and Transplant is another powerful example. They’re using predictive analytics to streamline organ and blood donations. These activities are actually logistics problems, not medical problems. Creating efficiency here could have a tremendous impact on healthcare.
Digital Transformation Process
So how does a company undergo a digital transformation? There’s no one single process, unfortunately. It starts with a keen understanding of your customer. What are their pains and their goals? What triggers them to look for a solution to those problems?
Then consider the best way to meet those needs if you were to start your business today. What is the best way to solve those problems? How can technology be used to bridge the gap?
Think of technology as a means, not an end. Technology may sit at the center of a digital transformation, but tech isn’t the value. For example, Uber is a unique piece of technology, but people don’t use the ride-sharing service for the great tech. They use it for cheap and fast rides. Tech just facilitates the service.
Admittedly, this isn’t an easy exercise. It’s hard to envision a unique solution, especially if it requires technologies that you don’t understand. You probably need the help of a digital transformation partner - someone who knows how technology can be leveraged to meet customers’ needs, even if the method is significantly different than what you’re doing now.
At DevSquad, we’ve been helping organizations of all sizes build tools that revolutionize their businesses. We’ll help you achieve your digital transformation goals with modern products that make you more effective and efficient. Talk with us today