Digital transformation (DT or DX for short) has been the main topic of many articles, studies, and panel discussions about staying relevant and competitive in an increasingly digital business world. At this point, the hype train is almost full and can barely stay on its tracks. Thus, many companies start their digital transformations without proper preparations, hastily grabbing digital technologies and rushing through the process, ending up with counterproductive effects. Let's take a closer look at DX and how to approach it.
Digital transformation can be defined as the process of integrating digital technologies into all areas of business, which fundamentally changes how it operates and how it delivers value to its customers. There's a reason this sounds so vague – the exact process of digital transformation will differ significantly for each company, making it practically impossible to formulate a definition applicable to every DX.
Exploring and applying new digital channels and technologies may require drastic changes to business models and business processes that thus far were the foundations of companies. So to make sure the company emerges better than before, a solid and well-thought digital transformation strategy is a must.
Over the years, there have been numerous myths circling DX. Here's a list of the most common ones juxtaposed with reality:
1. It's a bottom-up operation – you couldn't get more wrong here, as proper implementation of digital transformation requires leadership from the top.
2. DX mostly affects the customer experience – digital transformation opens up massive opportunities in many fields such as productivity, efficiency, or employee leverage.
3. We can push DX despite our IT – the relationship between business and IT is crucial for digital transformation – it must be improved for a successful DX.
4. Digital transformation doesn't matter outside technology and B2C companies – that's another fundamental misconception, as DX offers opportunities in all industries and is important everywhere.
5. We can wait with DX in our industry and see how the digital world develops – quite the contrary – the longer you wait, the bigger the gap between you and your industry's digital leaders. If you wait for too long, you'll never be able to catch up to them.
6. DX approach differs between industries and companies – although the process itself is almost always different, all the DX leaders share common DNA and the path to digital transformation shows common traits across industries.
Well, it's simple, really – going digital is crucial for survival on the market. We're deep in the digital age and anyone who doesn't adopt digital technology (e.g., artificial intelligence and machine learning, internet of things, modernization of legacy systems) will eventually fall off due to not meeting the current customer expectations. Or not implementing the most efficient digital business solutions.
Successful digital transformation initiatives can make a company thrive or even give it a second life on the market. Examples? We don't have to look far – LEGO blended the physical and digital worlds by investing in games for mobile devices. They're also deep in experimenting with modern technologies, such as 3D printing, sensors, and sophisticated elements that can be controlled via a dedicated app.
The digital transformation journey has been studied many times. Those studies point out key areas of successful digital transformation efforts. The main four can be summed up as IT modernization, operations digitization, digital marketing, and new endeavors.
Uplifting existing IT infrastructure (which includes e.g., updating software, replacing hardware, introducing new technologies, data clouds, and mobile infrastructure) is often the first step in the digital transformation process. Such digital initiatives will not only modernize your company's IT and communication platforms but also provide you with maintenance cost savings and increased employee satisfaction/efficiency. And all that thanks to just switching to up-to-date tools. But remember that successful implementation of new technologies takes time and experienced IT architects.
IT modernization can also be done later on the line – successful companies still invest in their IT even long after their DX has been completed. This ensures continuous evolution of existing processes and constant bettering of customer experience and work efficiency.
By digitizing your operations, you'll end up with simplified, optimized, and rationalized processes. This essential step, often performed near the start of DX, can have many forms. The simplest of them is, of course, switching from analog work to its digital equivalent. The re-structure of your business may need to go way further, e.g., by merging separate divisions into one. The digitization of operations can be done step by step – starting with the basics and then going further as the company matures.
What makes this step essential? Without streamlined, fine-tuned operations, your company will be left behind by more efficient digital transformation leaders. Plus, proper digitization of processes opens more transformation possibilities. A good example of this is inducing the creation of a whole ecosystem of products by simply improving a company's eCommerce platform and logistics, and adding products from other retailers to its offer.
This process will, of course, require time and technology, but when done properly, will bring significant savings in money, time, and human resources, while upping customer satisfaction.
Going digital with your marketing includes using digital solutions in selling online, profiling and winning clients, or building brand awareness. This area differs from the others, as it focuses on a rather narrow topic – digital tools for interacting with and selling to customers. You'll need to invest in specific resources, like capturing clean customer data, its analysis, tools for building omnichannel presence (e.g., AI, chatbots, automatic responders), and so on.
Digital channels can be successfully used for creating viral campaigns (including geo-targeted ones), setting up digital marketplaces, etc. The aforementioned artificial intelligence can help in studying customer behaviors and adjusting the work of the marketing team to observed trends.
By digitizing your marketing, you'll be able to reduce customer acquisition costs, get higher returns on marketing investments, provide better customer service and procure new customers thanks to collected data.
And last, but definitely not least, digital transformation provides new opportunities for growth. To fully reap the benefits of this area, your company should be well-established – the strategies leading to new business models, services/products, or creating a whole new business ecosystem can be quite disruptive. Freshly transformed businesses or those still in their DX process lack the resources and digital maturity to fully embrace such bold actions.
Are the benefits worth the risk? Well, it's undoubtedly an individual matter, as the so-called Key Performance Indicators (or KPIs for short) can get really nuanced or even vague here. This can be summed up as creating a solution for a major customer problem and profiting from it. That doesn't sound super appealing, does it? For this reason, each new business venture should be preceded by a thorough analysis of the market and the company's capabilities.
As already mentioned, it's hard to provide specific advice and solutions, as each process of incorporating digital technology is different. All we can do here is provide you with some general "do's" and "don'ts" that can help you avoid the most common digital disruption – the lack of proper planning. For more specific advice and help in formulating solid DX strategies, contact a qualified business transformation consultant.
A valid digital transformation strategy should draw from 3 fields – vision, plan, and action. So before you go to the planning phase, you should ask yourself some essential questions. There are three "must-have" ones:
With these, you'll have a solid foundation for exploring further topics, such as long-term goals, needed skills and knowledge, who should be involved, potential external help, gathering insights, etc.
When your company already has its DX business strategy and starts the transformation process, make security a priority. Transforming and freshly started digital businesses are quite vulnerable to cyberattacks – switching to remote work can leave gaps in security which can be mercilessly exploited by cybercriminals. Thus, investing in solid security measures (both hardware and software) should be on top of the priority list. This is especially true for big companies that deal with sensitive digital data.
Another good practice is prioritizing the hybrid work model. A flexible work model gives far more opportunities than sticking to just remote or on-location work – it can be suited to your employee's needs, resulting in higher efficiency. But remember – a good and efficient hybrid work structure requires a lot of planning to become a valid long-term solution. The effort is definitely worth it – a hybrid work system significantly broadens your business's horizons, e.g., it opens bigger pools of potential employees by enabling asynchronous work across different continents.
When it comes to the "don'ts", the first major thing is – never start any initiative without leaning on data analytics. Each business decision, especially those about DX, should be backed by solid data. Without the work of data scientists/analysts, your resources will stretch thin, and you'll be more likely to encounter digital disruptions. Even with minimal data backing (such as only 4 formulated KPIs), your chances of success are significantly higher.
While we're on the topic of "don'ts", underestimating customer experience is a terrible idea. Customers and clients are at the center of any business strategy, and thus their experience should play a big part in digital transformations. These two are often tightly connected and affect each other significantly.
The digital transformation process can be a long and complicated endeavor, but when done correctly, it can boost your business significantly and strengthen its position in the market. DX should never be done hastily and without proper planning. To make sure your digital transformation strategy will lead to the most desirable outcome, don't hesitate to reach for a helping hand of a professional DX consultant. You can find such individuals at Silicon Cities – a professional advisory & consulting firm based in Sydney.
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