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DIGITAL TRANSFORMATION
So what exactly is digital transformation?
If you type that question into Google, you’ll get billions of results. There might be a misconception that digital transformation is only about technology, but that’s not the reality.
Digital transformation is a fundamental change in how an organization operates, communicates, and interacts with customers. It’s a disruption from operating in a “traditional” manner to becoming more “digital.” It’s also about nurturing a digital culture and enhancing skills for everyone in your company when you need a team to work through the transformation process.
As Brian Corish, CEO of Accenture Interactive, put it simply: “Digital transformation is reinventing business models. It’s a reinvention process.”
What’s the difference between Digitization, Digitalization, and Digital Transformation?
There are many terms when it comes to business and digital, so it’s easy to get confused between them. The most commonly used ones are digitization, digitalization, and digital transformation. Let’s consider each one to see the difference.
Digitization involves information is the process of creating something digital or making it available in a digital form. For example, if you create an online version of a printed newsletter or magazine, or use electronic signatures to sign documents online.
Digitalization involves processes is about using digital technologies to change your business model or provide a new revenue source. It’s about using online channels and technologies to become a digital business. An example is using cloud computing to store data or automation to streamline workflows.
Digital transformation is a reimagining process. It considers leveraging digital technologies and processes to build new systems, enhance digital thinking, and exploit new opportunities.
Types of Digital Transformation
Many organizations focus on organizational transformation, but there are four types of digital transformation you need to consider to realize its full value. They include the following types:
Process Transformation – This focuses on your processes like data, analytics, AI, and any processes that can aim to reduce costs and drive operational efficiency in the business. Retail healthcare giant Walgreens is a prime example of how they revamped their MyWalgreens app to centralize their digital assets and provide a better experience for customers.
Business Model Transformation – This is about making fundamental changes to how a business or organization operates, which may include personnel, processes, and technology. Think about the giant Netflix and how it revolutionized the video distribution industry by completely changing this model.
Domain Transformation – This area brings excellent opportunities to move into a new domain or field that a business may not have previously explored by acquiring new technologies. Think about Google and its various business branches, such as Google Nest, an Internet of Things (IoT) product offering thermostats and smoke detectors for homes.
Cultural/Organizational Transformation – This is about redefining mindsets, processes, capabilities, and skills for a digital world. It’s driving digital transformation forward through culture-based growth initiatives and new ways of thinking. Pitney Bowes is an excellent example here as it transitioned from a mail solution company to a technology-enabled shipping and e-commerce company, transforming into a digital business.
Six Steps for Digital Transformation
Digital transformation is a long and complex process, so it’s crucial to approach it strategically from the outset. This means building a digital transformation framework so that you can always review each step to see if improvements can be made. Let’s take a look at the following six steps:
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Understand why you’re doing this
An essential part of digital transformation is understanding the motivation to become more digital. No two businesses are alike, so it’s crucial to know why your business is embarking on this journey.
Think about the core reasons for your change. Is it to improve customer experience, increase process efficiency, or manage your data better? When you know the reason, you can plan ahead to ensure they are met.
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“Audit” your company
To know where you’re going, you need to know where your company is at present. Review what processes and systems are in place and how they’re performing. If you’re using digital tools and technologies, what are they, and are they actually working? Check the operations of your organization, how it’s structured, and how it functions.
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Find your “gaps”
The reason you’re looking to drive digital transformation is that there’s inefficiency in your business or untapped opportunities. What gaps need to be filled? For example, are you extracting value from your customer data? Do you have a way to attract and retain potential customers for business? How’s your customer experience from one channel to the next?
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Look at your internal capabilities
Besides technology, this stage is to examine your capabilities. There’s no point in transforming your business if you don’t have the digital skills to drive it. What digital skills are needed to propel the transformation process, and do you have any of those skills within the company? Do you have any training programs that can enhance the skills of current employees to equip them with essential digital skills or at least an understanding of digital?
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Create a digital transformation strategy
Once you understand your motivations, capabilities, gaps, and internal capacities, it’s time to create a digital transformation strategy that can guide your business. This will serve as a roadmap for you to follow, tied to KPIs with an available action plan.
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Review and Flexibility
Your digital transformation strategy should not be rigid. The digital ecosystem and customer landscape are constantly evolving, so it’s crucial to leave room to review your strategy if external or internal factors necessitate it. Flexibility is essential when navigating this type of transformation, and your company needs to be able to pivot and adapt as needed.
3 Great Examples of Digital Transformation
There are several great examples of organizations embarking on digital transformation. Below are three well-known brands in different industries to inspire you with what can be achieved.
DOMINO’S
The famous pizza chain Domino’s, which began operations in the 1960s, has transformed into a “truly digital-first business.” In 2021, 91% of its sales were made through digital channels, according to Marketing Week.
Once at risk of bankruptcy, the traditional business operation turned the tide in 2011. The CEO at the time tasked the IT team to enable any smartphone user to order pizza in 17 seconds effortlessly. “The green light” is on, Domino’s opportunity for transformation has arrived!
The Domino’s app was born (and disrupted the restaurant industry), and delivery became even more seamless with electric bikes and autonomous delivery vehicles, turning the business into a $4.36 billion revenue generator in 2021.
NIKE
Among the most prominent brands on the planet, Nike’s iconic swoosh logo is instantly recognizable. Even Nike, a global giant, has undergone a digital transformation to stay competitive and meet its customers where they are: online.
Equipped with strong leadership, Nike transformed its mindset, supply chain, and brand. The company focused on stronger data analytics, updated its e-commerce strategy, launched powerful digital marketing campaigns, and enhanced direct selling to customers. The brand also effectively utilized social media to boost brand awareness, attract customers, and drive its social initiatives to build community.
IKEA
Anyone who has furnished a home is familiar with IKEA. Founded by Ingvar Kamprad at just 17, the company has become one of the most successful brands and is not shy of innovation.
Its digital transformation journey is ongoing as it continuously leverages technologies and e-commerce channels to attract customers and drive sales. It adopts a multi-channel approach to allow customers to transition seamlessly between channels.
IKEA decided to stop producing and printing its famous catalogs to redirect investments into other areas. Its acquisition of Geomagical Labs enables customers to create a 3D description of a room, “remove” existing furniture, and virtually add new items. The brand is also planning the “Shop and Go” checkout service, a product location system in stores, and a chatbot to serve customers more efficiently.
How has COVID accelerated the digital transformation process?
E-commerce sales skyrocketed during the Covid-19 pandemic. In the United States, consumers spent $870 billion online in 2021, a 14% increase compared to 2020 According to Digital Commerce 360, if the pandemic hadn’t occurred, e-commerce sales wouldn’t have reached that level until 2023 (two years later).
Due to the aftermath of the pandemic, companies have shifted to using technology and digital networks to reach and serve customers. For businesses already present online, this meant upgrading operations to meet demand. For those just beginning their digital transformation journey, it required a sudden pivot.
According to McKinsey’s Global Survey of executives, companies have accelerated the digitization of customer interactions, supply chains, and internal operations within 3 to 4 years. Meanwhile, the market share of digital or digitally-supported products has rapidly increased over seven years.
There have also been significant changes for companies during this time, such as remote work (including the surge of “digital nomads” across cities), shifting customer needs and preferences, along with a move towards cloud data. McKinsey’s survey found that many executives believe these changes will persist in business.
Finally, the pandemic has created a new way of working for companies across industries.
Digital transformation across industries
No industry has been left untouched by digital transformation. To serve customers and remain competitive, companies across sectors are investing in digital transformation to integrate digital into their processes and culture.
Let’s consider some industries to see transformation areas and future trends.
Digital transformation in public administration
Privacy and compliance regulations are crucial factors in this field, and therefore, the digital transformation process is slow. A report from Deloitte showed that only 30% of surveyed organizations assessed their digital capabilities ahead of their peers in the public sector, while 70% said they lagged behind the private sector.
The challenges of digital transformation for public administration include:
- Data collection and protection
- Information sharing
- Silent strategy
- Cost and budget pressures
- A risk-averse culture
- Skill gaps
The key to overcoming these challenges and becoming “more” in the digital space is:
- Transition to the cloud
- Secure access to communication information
- Cross-functional information sharing
- Digital skills training
Digital transformation in healthcare
The global digital healthcare market is expected to reach over $500 billion by 2025, with healthcare information technology dominating the market share. The industry faces some challenges in the transformation process:
- Patient delivery and service
- Speed of care
- Privacy
- Data collection and management
However, the pandemic has accelerated rapid changes in this field due to shifts in consumer preferences and innovation in care services, including:
- Remote patient monitoring
- AI-driven automation, e.g., image-guided therapy
- Tele-ICU
- Prescription via phone
Digital transformation in financial services and banking
While 92% of financial leaders have begun their digital intervention journey, only 11% believe they are in an advanced stage, according to EY’s Digital Survey.
The challenges faced by the financial industry are related to the protection of sensitive information and data.
- Management reporting
- Transaction processing
- Real-time data analysis and data management
- Compliance and privacy
Launched in 2022 and beyond are digital transformation initiatives to enhance security and provide a better customer experience.
- Touchless transactions
- Hyper-personalization
- Super apps
Tech giants like Google and Apple are stepping up their activities in this field.
Digital transformation in manufacturing
Digital transformation in the manufacturing market is expected to reach $767 billion by 2026 with increased spending on IoT.
Challenges facing this industry include:
- E-commerce – selling to businesses
- Big data and data analytics
- Real-time data
Like the financial sector, this industry must accelerate its digital transformation process during the pandemic and enhance activities in certain areas to improve, such as:
- Machines
- AR for assembly lines
- 3D printing
- B2B e-commerce
- IoT for real-time data
Digital transformation in small businesses
72% of small businesses are accelerating their digitization pace to address the challenges caused by COVID-19 according to the “2020 Digital Transformation for Small Businesses”.
Unlike large corporations, small businesses can leverage the fact that they are smaller to their advantage. This can help drive changes in corporate thinking more easily, trigger specialized training programs focused on key areas, and view digital strategies and technologies that have an immediate impact. Challenges small businesses face include:
- Improving operations and service delivery
- Customer experience
- Market expansion
- Sales and marketing
- Finding talent
However, strategies are being implemented to address each of these issues by:
- Automating or digitizing processes
- Investing in talent and digital skills
- Improving online sales and digital payments
Digital transformation in human resources
The HR market is expected to reach $43 billion by 2028. This growth is driven by the adoption of HR software. Challenges facing this field include:
- Optimizing workplace experiences
- Increasing efficiency
- Enhancing and training employees
- Automating work processes
- Talent management
These barriers are being addressed by the global HR industry through the introduction of:
- New ways of working – remote, hybrid working
- Digital learning platforms
- Social talent attraction
- People analytics
- Continuous performance management
- Cloud-based HR
Benefits of digital transformation
There are many benefits to digital transformation for businesses and their workforce, including:
- Enhancing customer experiences
- Driving data-driven insights
- Encouraging collaboration
- Improving employee experiences
- Enhancing innovation and agility
- Updating skills and knowledge
- Promoting a digital culture
- Streamlining processes & operations
2023 Digital Commerce Transformation Trends
From a commercial perspective, companies are seeking to embed digital into their entire business in the most effective ways possible. Some of these ways are:
Considering a new digital business model – Any model should be adjusted to fit your own business. Consider your products or services and see how technologies and online channels can help create a seamless customer experience and sell more. It could be as simple as setting up an e-commerce store or focusing on social commerce.
Focusing on employee engagement processes and readiness – You can have all the technology and tools in the world, but if your employees don’t know how to use them, having them won’t help much. Ensure you create training programs for new employees so they know what digital tools are available and how to use them.
Implementing personalization without compromising privacy – The issue becomes more about personalization in communication is that you need customer data to do it. And nowadays, many consumers are concerned about providing sensitive information. The best way to achieve this is through transparency and considering third-party data collection methods.
Digital tools in the workplace – Hybrid work and remote work are the new normal and this requires collaboration tools to work smoothly. There are many tools on the market for communication, project management, and document sharing, such as Zoom, Slack (which has exploded in business communication), and Monday.
Improving digital skills – There’s no denying that there’s a global shortage of digital skills in businesses. If you can’t find talent, what’s the solution? Upgrade new skills for existing employees so they can not only perform new functions and innovate but also advance in their careers.
2023 Technology Transformation Trends
As digital continues to accelerate across industries, it’s important to maintain the processes and thinking mentioned above. However, here are the main technology trends in 2022 and beyond.
5G – The fifth generation of mobile networks has been launched and it will allow faster connection speeds, extremely low latency, and larger bandwidth will transform industries and enhance daily experiences. This will enable advanced services in e-health, connected vehicles, transportation systems, as well as cloud-based gaming.
Untrusted Security – With the increase in hacking incidents and network attacks, businesses are seeking to deploy untrusted security models. This will help secure applications, identities, data, networks, and infrastructure.
Hyper Automation – This can be defined as “automation on steroids,” where companies can execute business and IT processes through process automation using robots, low-code/no-code or AI and Machine Learning (ML).
Predictive Analytics – By analyzing historical data using AI and ML and correlating that data with factors such as economics, business environment, and consumer behavior models, predictive analytics tools will enable businesses to make forecasts.
Customer Relationship Management and Customer Data Platforms – As customer data becomes more valuable and critical (consideration of third-party data), companies will invest in better platforms for their customer data. By cross-referencing data across these platforms, it will be easier to obtain more detailed information.
Creative AI – This refers to AI programs that can use existing content such as text, images, or sounds to generate new content. For example, using FaceApp to upload a picture and see how a person will look at different ages.
5 Digital Transformation Mistakes to Avoid
70% of digital transformations fail to achieve their goals according to a BCG report. This means there could be many things working against you in your digital transformation journey. So, consider what you should avoid to ensure a successful transformation process.
Having inaccurate data – The issue is not the quantity but the quality. When it comes to data, companies need to ensure they are looking at the right data and drive detailed information forward.
Resistance from employees – When employees don’t understand the reasons and benefits of the change, there will be resistance. Ensure your workforce understands the motivation behind digital transformation and the benefits for the business and customers.
Underestimating costs – Digital transformation is an expensive process because it’s a business overhaul. Make sure you approach it with a budget that can meet your expectations and goals.
Lack of commitment – This is a long-term process that will require time and commitment. Ensure your business has a multi-year plan to guide the process and expectations across the company about the necessary time.
Skill gaps – To transform your business, you need the right workforce, and often companies lack the necessary knowledge and skills. Training can have a significant impact on employee skills, so consider implementing a suitable program covering specific areas your company needs to develop.
Digital transformation is a complex process, and the human element in it is as important as the technology.
If your business is in need of an effective digital transformation solution, feel free to contact Athena again.
(Translation source: https://digitalmarketinginstitute.com/)
