What Is Digital Transformation?

February 17, 2020

When it comes to business, small companies and huge enterprises should quickly react to the latest changes in their field, technologies, marketing strategies, etc. They should be able to adapt to current trends and successfully implement them into the workflow of their system.

The faster and wisely you respond to the changes, the more chances you get to succeed in the future. Marketing and business overall are not static, and it is essential to keep up with trends, use them for your company, thus gaining more customers and revenue. Nowadays, businesses go through digital transformation. What is it? How can it benefit your business?

Let’s dive into the details of this topic.

Digital transformation is an integration of digital technology solutions into the work of the company. Although the term is mainly used about business, it is also applied to government, mass media, culture, medicine, science segments of society. It changes the way the company works and elevates the customer experience. Digital transformation is also used as a synonym to “paperless,” meaning that all the data is digitalized and stored in the company’s system.

What Is Digital Transformation

The implementation of these solutions into your business will affect every department and all the operations that are carried within the company. It will change the way your company functions internally and externally. Thus, going through digital transformation successfully will bring value to the overall business workflow and customer experience.

Examples of Digital Transformation: You’ve Already Seen Them

If you think that you haven’t seen any digital transformation examples, you are wrong. The change might be slow, but it happens. For instance, have you shopped on Nike’s website? You can check it if you didn’t. The first thing that impresses most is that you can create your own design of the shoes online. Thus, the user experience becomes more personalized, and the company can offer the best options available to suit the customer’s taste. What is more, there is no vendor involved in the process, and customers buy the products directly from Nike.

Another bright example of digital transformation is Disney. A few years ago, they were falling behind, but the company has come up with the idea of buying streaming services and turning Disney into the online platform, where you can watch movies. As a result, they are back on track and managed to increase their revenue.

One more example is Microsoft who has shifted from traditional software to cloud-based and managed to survive the competition with Apple and Amazon.

The examples of digital transformation can be found everywhere nowadays affecting every area of human activity.

What’s the Difference Between Digital Transformation and Business Transformation?

When it comes to business and digital transformations, the first one is a broader term that incorporates other transformations. It means that when a company wants to keep up with the latest tendencies that are appearing daily and wishes to deliver better services, have a better workflow, and better communication with customers, it has to go through a business transformation.

So, a business transformation involves all the changes in every department of the company and consists of:
– digital transformation (mainly is directed to facilitate and enhance the customer area of the company or inner company organization);
– IT functional transformation (focuses on how the work is done within the IT department of the company);
– enterprise transformation (directed on how the work is done within the company).

To put it in other words, a business transformation requires to set new business models that much depend on modern market demands. While digital transformation is about how this model can work and what tools and solutions are necessary to make new strategies work in the best way possible, meaning facilitating business-customer area of work, business-business cooperation, as well as inner company system organization of work (business-employee). Digital transformation is focused on technological tools and solutions that can deal with operational problems to reach the goal of business transformation.

The Roadmap

The moment you set a framework of digital transformation, you can start building a roadmap of the process. To make it easier, remember that there are three main stages that should be outlined and divided into smaller steps in the roadmap. Here they are:

Stage 1: Defining value. This stage involves securing senior management. It’s the first step. You have to make sure that everyone in the company is involved in the process and takes an active part in it. Gather board meetings with management, as well as different departments of the company, to define the goals of the transformation. Make them challenging and motivating. The last but not least step on this stage is the budget. Allocate funds on the resources and technologies to be used.

Stage 2: Launching and maintaining a digital transformation. First, think of the lighthouse projects you can launch at the beginning of the transformation process. Once they are tested and operate at their best, you can follow up with the related projects to continue the transformation. Next, gather high-profile professionals in your team who will have all the necessary skills. Moving further, think of the new agile ways of the work organization.

Stage 3: Scaling up. From now on you have to continually upgrade and innovate the technologies you use as they develop and continuously offer new features and capabilities. Apart from technology, your employees should also be appropriately trained and be able to acquire new skills. And the last thing that should be included in the roadmap is the adoption of the new operating model. From now on, the focus will be shifted to new centers, so the model should suit them.

What Technology Can Be Used?

Digital transformation for businesses of different industries is necessary due to all the emerging technologies. These technologies change the way companies function and organize their work. They help to deliver better user experience, as well as bring more revenue for the business.

Digital Transformation Technologies

Today we have several technologies that can be implemented into the company’s system. Each technology can be tailored to the needs of your business and level up the services you provide. There are certain tendencies in the technology used for the digital transformation of the enterprise, this list includes:

– Cloud Computing
Cloud computing can be the first thing to consider when embarking on the path of digital transformation. There are several good reasons for this. Think about how you can improve internal and external processes, operations, and services. Cloud computing has the required infrastructure, platforms, and computing abilities, thus helps you stay agile in your business field and ready to embrace the latest changes in the world of technology. Taking this into account, Cloud computing is cost and labor effective, secure (you can omit system shutdowns and create several backups). Scale and speed come with Cloud computing, two essential things the company needs to move towards digital transformation nowadays.

– Artificial Intelligence (AI)/Machine Learning (ML)
AI and ML, when properly used for digital transformation, can help businesses gain additional income and reduce time spent on executing day-today activities. ML is capable of analyzing big and complex data and making accurate decisions based on the available information. Thanks to the implementation of these technologies there is less room for errors and more for impeccable high-quality service.

– Blockchain
Blockchain is a powerful asset for the companies that are heading to digital transformation. The use of this technology will facilitate transactions, eliminating the third party in the process, thus making it easier and more transparent both for partner businesses and clients. The point is to make decentralized ledger that will reduce transaction time and cost, as well as will be more secure.

– Augmented Reality (AR)
Augmented Reality is a technology that can change and boost operational activities of the departments and enhance the competitiveness of the company on the market. AR gives a chance to see inside of the objects (for instance, machines, bodies, etc.) without opening them and have a full description of the problem found inside. It can be applied for product development, maintenance, and safety measures.

– Internet of Things (IoT)
Another way to make a digital transformation is to use the Internet of Things (IoT). Like the previous ones, this technology brings a lot of benefits to the business. For instance, it opens several new opportunities for the company thanks to the collected data that can be used to understand your customers and their needs better and, as a result, offering them better services. Also, IoT can help you expand the circle of your target audience. In addition, it improves employee productivity and reduces costs, as the processes are automized.

Think of the technologies listed above and how they can be useful for your company.

Digital Transformation Process: How Is It Done?

Digital Transformation Process

Digital transformation cannot be completed in one day. It’s rather a continuous process that involves a lot of work. Any process involves several stages, so you should think about the strategy for your company, the execution part of the process, and its outcome. Setting a plan is ⅓ of the process, but going digital without one is a lost cause. Here are the steps you should follow to outline the process of digital transformation:

Step 1. Analyze the current state of affairs within the company and outside. It is important to understand where you stand at this very moment, know your strong and weak sides. Check how the competitors are dealing with the similar problems you face.

Step 2. Set up transformation objectives. What do you want to see as the final result? What is the goal of the company? Which operations, departments, or processes should be renovated? These are the essential questions you have to answer before moving to the next stages of the process. Involve your employees into the process as much as possible, as they do certain activities daily and know all the pitfalls or inaccuracies.

Step 3. Choose the right technology and outline the budget. When thinking of the technology to be implemented into the work of the company, provide thorough research. The technology should suit the needs of your company, employees, and clients. Communicate with the vendor and set close relationships for further collaboration, as support of the system is as important as its development or implementation. Make sure the technology is scalable, so you can continue to grow if some part needs to be innovated or changed.

Step 4. Create a clear roadmap for the process and prioritize the activities. Access the capabilities of the company, resources, budget, identify changes, and do a cost-benefit analysis. Then, logically prioritize activities.

Step 5. Identify and train your team. Choose employees and create teams that can execute the implementation of technology. All the changes that are going to be made should be demonstrated to the employees. It is important to educate your staff, so can do digitally transformed business, once the system starts to operate differently.

Step 6. Implement the changes. Do everything that is required to incorporate the technology into the work of your company, run tests, and add additional changes if needed.

Step 7. Provide ongoing support of the new technologies and use new features to scale up the performance of the system and services.

Benefits of Digital Transformation: How Is It Useful for Your Business?

Taking into account the information stated above, we can highlight several benefits that come with digital transformation. Although the process can be time-consuming and require a lot of resources to be completed, still the advantages it offers, cover the expenses.

So, what are the benefits we get with the digital transformation of business?

1. Less manual work as operations and processes will be automized, thus making the overall work more efficient and almost flawless.
2. Reduced time spent on day-to-day activities, as the system will be automized.
3. The client’s satisfaction will grow. It follows from the benefits listed above. Flawless and quick service will win the hearts of your clients and more likely make them your regular customers.
4. Increased revenue. This advantage is also a result of the listed above. Reduced time and errors in the process save up a lot of funds, and loyal clients will bring more revenue.

These are four significant benefits a digital transformation brings to businesses, both small and large ones. Of course, the list is not complete, as everyone will find something different for their own business.

How to Measure ROI on Digital Transformation?

The thing about digital transformation is that the changes will never stop. You need to make sure your company is well-equipped for the dynamic tech environment. From this moment on your business will have to constantly adapt, upgrade and respond to innovative tech trends. That is why it is crucial to measure ROI and define whether your business is moving in the right direction.

To begin with, each company may have its particular way of measuring ROI, as the objectives may differ, as well as the metrics that need to be evaluated. However, there are some common steps to ease the way and see whether your digital metamorphosis is effective.

Step 1. Establish Your Goals

The reason why it’s essential to define your objectives first is because it will directly impact the metrics of your ROI. Taking into consideration your company specific challenges, requirements, and cultural values. Some business may find themselves in a dire need of increasing the agility of operations, while another may pursue the goal to boost customer experience. At this step, make sure that all the senior management are headed in the same direction and share similar values. This will save your management from a chaos that may occur when not having a clear set of goals.

Step 2. Pick Metrics that Align Your Goals

Depending on your whats to achieve, you will define your hows to measure. For instance, if your goal is to increase customer experience, you may want to measure the number of return customers, monitor brand awareness, or assess net promotor score. In case you’re headed in adopting a digital workplace, you may want to monitor the number of applications your employees are switching among. And then see whether it affects the efficiency or produces distraction that leads to additional errors.

Step 3. Get Down to Measuring Business

With a set number of clear objectives and an allocated budget to reach the goals you may start examining the results. You will do so by examining whether your current achievement corresponds to the desired objective. The chosen metrics will serve as a fundamental means to measure something that may seem abstract at the first glance. To see how it works let’s have a look at the example of measuring ROI within the HR department of a large organization presented by Forbes.

So, let’s say they want to automate the process of leaving a vacation request to increase operational efficiency. Taking into consideration all of the manual operations needed to get their request approved takes 75 monthly hours of employee time. With appropriate digital tools the time can be reduced to 15 monthly hours. This goal is clear and measurable, so it’s easy to see whether you’ve reached the desired results or not. By estimating ROI of such an objective, one can then see the bigger picture and assess the overall efficiency of digital changes.

Top KPIs to Measure Your Success

If a CIO gives you a quizzical look when asked about gauging the transformation success, it’s a bad sign. Digital Key Performance Indicators (KPIs) will serve as a lifeline if you want to keep your digital metamorphosis efficient. The worst thing that can happen while deploying new tech solutions to boost your business is not knowing whether you’re making any progress. KPIs will help you get the grasp of the idea whether you’re spending the time doing the right thing, or whether you need to shift the priorities to achieve business growth.

As you’ve probably understood, there are no strict instructions when it comes to digital transformation, as everything is customized to the peculiar needs of a company. However, here are some of the top KPIs to focus on.

  • Customer Acquisition Cost (CAC)

This indicator will show you the picture whether the amount of money you spend to bring new customers corresponds to your objectives and budget. This is regarded as one of the essential metrics to assess during digital changes process, as it’s clearly shows the cost effectiveness of your tech solutions.

  • Customer Satisfaction and Retention

76% of customers believe that companies should understand their expectations and needs. That is why measuring customer satisfaction and retention will show you whether you are meeting your clients demands with a new digital mindset. You can measure it with a customer satisfaction score or a percentage of clients repeating a purchase.

  • Net Promoter Score (NPS)

Determining NPS is vital to see a long-term business growth affected by transformation. To put is simply, you want to find out whether your customer will recommend your company to a friend. You can send surveys consistently to your customers, and monitor whether the number is growing.

  • Percentage of Product Defects

One of the key objectives of automation caused by digital transformation is to reduce the number of errors due to manual operations, for instance. That is why it is important to estimate whether the tech solutions of AI or ML you have applied to optimize operations and the production process are truly efficient. To measure this KPIs you’ll need to take the number of faulty products, the total number of products produced, and see whether the number is becoming less with the new digital solutions.

  • Revenue Growth Rate

Probably, one of the most desired KPIs to be as high as possible. This indicator will show you the rate at which you’re boosting your business income. The goal of any company is to boost revenue, and to do it fast. This is the key element that shows whether your venture will survive. To have revenue growth a company requires to attract new customers as well as make sure past customers return.

  • Process Downtime Level

This indicator is good for companies automating the processes and operations. It may show whether the time wasted due to tech problems or employees sickness have reduced thanks to new tech solutions.

What Are the Challenges of Digital Transformation?

Challenges of Digital Transformation

While 85% of enterprise decision-makers believe that they have a limited time frame of 2 years for successful in-depth digital transformation, otherwise they will be lacking behind their competitors, many of them still view this metamorphosis as something troublesome and quite challenging. So what are the major issues a business may face when going through the changing process?

  • Finding common grounds at every level of an organization

Undergoing transformation cannot be done in a silo. This process will require cross-functional effort. So, keep all the departments, both leaders and employees involved. The possible way to find common grounds is to get feedback from all the departments and make sure that employees share values of a new digital mindset.

  • Integrating legacy and digital assets

One of the most crucial challenges is overcoming doubts whether a business needs new tech tools when there has already been a huge investment into their legacy programming. The thing is that the aim of transformation is to link up the legacy with new digital tools, as well as enhance the already existing technology to improve your business.

  • Facing digital change fears

The overload of tech-savvy solutions may scare employees away, as it can be too much to handle. That is why, invest time in training your employees to be ready to work with new technology. Once workers will see that the advanced technology helps them to become more efficient, all their fears will disappear.

  • Managing risks of digital infrastructure

With new opportunities come new risks. On the one hand, each employee-owned device is a portal into a corporate data stores. On the other hand, digital tools allow a company to reinforce data security. Digitized security systems ensure that online assets are better protected, and cloud computing risks are easier to identify and handle.

  • Getting lost trying to keep up with all the current trends

Last but not least challenge is not to get lost in a chaotic bouncing from one trend to another. That is why the only way to overcome this hurdle is to have a well-thought-out framework of your transformation. In order not to get stuck in the mish-mash of solutions trying to keep up with ever changing digital environment, you’ll need to have a blueprint and always keep the focus on the final goal.

Digital Transformation Framework: The Guidelines

Not having a coherent framework is in fact a road to a failed digital transformation. With no plan, a company is doomed to get trapped in the middle of digital metamorphosis, as it is impossible to adapt to a new technology and trends appearing every day with no strict outline of actions.

For this reason, before getting down to business, any organization needs to set up a digital transformation framework that will both serve as a guideline and always keep the focus on the final goal.

There is no existing strict framework that can be applied to each and every business, as every company will have to outline a plan specific to its needs, requirements and values.

However, as digital changing process is not indivisible, there can be four types of basic framework you can then customize for your company in particular.

Framework guidelines regarding:

  • Processes and Operations

Some companies may want to boost customer experience, some want to lower the costs of production, and others may want to increase quality. The objective may be various, though the means to achieve them can be clearly defined. By incorporating new technology, the processes and operations at a company may be significantly enhanced. Whether it’s the trending in 2020 AI or ML, IoT or AR, when deployed smart, such transformations can create considerable value.

For instance, Airbus uses display glasses to advance the quality of employees inspecting the planes. While Domino’s Pizza enable the order process from any device, thus overtaking PizzaHut in sales.

See? The goals are absolutely different, while the former example is focused on enhancing the quality of an item and in turn its safety, the latter is mainly concerned with boosting customer experience that will make the sales better. Still, the means are the same – transformation of the old processes and operations with new tech solutions.

  • Business Model Transformation

This area of transformation requires a fresh outlook at the way value is delivered in the industry as well as in your company. Some of the prominent examples of such transformation may include Netflix reimagining its business model from outdated DVD sales company to a leading American media-services provider and a production company. Another example is Apple reinventing music delivery with I-Tunes.

As you’ve probably noticed, all the verbs have prefix ‘re’ meaning companies take their existing model and by launching fresh initiatives ‘again and again’ open new opportunities for their business growth.

Needless to say that changing the way a company delivers value to users and customers requires strong leadership, active involvement and well-thought-out strategic planning of Strategy/Business departments. Not to mention the needed courage to take risks on the way to something brand new.

  • Domain Transformation

The best thing about digital transformation is that with its endless opportunities only the sky is the limit. A business can successfully create a new source of revenue by plunging into an absolutely new industry. Let’s take Amazon, for example. They dared to enter a new market area by launching Amazon Web Services, offering cloud computing services. It’s remarkable as this domain was predominantly owned by IT giants like Microsoft or IBM. However, the unique opportunities of tech solutions, their strong digital capabilities and exceptionally brave thinking make it possible for AWS to be bringing 60% of Amazon annual profit now.

It goes without saying that such companies as Amazon have better abilities to take advantage of the new technology and expand to a new domain easier. Still, it shows that with new technologies like AI, ML, UX, IoT, AR, a business can unlock new growth way cheaper and more efficient. That is why don’t be scared to recognize new domains and see whether your company can reap the benefits of unlocked opportunities.

  • Cultural and Organization Transformation

Many companies try to shift focus on cultural metamorphosis, trying to incorporate digital world values without truly making important digital changes. Reorganizing the culture of your company should come along with acquiring new innovative skills as well as adopting new technology.

There should be definite and strong initiatives that will shape workflow practices to digital by changing old organizational norms and bringing new value. There’s no use educating your employees why decentralized decision making is important if they don’t feel they’re being heard. There’s no point in making workers change their common manual operations if new automated processes won’t be more efficient than the manual ones.

What we’re saying here is that cultural shift alone doesn’t bring any value to a business success. However, alongside with effective tech solutions, such transformation will empower company for never-ending growth. That is why when thinking through the framework for a cultural transformation, make sure it’s the part of a bigger powerful digital change.

What is Digital Transformation Consulting?

Within a few years, digital transformation turned from an unknown term to a buzzword known to everybody. Cloud Computing, IoT, Blockchain, AI and AR have penetrated into a business vocabulary as well as in business operations. However, it can still make one’s head go dizzy when trying to define the objectives and the path of transformation for a business.

We are here to help. Enjoy our IT consulting team outlining a thorough strategy for efficient transformation taking into account your specific business objectives. Our IT advisors will examine your existing software solutions, detect any issues that need to be solved and design a customized roadmap and strategy for your business to reap all the benefits of the latest technologies.

For over 10 years, we have been delivering advanced tech solutions to businesses helping them to keep up with a speedy and persistent pace of a digital world. From detecting the pain points to removing them, from designing new tech solutions to successfully implementing them into your business – we’re here to help you unlock future opportunities.

Future of Digital Transformation: What Is Next?

Digital transformation is a rather new concept for now, and it only starts to develop and penetrate different business fields and spheres of human activity. We already know the benefits it possesses and can only imagine how it will look like in the future, as the technologies constantly upgrade, evolve, and acquire new features.

The tendency mainly prevails in IT and financial spheres, but it has a lot of potential and can be used to improve government matters, healthcare, and insurance, banking, retail, hospitality, education, construction etc. Companies should take a serious look at digital transformation and make use of it for their systems to survive current and future competitions, keep their clients and increase revenue.