What is Digital Transformation? A Guide for Businesses
Across industries, the Covid-19 pandemic forced many companies to accelerate their digital transformations to compete and even survive.
As the world and its consumers become more digital, a company’s success is contingent on how digital it can become. This applies to both B2C and B2B sectors as consumer behaviors, knowledge consumption and processes have now changed.
In 2022, spending on digital transformation technologies and services is projected to reach $1.8 trillion and increase to $2.8 trillion by 2025 according to Statista. That growth demonstrates how much companies are planning to invest to compete.
So, how can your business drive its transformation to be where your customers are? And what strategies are different industries using to ensure their long-term survival in a digital world?
In this blog, we’ll dive into the ins and outs of digital transformation by exploring:
- Digital transformation definition
- Steps to digital transformation
- Examples of digital transformation
- Benefits of digital transformation
- Digital transformation trends
- Digital transformation mistakes
Digital transformation definition
So what is digital transformation? If you type that question into Google, you’ll get billions of results. There may be a misconception that digital transformation is just about technology, but that’s not the case.
Digital transformation is a foundational change in how an organization operates, communicates, and engages with customers. It’s a disruption to the ‘traditional’ way of operating to become more digital. It’s also about cultivating a digital culture and upskilling the people in your company as it takes a team to work through a transformation.
As Brian Corish, Managing Director of Accenture Interactive simply puts it: “Digital transformation is reinventing the business model. It’s reinventing processes”
What’s the difference between digitization, digitalization, and digital transformation?
There are a lot of terms when it comes to businesses and digital, so it’s easy to confuse them. The most commonly used ones are digitization, digitalization, and digital transformation. Let’s look at each of them to see the difference.
- Digitize or digitization is the process of making something digital or creating it in a digital form. For example, if you create an online version of a printed newsletter or magazine, or use an electronic signature for signing documents online.
- Digitalization is about using digital technologies to change your business model or provide a new stream of revenue. It’s about using online technologies and channels to become a digital business. An example is using cloud computing to store data or automation to streamline workflows.
- Digital transformation is a process of reinvention. It looks at leveraging digital technologies and processes to build new systems, cultivate a digital mindset and exploit new opportunities.
Types of digital transformation
Many organizations focus on organizational transformation, but there are four types of digital transformation that you need to consider to realize its full value. These include:
- Process Transformation - This focuses on your processes such as data, analytics, AI, and any process that can work towards lowering costs and driving operational efficiency in the business. Healthcare retail giant Walgreens is a good example of this in how it relaunched its MyWalgreens app to centralize its digital assets and provide a better customer experience.
- Business Model Transformation - This is about making fundamental changes in how a business or organization runs which can include personnel, processes, and technology. For example, think about the powerhouse that is Netflix and how it revolutionized the video distribution industry by turning the model completely on its head.
- Domain Transformation - This area offers a great opportunity to move into a new domain or area that a business may not have explored before by acquiring new technologies. Think about Google and its many business offshoots such as Google Nest, an Internet of Things (IoT) product that provides thermostats and smoke detectors in the home.
- Cultural/Organizational Transformation - This is about redefining mindsets, processes, capabilities and skills for a digital world. It’s about driving digital transformation forward through growth initiatives that are grounded in a new culture and way of thinking. Pitney Bowes is a great example here as it pivoted from a mailing solutions company to a shipping and ecommerce technology company that transformed into a digital business.
