Digital Transformation for the Modern Enterprise: An Introduction

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What is Digital Transformation?

Digital transformation describes a process wherein organisations digitise their operations to increase the value they deliver. While business value can be difficult to define, these organisations seek to become more efficient, agile, and customer-centric through digital transformation.

In the past few years, with governments and regulators putting forth new imperatives, digital transformation has emerged as essential for many organisations. It begins with implementing technology that enhances business operations and ends with business models that uncover additional revenue streams, all while improving the customer experience. In a nutshell, it’s transforming how organisations create and deliver value.

Furthermore, companies that undergo a successful business transformation are integrating technology into every aspect of their organisation while also ensuring their culture aligns with these new ways of working.

The importance of digital transformation

It’s a fact that organisations are seeking to increase their value through digital innovation. It’s therefore not surprising that Polaris Research forecasts an annual growth of 23.6% till the year 2030 in the global digital transformation market, valuing it at $3.8 trillion by the end of the decade.

This i because integrating digital technologies with business strategy helps organisations:

Gain a better understanding of customer needs.

Improve responsiveness.

Reduce time-to-market.

Improve employee engagement.

Provide a more engaging customer experience.

Blockbuster is a notable example of a company that failed to grasp digital transformation. Faced with competition from digital streaming services like Netflix, it went from owning over 9,000 stores worldwide (at its peak in the mid 2000s) to bankruptcy six years later.

What are digital transformation drivers?

Rapid advances in digital technologies are driving transformation across society. The move to cloud computing, the adoption of social media and mobile, and the emergence of artificial intelligence (and other technologies) have given organisations unprecedented access to data. They can collect and analyse this data to deliver better products and services.

Digital leaders such as Amazon and Uber have raised the bar for consumer expectations. They have now come to expect intuitive, easy-to-use services that serve their requirements 24/7. Whether it’s banking, shopping, healthcare, or something else, digital technology has revolutionised consumer culture.

Consumers also expect the same level of service from their employers. Consequently, businesses have been automating their operations, enabling collaboration, flexibility, and scalability.

How Technology Drives Business Growth

Investing in the right technology helps businesses increase efficiency, saving them time and money. For instance, analytics and big data are enabling faster decision making, automation is reducing manual labour, and cloud is enabling scalability.

Elsewhere, digital marketing — such as content and social media marketing — is helping businesses reach new customers and create a positive experience. Thus, by investing in digital technologies, businesses are maximising the benefits of business transformation.

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Key digital transformation technologies

No single technology drives digital transformation. The following have been deployed in successful transformation initiatives:

Cloud technology: The move to the cloud has given organisations access to scalable applications and platforms that support their business objectives.

Big data and artificial Intelligence: With the move to the cloud, the volume of data generated has exploded. AI and machine learning algorithms are providing organisations with powerful tools for faster decision making.

Automation: Scripts such as chatbots are automating many of the repetitive tasks once handled by humans.

Mobile: On-demand connectivity is empowering employees to do their jobs from whichever location or device they choose.

Emerging Technologies: New technologies are developed almost daily. Blockchain, virtual reality (VR), and the internet of things (IoT), for instance, are promising to deliver greater efficiencies to businesses and consumers.

Examples of digital transformation initiatives include:

Deploying big data analytics to optimise business processes.

Migrating on-premises data centres to the cloud.

Deploying robotic process automation to automate tasks.

Deploying blockchain, internet of things, and other technologies.

Transitioning from brick-and-mortar to online.

Switching from traditional advertising to digital marketing.

Transitioning to a remote workforce.

Deploying virtual reality/augmented reality to improve the in-store experience.

Benefits of Digital Transformation

In an increasingly digitised society, digital transformation helps businesses remain competitive and relevant. Some of the benefits of digital transformation include:

Increased customer engagement: Improving the customer experience is one of the best ways to leverage technology for business growth. Digital technologies are helping businesses create a unified experience for customers across platforms, enabling them to interact with the business seamlessly and easily. As a result, customer loyalty has increased, customer satisfaction has improved, making customer experience a key driver for business growth.

Decreased operational costs: Through digital technologies, businesses automate many manual processes. This has led to significant cost savings and improved job satisfaction.

Increased scalability and flexibility: Businesses can scale quickly and flexibly and adapt to fluctuating demands. Thus, through digital transformation, they remain one step ahead of their competition.

Enhanced decision making: As digital technologies collect vast amounts of data, businesses are able to make informed decisions and stay ahead of the curve.

Challenges of Digital Transformation

Digital transformation can be overwhelming: from sourcing the right technology, to overcoming apathy, to measuring success, it's a major commitment that requires careful planning and execution.

In fact, research suggests that 78% of digital transformation projects don’t succeed: the intricacies of data privacy laws, lack of qualified resources, and difficulty in extracting value from data are some of the top reasons given for these failures.

Following are some common reasons for the failure of digital transformation projects:

Lack of business strategy — Given the complexities involved, a coherent plan of action is crucial. A coherent strategy avoids wasted effort and builds confidence‌.

Lack of budget — Insufficient funding often follows from an inadequate strategy. Without a clear plan of action, it's difficult to justify funding.

Lack of adoption — Besides the natural resistance to change, employees may not have sufficient confidence or training to use new technologies.

Legacy systems — Organisations may still have to maintain their legacy systems.

Other reasons for the failure of digital transformation projects include a lack of collaboration between departments, limited in-house expertise, concerns about data security, and regulatory constraints.

The role of culture in digital transformation

It's worth remembering that organisational culture occupies a central role in business transformation. It's therefore incumbent on business leaders to foster a culture of innovation, empowering everyone to embrace more flexible and agile ways of working.

In fact, McKinsey reports a variance of 30% in performance among companies directly related to their ability to embrace digital objectives.

While technology is obviously important to digital transformation, change management is a people issue. Failure to invest in digital skills results in expensive technologies which employees are unwilling or unable to use.

How to Build a Digital Transformation Strategy

If you want to successfully implement a digital transformation strategy for your organisation, you must create a strategic plan with a clear vision and goals. This will help to guide your transformation and ensure its success.

Digital Transformation Strategy | Source: PTC.com — *Digital Transformation Strategy | Source:* *PTC.com*

Leveraging a digital transformation framework

Although you can choose to forge your own path, there's no need to reinvent the wheel. Given that many companies have undergone successful transformations, a digital transformation framework will shorten your learning curve, helping you avoid many of the common pitfalls.

Focusing on leadership, agility, customer experience, and technology integration, transformation frameworks include:

Gartner’s Roadmap for Digital Business Transformation

Boston Consulting Group’s Six Factors of Digital Transformation

PwC’s Five Step Transformation Programme

Ionology’s Digital Transformation Framework

Building your transformation roadmap

A digital transformation roadmap sets out how technology will ‌support your organisation in reaching its goals. Once you've settled on a transformation framework, here are some steps to help you execute:

Identify your strengths — Evaluate your current situation. Identify your strengths and weaknesses. Your digital transformation journey is as much about what you’re doing right as it’s about what you can improve.

Identify your customers — Do you understand who your customers are? Do you understand their pain points and how they perceive your brand? Although your digital transformation project is about improving the customer experience, it's rarely about abandoning your identity.

Identify your business goals — Understand where you wish your organisation to be in a few months or years. This will help you outline key performance indicators (KPIs) to track your progress along your digital transformation journey.

Invest in the right technology — Digital technologies are constantly evolving, so you should invest in technologies that best support your business goals. These include cloud computing, mobile apps, artificial intelligence, and blockchain.

Develop an agile framework — Create a framework that helps you prioritise your projects based on business needs and objectives. This will ensure your organisation focuses on the most important initiatives and makes the most of the resources available.

Measure progress and adjust accordingly — It’s vital to track your digital transformation progress and adjust your approach. This includes measuring revenues and costs against targets. Regularly assess risks like disruption from new technologies, regulatory changes, or changes within your industry. Make small adjustments rather than big changes: not only will it be easier to backtrack if a change doesn’t work, but it'll be easier to identify what’s worked and repeat it.

Establish a digital culture — You may encounter some resistance to change but, if your digital transformation initiative is to succeed, everyone needs to be on board. Make sure you communicate the benefits of your initiative and implement a system for collecting feedback.

Key digital transformation roles

Assembling the right team is essential to the success of your digital transformation project. In a McKinsey survey, 70% of respondents reported ‌their teams changed for the better when digitally savvy leaders joined them.

C-level executives such as the chief information officer (CIO), chief technology officer (CTO), chief digital officer (CDO), and chief transformation officer have a primary role in driving digital transformation.

Furthermore, the IT department fulfills a key role in selecting and implementing new technologies. Their competencies include:

Data architects who understand how to structure data for artificial intelligence and machine learning applications.

Cloud architects who build secure and resilient networks.

Scrum masters and software engineers who deploy agile development methodologies to speed up product development.

Digital product managers.

Systems integrators.

Other key competencies outside the IT department include:

Project managers who keep projects running smoothly.

Technology liaisons who understand the business context behind technologies.

User experience (UX) engineers.

Change managers.

Communication managers.

How to Measure Digital Transformation ROI

Measuring digital transformation ROI is tricky. Because digital transformation projects cross functional boundaries, traditional business value calculations become less effective. Also, technology outcomes need to be tied to business outcomes.

It's therefore tempting to be guided by short-term, project-based thinking. However, short-term failures or successes may not always indicate the outcome of your overall initiative.

In fact, short-term failures may enhance the overall objective — i.e. learning from as many early failures as possible — and build the tolerance for risk required for a successful digital transformation.

Best practices for measuring digital transformation ROI include:

Outlining short and long-term business goals.

Setting mini goals for agile experimentation.

Identifying strategic key performance indicators (KPIs) such as lifetime customer value, revenue growth, and time-to-market.

Identifying operational metrics such as productivity improvements.

Depending on the circumstances of each organisation, many factors are used to calculate digital transformation ROI. The important thing is to track costs, time frames, and baseline figures that demonstrate long-term success. It's also important to look for ways to improve outcomes with each new initiative.

Examples of successful companies that have adopted digital transformation strategies

Technologies like cloud computing, mobile, analytics, machine learning, and artificial intelligence have helped companies automate businesses processes, run more efficiently, and grow more quickly.

Amazon

Amazon is well recognised for its end-to-end personalisation and recommendation engine that delivers high-quality customer experiences across every digital channel.

As a pioneer in the use of artificial intelligence and automation in e-commerce, the company has sought to keep up with new trends in technology; its revolutionary machine learning platform is able to individualise search results and recommendations by leveraging extensive customer data. The platform can also run personalised marketing campaigns based on this data.

Other applications of artificial intelligence which Amazon has implemented include:

Alexa, the voice-enabled AI assistant that has revolutionised the lives of millions of disabled users and others.

Amazon Go retail stores which deliver a completely automated in-store shopping experience.

Optimised supply chain and delivery for warehouses.

Apple

Like Amazon, Apple has been a digital transformation front-runner, with cloud computing, mobile technologies and artificial intelligence all playing key roles in its success.

iCloud allows users to store photos, videos, music, and other files on remote servers so they can be accessed from any of their devices. This service helps keep customer data safe while making it available whenever needed.

Additionally, Apple uses machine learning algorithms for features like face recognition on iPhone X and Animoji. These technologies not only deliver great customer experiences but also help the company gather valuable customer data that can be used to target new markets, develop new products, and improve customer service.

Walmart

Walmart has been on a mission to develop a best-in-class supply chain network. With so many technologies to choose from, the company decided to focus on three main issues:

Improve loading accuracy using internet of things sensors and machine vision cameras.

Real-time tracking of deliveries.

Improve traceability with blockchain technology.

These are just a few examples of successful companies that have adopted digital transformation strategies to enrich customer experiences, enhance customer service, and optimise business operations.

Key Takeaway

Far from being a one-time process, digital transformation is a journey. As a continuous process of adaptation, it forces organisations to become flexible and agile. It's essential your organisation embraces digital transformation to maintain a competitive advantage. Digital transformation enables you to prioritise customer needs while driving business growth and enhancing profitability.

Frequently Asked Questions

What are the key components of a successful digital transformation strategy?

A comprehensive digital transformation strategy includes key areas such as business model innovation, digital analytics, customer experience management, process automation and optimisation, cloud computing, digital supply chain management, digital workforce management, and more. By taking a holistic approach to your digital transformation strategy, you ensure that you’re well prepared to face the challenges of an ever changing digital landscape.

What challenges can businesses face when undergoing digital transformation?

Businesses can face a range of challenges when undergoing a digital transformation, including:

Cost and complexity: Digital transformation is a large undertaking and it can become expensive. It also involves a lot of complex technologies and processes that can be difficult to navigate.

Resources: Companies may find it hard to secure the resources required, such as expertise, funding and personnel.

Employee engagement: Companies need to ensure their employees are engaged with digital transformation projects and are willing to embrace new technologies and processes. Lack of employee engagement can create further challenges for businesses.

Keeping up with technology: Businesses must constantly stay abreast of the latest technologies in order to keep up with digital transformation trends. Otherwise, they run the risk of being left behind in this rapidly shifting digital landscape.

What strategies can be used to ensure an effective digital transformation?

Digital transformation involves the process of integrating digital technologies into business operations and customer experience models to achieve growth, efficiency, and profitability. To ensure a successful digital transformation, organisations should consider the following strategies:

Develop a clear and concise digital transformation strategy: It's important to develop a well-defined digital transformation strategy that outlines desired steps and outcomes. This strategy should be created with input from stakeholders across the organisation and effectively communicated to all employees.

Invest in the right technology, systems, and processes: Organisations should invest in technologies that enable digital transformation initiatives. They should also ensure existing systems are updated to support new digital strategies. Additionally, investing in customer experience management technologies or process automation can help maximise efficiency while fulfiling customer needs.

Ensure data security and compliance: It's essential to secure customer data and comply with relevant privacy regulations when embarking on a digital transformation journey. Organisations must ensure that data is properly encrypted and secured from threats like cyber-attacks or unauthorised access.

Use analytics: Analytics provide insights into how digital transformation initiatives are performing by allowing organisations to measure user engagement, cost savings, process optimisation, customer satisfaction, and more.

Establish governance and change management processes: As digital transformations can require changes to business processes, it's important to have comprehensive governance and change management processes in place. These procedures should be designed to manage the risks associated with digital transformation while ensuring successful adoption of new technologies or ways of working.

How can technology help businesses improve customer experience and engagement?

Technology is a powerful tool that businesses can use to improve their customer experience and engagement. It helps them gain better insights into customer needs and preferences, which in turn allows them to create more personalised customer experiences.

For example, automation technologies can streamline customer service processes, making it easier for customers to get the help they need quickly and conveniently. Automated customer service technologies can also ensure that customers are only being supplied with information and products that are relevant to them.

Analytics and data insights are also crucial for improving customer experience and engagement. By using data-driven intelligence, businesses can optimise the products and services they offer to customers so that they're tailored to meet customer preferences in terms of pricing, quality, etc.

Finally, technology can be used to measure customer satisfaction and engagement levels. This can be done by collecting customer feedback through surveys and social media channels, or by tracking customer behaviour when they interact with a business' digital platforms. These metrics can provide valuable insights into customer preferences, allowing businesses to make adjustments as needed in order to maximise customer experience and engagement.