In today’s fast-paced world, both small companies and large enterprises need to stay on their toes and quickly adapt to the latest changes to remain competitive with the latest developments in their industry. Embracing and weaving current trends into your workflow is a key to success in the digital age.
The quicker and smarter you respond to changes, the better your chances of future success. Staying up-to-date with trends can help you attract more customers and boost revenue. Many companies are currently undergoing digital transformations. But what does that mean, and how can it benefit your business?
Let’s dive into the details of this topic.
Digital transformation means blending digital technology into the company’s core. Though the term is mainly relevant to business, it also falls under government, mass media, culture, medicine, science, and many other industries. Simply put, it’s a big strategic change that affects company operations and how to elevate the customer experience. Digital transformation is also a synonym for “paperless,” meaning that all the data is digitalized and stored in the company’s system.
Implementing these solutions in your business will affect every department, and all the operations carried out within the company. It will change the way your company functions internally and externally. Thus, successfully undergoing digital transformation will bring value to the overall business workflow and customer experience by rethinking existing business processes to meet evolving market and customer demands now.
Examples of Digital Transformation: You've Already Seen Them
Digital transformation is evident everywhere. While some companies adapt more slowly, the shift is inevitable. It’s a smart move and one of the more significant strategies for staying competitive. Various industries have successfully implemented digital technologies to enhance customer experiences and streamline operations, showcasing numerous digital transformation examples.
Have you seen Nike’s latest technology? Nike has embraced direct-to-consumer sales through its client-facing apps, leveraging its website and mobile app for personalized shopping experiences.
Nike uses data analytics and AI to predict trends and manage inventory, ensuring popular products are always available. With Nike Fit, the company employs machine learning to measure foot size accurately, helping customers find the perfect fit. They’re also optimizing their supply chain with IoT devices and predictive analytics.
You can find examples of digital transformation everywhere nowadays, impacting nearly every aspect of human activity.
What's the Difference Between Digital Transformation and Business Transformation?
Speaking of business and digital transformations, the first term, "business transformation," is broader. It encompasses various transformations.
All companies must undergo a business transformation at some point to stay current with rapidly evolving trends, improve services, streamline workflows, and enhance customer communication.
"Business transformation" mainly means changes at all stages in every department. These "transformations" consist of:
- Digital transformation: Aimed at improving customer interactions and internal organization.
- IT functional transformation: Focused on optimizing the work within the IT department.
- Enterprise transformation: Concentrated on how work is done throughout the entire company.
In other words, business transformation calls for adopting new business models that align with modern market demands. Digital transformation, on the other hand, is about implementing the tools and solutions necessary to make these new strategies effective. It improves business-to-customer interactions, business-to-business cooperation, and internal company operations (business-to-employee).
For example, in the healthcare sector, digital transformation focuses on technological tools and solutions to address operational challenges, ultimately achieving the broader goals of business transformation.
The Digital Transformation Strategy Roadmap
Entering a digital transformation journey involves several key stages that require careful planning and execution. You can start building a roadmap when you set a digital transformation framework. Remember that three main stages should be outlined and divided into smaller steps in the roadmap to make it easier:
Stage 1: Defining value. This stage involves securing senior management. It’s the first step. Ensure that everyone in the company is engaged and actively participates. Gather board meetings with management and different departments of the company to define the goals of the transformation. Make them challenging and motivating. The last in this stage is the budget. Allocate funds for the resources and technologies.
Stage 2: Launching and maintaining. It requires a strategic approach. Start by identifying lighthouse projects to start the digital transformation projects. Once these projects are tested and optimized, you can proceed with related projects to continue the transformation. Assemble a team of high-profile professionals with the necessary skills. Consider implementing new agile methods for work organization.
Stage 3: Scaling up. From now on, continuously upgrade your technologies as they develop and offer new features and capabilities. In addition to technology, it’s important that your employees undergo training; it helps them acquire new skills faster and much more effectively. Adopting the new operating model is the last thing to include in the roadmap.
What Digital Technologies Can I Use?
Digital transformation is necessary for businesses in different industries because of all the emerging digital technologies. These technologies change the way companies function and organize their work. They help deliver a better user experience and generate more revenue for the business. Staying informed about the digital transformation technologies and trends like AI and robotic process automation can significantly improve digital transformation strategies and help meet the needs of both employees and customers.
We oversee certain tendencies in the technology used for the digital transformation of the enterprise; this list includes:
Cloud Computing
Many companies consider cloud computing the first to-go technology when entering a company’s path of digital transformation. There are many good reasons for this. Overall, it improves internal and external processes, operations, and services. With its infrastructure, platforms, and computing abilities, cloud computing helps you stay agile in your business field. Considering this, cloud computing is cost- and labor-effective, and what is important to mention is that it is secure (you can omit system shutdowns and create several backups). Two more important things come with cloud computing: scale and speed. These two are necessary to win the competition in the market.
Artificial Intelligence (AI)/Machine Learning (ML)
When properly used, AI and ML can help businesses earn additional income and reduce time spent executing day-to-day activities. With ML, you can analyze big and complex data and make accurate decisions based on available information. Minimize risks in production and create personalized experiences for your clients using AI. Thanks to these technologies, there is less room for errors and more for impeccable, high-quality service.
Blockchain
Blockchain is a powerful asset for companies heading toward digital transformation. This technology facilitates transactions, eliminating third parties and making it easier and more transparent for partner businesses and clients. It would be mistaken to think that only finance and banking companies can use this technology. Now, you can find blockchain integration in diverse industries such as retail, supply chain, healthcare, and telecommunications. And this list doesn’t end. We expect to see more usage of this technology in the coming future.
Augmented Reality (AR)
Augmented Reality is a real game-changer. It changes the departments’ operational activities and enhances the company’s competitiveness in the market. AR opens opportunities that once were hard to imagine, such as looking inside objects (machines, bodies) without opening them, examining and detecting them, and giving a full report with a description of the problem found inside. AR is applicable for product development, maintenance, and safety measures.
Internet of Things (IoT)
Over the last few years, we've seen another giant trend: IoT. This technology brings many benefits to the business. For instance, you can use the data collected with the help of IoT to understand your customers and their needs better and, as a result, offer them better services. Also, IoT can help you polish your segmentation strategy and expand your target audience. It can also improve employee productivity and reduce costs.
Robotic Process Automation (RPA)
Imagine having a digital assistant who takes care of all those repetitive and mundane tasks that consume your time, like data entry or invoice processing. That's exactly what Robotic Process Automation (RPA) does! By automating these routine activities, RPA boosts operational efficiency and accuracy and frees up your human resources to focus on more strategic, value-added activities. It's like having an extra set of hands that never gets tired, making your business runsmoother and smarter.
Mobile Technology
Those days when mobile phones were just for calls and texts are long gone! Today, mobile technology is everywhere, and it has changed the way we live and do business. From mobile tickets and wallets to entirely new business models like Uber, our dependence on mobile devices has greatly driven digital transformation. Mobile technologies and apps make everything possible, from ordering dinner from a favorite restaurant to managing banking and investments. Now, it's all about convenience and staying connected all the time anywhere.
Digitization
Digitization is the process of converting paper-based information into digital formats. It revolutionizes industries like healthcare with electronic medical records (EMR) and government services by making public records accessible online. Digitization is the backbone of transformation and digital initiatives everywhere. It makes information more accessible, manageable, and secure, paving the way for a more efficient and connected world.
Digital Twins
With digital twins, you can now experiment with a replica of your physical products or environments to find the best ways to improve efficiency or effectiveness. For instance, a manufacturer can create a digital twin of their shop floor to imagine where to place machinery for better output or safety. Similarly, product manufacturers can design digital replicas to improve ergonomics or usability. This game-changing technology allows organizations to improve their processes without disrupting existing operations.
Digital Transformation Process: How Is It Done?
With all the ambition, digital transformation is impossible to complete in one day. Instead, it’s a continuous process that involves a ton of work and effort. Significant investments in digital transformation efforts are necessary to improve operations and customer interactions. It requires careful planning and execution to ensure successful business outcomes. Like all processes, digital transformation involves several stages. We encourage you to get back to your company’s strategy. Consider what you want to achieve, your objectives, where to play, and which technology to use and, importantly, not use.
Creating a plan is just one part of the process, but going digital without one is a lost cause.
Use these steps as a guide to the digital transformation process:
Step 1. Analyze the environment within and outside the company. It is important to understand where you stand and your strengths and weaknesses. Check how your competitors are dealing with similar problems.
Step 2. Set transformation objectives. What do you want to see as the final result? What is the company’s goal? Which operations, departments, or processes do you think are worth renovating? Answer these questions before proceeding to the next stages of the process. Involve your employees in the process. They can provide valuable insights and point out potential issues from their daily activities.
Step 3. Choose the right technology and outline the budget. When considering the technology, don’t underestimate thorough research. The future 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 to continue growing even if some elements need maintenance or re-engineering.
Step 4. Create a clear roadmap for the process and prioritize the activities. Access the company’s capabilities, resources, and 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 implement new technology. Show all the changes that you plan to make to the employees. It is important to educate your staff so they will be well-prepared once the new system is ready.
Step 6. Implement the changes. This step includes running tests, ongoing maintenance, and adding necessary changes.
Step 7. Continuously undergo support for the new technologies. Use new features to stay up to date and increase the system and services’ performance.
Benefits of Digital Transformation: How Is It Useful for Your Business?
Considering the information above, we can highlight several benefits of digital transformation. Although the process can be time-consuming and require many resources, the advantages it offers cover the expenses and greatly increase business value.
So, what are the benefits we get with the digital transformation of business?
- There will be less manual work as operations and processes are automized, making the overall work more efficient and almost flawless;
- Reduced time spent on day-to-day activities;
- 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;
- Another important advantage is increased revenue. Reduced time and errors save your funds; loyal clients will bring more revenue.
These are four significant benefits of digital transformation for small and large businesses. Of course, this list is not complete, as all businesses are different, and each will find something unique.
How to Measure ROI on Digital Transformation?
Digital transformation is an ongoing process of change that never stops. Measuring ROI is an important step in defining the effectiveness of your digital transformation initiatives. Make sure your company is well-equipped for the dynamic tech environment. From then on, your digital business always adapts, upgrades, and constantly responds to innovative tech trends. Assessing ROI is important to see if your business is moving along the right path.
At the start, each company may measure ROI in its own way, as objectives and metrics can differ. However, there are some common steps to ease the way and see if your digital metamorphosis is compelling.
Step 1. Establish Your Goals
There are many reasons why it's essential to define your objectives.
First is because it will directly impact the metrics of your ROI. Consider your company's specific challenges, requirements, and cultural values. Some businesses may need to increase operational agility, while others may chase it to boost customer experience. At this step, ensure that business leaders and all the senior management are headed in the same direction and share similar values. At this stage, ensure that all senior management is aligned and shares similar values. This alignment will prevent chaos and confusion from a lack of clear goals.
Step 2. Pick Metrics that Align Your Goals
Depending on what you aim to achieve, you will determine how to measure it. For instance, if your goal is to enhance customer experience, you might measure the number of return customers, monitor brand awareness, or assess net promoter scores. Suppose you plan to adopt a digital workplace. In that case, you may want to track the number of applications your employees switch between and evaluate whether this affects efficiency or causes distractions that lead to errors.
Step 3. Get Down to Measuring Business
With a clear set of objectives and an allocated budget to reach them, you can begin evaluating the results. This involves examining whether your current state aligns with your desired objectives. The chosen metrics will be tools for measuring progress, even if the goals initially seem abstract.
To illustrate this, let's consider an example of measuring ROI within the HR department of a large organization, as presented by Forbes. Suppose they aim to automate the vacation request process to increase operational efficiency. Now, the manual process takes 75 hours of employee time each month. Appropriate digital tools can reduce this time to 15 hours per month. The goal is clear and measurable, making it easy to see if you've hit the mark. By estimating the ROI of this objective, you can get a better sense of the bigger picture and evaluate the overall efficiency of the digital changes.
Top KPIs to Measure Your Success
Key Performance Indicators (KPIs) are the compass that will guide your digital metamorphosis. Tracking these KPIs is essential for ensuring a successful digital transformation. KPIs are the lighthouse that helps you see if you're navigating in the right direction or need to change course to achieve business growth.
There are no one-size-fits-all instructions for any successful digital transformation strategies. However, here are some key areas to anchor your focus.
- Customer Acquisition Cost (CAC)
This indicator will show if your money to attract new customers aligns with your objectives and budget. It's one of the essential gauges during the digital transformation process, as it shows the cost-effectiveness of your tech solutions.
- Customer Satisfaction and Retention
76% of customers believe that companies should understand their customer expectations, and needs. Measuring customer satisfaction and retention is like checking the pulse of your business to see if you're meeting client demands with your new digital mindset. You can track this through customer satisfaction scores or the percentage of repeat purchases.
- Net Promoter Score (NPS)
Determining NPS is important for seeing long-term business growth influenced by transformation. Simply put, you want to know if your customers would recommend your company to a friend. Regular surveys can help you monitor whether this number is on the rise.
- Percentage of Product Defects
One of the key goals of automation through digital transformation is to reduce errors from manual operations. It's important to evaluate if the AI or ML solutions you've implemented are truly effective. Measure this KPI by taking the number of faulty products, the total number produced, and seeing if the defect rate decreases with new digital solutions.
- Revenue Growth Rate
Likely, one of the most desired KPIs. This metric shows the speed at which your business income is growing. The goal is to boost revenue quickly, as it's the lifeline of any venture. Achieving revenue growth requires attracting new customers and ensuring past customers return.
- Process Downtime Level
This indicator is valuable for companies automating processes and operations. It reveals if the time lost due to tech problems or employee absences has decreased thanks to new tech solutions.
What Are the Challenges of Digital Transformation?
While 85% of enterprise decision-makers believe they have a limited time frame of two years for successful in-depth digital transformation, many view this metamorphosis as daunting and quite challenging. Digital transformation leaders play a central role in guiding organizations through these challenges. So, what are the major issues a business may face during this transformation process?
- Finding common grounds at every level of an organization
Undergoing transformation cannot be done in a silo. This process requires cross-functional effort. So, keep all the departments, both leaders and employees involved. One effective way to find common ground is to gather feedback from all departments and ensure that employees share the values of a new digital mindset.
- Integrating legacy and digital assets
One of the main challenges is overcoming doubts about whether a business needs new tech tools when it has already invested heavily in its legacy programming. The transformation aims to link the many legacy systems with new digital tools and scale up the existing technology to improve the business.
- Facing digital change fears
The overload of tech-savvy solutions may intimidate employees. That's why it's important to invest time in training them to work with new technology. Their fears will disappear once workers see that advanced technology helps them do their jobs and become more efficient.
- 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 digital data store. 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 more accessible to identify and handle.
- Getting lost trying to keep up with all the current trends
The last but not least challenge is to avoid getting 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 for your transformation. To avoid getting stuck in the mish-mash of solutions trying to keep up with the ever-changing digital environment, you'll need to have a blueprint and always focus on the final goal.
Digital Transformation Framework: The Guidelines
Well-defined digital transformation strategies are essential for navigating the complexities. With no plan, a company is doomed to get trapped in the middle of digital metamorphosis, as it is only possible to adapt to new technology and trends appearing daily with a 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 one-size-fits-all framework businesses can apply to, as every company outlines a plan specific to its needs, requirements, and values.
As the digital changing process is not indivisible, there are four basic frameworks that you can customize for your company:
- Processes and Operations
Some companies want to boost customer experience, lower production costs, or increase quality. The objectives may be various, though the means to achieve them can be clearly defined. Incorporating new technology may significantly enhance a company's processes and operations.
For instance, Airbus uses display glasses to improve the quality of employees inspecting the planes. Domino's Pizza enables the order process from any device, thus overtaking Pizza Hut in sales.
While the goals are different—Airbus focuses on enhancing the quality and safety of its products, while Domino's aims to improve customer experience and increase sales—the means are the same: transforming old processes and operations with new tech solutions.
- Business Model Transformation
This area of transformation requires a fresh outlook on how value is delivered in the industry and within your company. Examples include Netflix reimagining its business model from an outdated DVD rental company to a leading media-services provider and production company.
Another example is Apple reinventing music delivery with iTunes.
As you've probably noticed, all the verbs have the prefix' re,' indicating that companies take their existing models andopen new opportunities for business growth by repeatedly launching fresh initiatives.
Changing how a company delivers value to users and customers requires strong leadership, active involvement, and well-thought-out strategic planning from the Strategy and Business departments. It also needs the courage to take risks on the path to something new.
- Domain Transformation
The allure of digital transformation is that with its endless opportunities, the sky is the limit. A business can successfully create a new source of revenue by venturing into an entirely new industry. Take Amazon, for example. They boldly entered a new market by launching Amazon Web Services (AWS), offering cloud computing services. This was remarkable, as IT giants like Microsoft and IBM predominantly owned the domain. However, the unique opportunities of tech solutions, their strong digital capabilities, and exceptionally brave thinking have enabled AWS now to contribute 60% of Amazon's annual profit.
It goes without saying that companies like Amazon are better able to leverage new technology and expand into new domains more quickly. Still, technologies like AI, ML, UX, IoT, and AR show that a business can unlock new growth cost-effectively and efficiently. Therefore, explore new domains and see whether your company can benefit from these unlocked opportunities for competitive advantage.
- Cultural and Organization Transformation
Many companies focus on cultural change by adopting digital values without making real changes to business culture. To transform, change your company culture, and embrace new skills and technologies.
You need solid and clear initiatives to update workflows and bring in new value by changing old habits. Teaching employees about decentralized decision-making is only worthwhile if they feel heard. Similarly, manual tasks should only be replaced if the new automated processes are actually better.
In short, cultural change alone won't drive business success. However, when combined with effective tech solutions, it can lead to continuous growth. So, when planning cultural changes, ensure they're part of a bigger digital transformation strategy.
Digital transformation has quickly gone from an unknown term to a buzzword. Technologies like Cloud Computing, IoT, Blockchain, AI, and AR are now part of everyday business language and operations. Yet, figuring out the right path for your business can still be confusing.
That's where we come in. Our IT consulting team can help you develop a clear strategy for digital transformation tailored to your business goals. We'll audit your current software, identify issues, and create a custom roadmap to help you fully take advantage of the latest technologies.
For over 17 years, we've been helping businesses stay ahead in the fast-paced digital world. From identifying and fixing pain points to designing and implementing new tech solutions, we're here to help you unlock future opportunities.
Future of Digital Transformation: What Is Next?
Each digital transformation initiative will need to adapt to emerging technologies, change management, and market demands. We already know the benefits of digital transformation and can only imagine how it will evolve as technologies continuously upgrade and acquire new features.
While digital transformation has predominantly affected the IT and financial sectors, its potential extends far beyond. It can revolutionize government operations, healthcare and insurance, banking, retail, hospitality, education, and many other industries. Companies should take a serious look at digital transformation and use it to stay competitive, retain clients, and boost revenue.
