What Is Digital Transformation? A Guide For Businesses
The Covid-19 outbreak drove several organizations across industries to hasten their digital changes to compete and survive. As the world and its consumers become digital, a company's success depends on how digital it can become. As customer behaviors, information consumption, and processes have changed, this applies to B2C and B2B sectors.
According to Statista, spending on digital marketing services and transformation technology expects to reach $1.8 trillion in 2022 and $2.8 trillion by 2025. This expansion illustrates how much corporations intend to invest in competing.
So, how can you drive your company's change to be where your consumers are? And how are different industries ensuring their long-term survival in a digital world?
In this blog, we'll delve into the intricacies of digital transformation by investigating:
- Definition of digital transformation
- Digital Transformation Steps
- Digital transformation examples
- The Advantages of Digital Transformation
- Trends in digital transformation
- Mistakes in the digital transition
Definition Of Digital Transformation
So, what exactly is digital transformation? If you Google that question, you'll receive billions of results. There is a common notion that digital transformation is solely about technology, and it is not the case.
Digital transformation is a fundamental shift in how a company operates, communicates, and interacts with customers. It's also about building a digital culture and upskilling your employees because transformations require a team effort.
"Digital transformation is rewriting the business model," says Brian Corish, Managing Director of Accenture Interactive. It's about reinventing procedures."
What Distinguishes Digitization, Digitalization, And Digital Transformation?
When it comes to businesses and digital, there are so many phrases that it's easy to get mixed up. Digitization, digitalization, and digital transformation are the most widely used terms, and let's look at each of them to see what the difference is.
Digitize & digitization: The process of making anything in digital form is known as digitization. For example, if you produce an online version of a printed periodical or magazine or sign documents online using an electronic signature.
Digitalization is using digital technologies to alter your business model or generate new revenue streams. It is about becoming a digital business by utilizing internet technology and channels. Two examples are using cloud computing to store data or automation to streamline procedures.
The process of digital transformation is one of reinvention. It examines using digital technologies and techniques to create new systems, nurture a digital mentality, and capitalize on new opportunities.
Different Types Of Digital Transformation
Many firms concentrate on organizational change, but there are four types of digital transformation to consider to maximize its value. These are some examples:
Process Transformation focuses on your processes such as data, analytics, AI, and any other method that can help reduce costs and improve operational efficiency in the business. Walgreens is an excellent example, having rebuilt its MyWalgreens app to concentrate its digital assets and create a better consumer experience.
Business Model Transformation is making significant changes to how a company or organization operates, including staff, procedures, and technology. Consider the force that is Netflix and how it transformed the video distribution industry by entirely flipping the model.
Domain Transformation - By obtaining new technologies, a business might move into a new domain or area that it has not before investigated. Consider Google and its numerous company offshoots, such as Google Nest, an Internet of Things (IoT) product that supplies home thermostats and smoke alarms.
Cultural/Organizational Transformation entails rethinking mindsets, procedures, competencies, and skills in preparation for a digital future. It is about accelerating digital transformation through growth initiatives based on a new culture and style of thinking. Pitney Bowes is an excellent illustration of this, as it transitioned from a mailing solutions company to a shipping and ecommerce technology company before becoming a digital corporation.
6 Digital Transformation Steps
Because digital transformation is a lengthy and challenging process, taking a strategic strategy from the start is critical. That means you should always create a digital transformation framework to go back and improve on a phase. The six stages listed below
1. Recognize why you're doing it.
Understanding the incentives for becoming more digital is a critical component of digital transformation. Because no two businesses are alike, knowing why yours is going on this road is crucial.
Consider the primary causes for your transformation. Is it to improve customer experience, increase operational efficiency, or manage data? Once you understand the reasons, you may make plans to ensure they meet.
2. Audit your firm
To know where you need to go, you must first understand where your firm is currently. Examine the procedures and mechanisms in existence, as well as their effectiveness. What digital tools and technologies do you use, and how well do they work? Examine how your organization works, how it is structured, and how it runs.
3. Identify your gaps
You want to drive digital transformation because there are inefficiencies in your business or opportunities you haven't taken advantage of. What gaps must fill? Are you, for example, extracting value from your consumer data? Do you have a strategy in place to engage and retain new leads? What is the consistency of your consumer experience from one channel to the next?
4. Examine Your In-House Talents
Above and beyond technology, this stage is about evaluating your abilities. There's no use in modernizing your firm if you don't have the digital capabilities to drive it. What digital skills are required to achieve transformation, and do you have any in your organization? Do you have a training program to help existing staff gain digital skills or digital literacy?
5. Make a plan for digital transformation
Once you've identified your motivations, competencies, gaps, and in-house talent, you can develop a digital transformation strategy to steer your organization. It should serve as a road map for you to follow, with KPIs and a finance strategy.
6. Review and revise - be flexible!
Your digital transformation approach should be fluid. Because the digital and consumer ecosystems are constantly changing, it's critical to leave room to revise your plan if external or internal variables merit it. Agility is essential when managing this shift, and your firm must be ready to pivot and adapt as needed.
Three Excellent Examples Of Digital Transformation
There are several excellent instances of firms that have mastered digital transformation. Here are three well-known brands from various industries to give your ideas on what you may do.
The well-known pizza firm Domino's was founded in the 1960s and has evolved into a "fully digital-first corporation." Marketing Week will make 91 percent of its sales through digital platforms by 2021.
Where it was once on the verge of bankruptcy, the brick-and-mortar industry turned things around in 2011. The then-CEO charged the IT team to make it simple for any client with a smartphone to order a pizza in the 17 seconds it took for a light to turn green!
The Domino's app was born (and disrupted the restaurant industry), and delivery is now even more accessible as e-bikes and autonomous delivery have made the company generate $4.36 billion in revenue in 2021.
Nike's tick logo is instantly recognizable as one of the world's most recognizable companies. However, Nike needed to undertake a digital revolution to remain competitive and reach their customers where they were.
Through outstanding leadership, Nike altered the company's culture, supply chain, and brand. The company prioritized more robust data analytics, revised its e-commerce strategy, created effective digital marketing campaigns, and increased direct-to-customer sales. In 2018, also tested concept stores and broadened membership opportunities.
The brand also efficiently uses social media for brand exposure, consumer involvement, and promoting its social efforts to develop a community. This Twitter series intends to raise awareness of Mental Health Awareness Week among sports.
"Consumers continue to gravitate toward digital to find the items they love," said Nike's CFO, Matt Friend, "and NIKE's digital experience has continued to establish deep consumer connections and capture digital market share over the past four years."
IKEA is well-known to everyone who has equipped a home. Founded by Ingvar Kamprad at the age of 17, the company has gone on to become one of the most successful and innovative brands.
Its digital transformation has always been aggressive, as it uses technologies and platforms to engage customers and generate sales. It takes an omnichannel approach to make it easy for customers to switch from one channel to another.
The decision by IKEA to discontinue production of its well-known print catalog transferred funding to other areas. Customers can create a 3D depiction of a room, 'remove' existing furniture, and digitally add new pieces thanks to IKEA's acquisition of Geomagical Labs. The company is also working on a 'Shop and Go' payment system, a geolocation system for in-store products, and chatbots to make customer assistance easier.
COVID Accelerated Digital Transformation In What Ways?
During the Covid-19 outbreak, ecommerce sales increased dramatically. In the United States, consumers will spend $870 billion online in 2021, up 14% from 2020. According to Digital Commerce 360, ecommerce sales would not have reached that level until 2023 if the pandemic had not occurred (two years later).
Companies shifted to digital technology and networks to contact and serve clients due to the pandemic. It means scaling operations to meet the demand for online businesses, and it requires an unanticipated turnaround for many who had only recently begun their digital transformation journey.
According to a McKinsey Global Survey of CEOs, companies have advanced the digitalization of their customer and supply-chain contacts, as well as internal operations, according to a McKinsey Global Survey of CEOs. In the meantime, the proportion of digital or digitally enabled products has increased by seven years.
During this time, firms experienced substantial changes such as remote working (including increasing people working as digital nomads between cities), shifting customer wants and tastes, and cloud migration. According to McKinsey's poll, many executives expect these developments will continue in the business.
Industry-Wide Digital Transformation
No industry has escaped the effects of the digital revolution. Companies across industries are investing in digital transformation to incorporate it into their operations and culture to serve their consumers better and compete.
Let's look at a few industries to see where transformation is occurring and where future trends are emerging.
Governance's Digital Transition
Because privacy and compliance with rules are crucial in this industry, it has been reluctant to convert digitally. According to a Deloitte analysis, only 30% of firms thought their digital skills were better than their public sector colleagues, while 70% said they were terrible.
The following are the digital transformation problems for governance:
- Data gathering and security
- Information exchange
- Strategies that siloed
- Cost and budget constraints
- A risk-averse society
- Skills shortages
The following are critical to overcoming these hurdles and becoming more of a digital sector:
- A move to the cloud
- Secure communication access
- Information sharing between departments
- Training in digital skills
The Advantages Of Digital Transformation
There are numerous advantages to digital transformation for a firm and its personnel, including:
- Improves the consumer experience
- generates data-driven insights
- Improves employee experience by encouraging collaboration
- Improves agility and innovation
- Improves abilities and knowledge
- Encourages a digital culture
- Process and operations consolidated.
Commercial Trends For Digital Transformation In 2022
Commercially, businesses are seeking the most effective ways to integrate digital into their operations. Among these methods are:
Consider developing a new digital business model - It should suit any model to your specific needs. Examine your products or services and consider how internet technology and channels can assist you in creating a smooth client experience and increasing sales. It could be as simple as ecommerce website development and launch or concentrating on social commerce.
Emphasis on employee onboarding - You can have all the technology and tools in the world, but if your staff doesn't know how to utilize them, they're useless. Create an onboarding program for new staff, so they understand what digital tools are accessible and how to use them.
Implement customization without jeopardizing privacy - The problem with becoming more individualized in communications is that it necessitates the use of customer data. Furthermore, many consumers are concerned about sharing sensitive information today. The most straightforward approach is to be transparent and investigate methods of collecting zero-party data.
Digital workplace tools - Hybrid and remote working are increasingly the norms, and they necessitate the use of collaborative tools. There are numerous solutions on the market for communication, project management, and document sharing, including Zoom, Slack (which has revolutionized business communications), and Monday.
Upskilling in digital: There is no denying a global digital skills shortage in organizations. What is the remedy if you can't discover talent? Upskill current employees in new skills so they can execute new functions and be inventive and advance their careers.
Avoid These 5 Digital Transformation Mistakes
According to a BCG analysis, 70% of digital transformations fall short of their goals. That implies there could be a lot working against you on your digital transformation journey. So, let's consider what you should avoid ensuring transformation success.
Having the wrong data - When it comes to information, it's not about quantity but quality. Businesses must ensure they are looking at the correct data and producing insights.
Staff opposition - There will be pushback when employees do not grasp the reasons for and advantages of change. Ensure that your personnel understands the reasons for a digital transformation and the benefits to the business and customers.
Underestimate costs – Because digital transformation is a business reinvention, it is an expensive process. Make sure you go in with a budget that will allow you to meet your expectations and goals.
A lack of commitment - This lengthy procedure will require time and dedication. Ensure your organization has a multi-year plan to steer the process and that everyone understands that time is needed.
A lack of expertise - Transforming your business involves labor, and many companies lack the necessary knowledge and abilities. Training may significantly impact employee skills, so consider developing or bringing in a personalized program that addresses the areas your firm requires to grow.
Drive Digital Transformation Success For Your Company And Employees
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