Defining Digital Transformation: The Strategy of Change
It is harder than ever to separate the wheat from the chaff when it comes to digital transformation (DT or DX). A simple Google search of the term reveals millions of results of varying levels of quality. The amount of information out there is significant, but only a small portion of that is valuable. It … Continued
It is harder than ever to separate the wheat from the chaff when it comes to digital transformation (DT or DX). A simple Google search of the term reveals millions of results of varying levels of quality. The amount of information out there is significant, but only a small portion of that is valuable. It is no surprise to see given that digital transformation is so complex and multifaceted.
Ultimately, DT will affect every business sooner or later. The question is how you will address digital transformation at your business, and who will be first, you or your competitor. To help you better understand DT, we have taken our experience as well as some in-depth industry research and combined it into a detailed review of the topic. So let’s dive in!
What is Digital Transformation About?
The Difference Between Digital Transformation and Digitalization
Most associate digital transformation with the process of implementing digital technologies into business processes. Right? Not exactly. It’s much broader than that. First, let’s take a look at the differences between digitization, digitalization and digital transformation.
The process of digitization is all about converting information from the analog form to digital. For those of us old enough to remember, business was conducted with typewriters and multi-part forms, finally evolving to word processing and Microsoft Word. Now, important documents could be scanned and saved on a hard drive, but the process of printing and signing a physical document still exists.
Generally, digitization offers direct cost savings in the short term. In our example above, you no longer waste paper and space on physical document storage, you store it on a hard drive. Without digitization, business growth becomes difficult and costly, requiring resources or infrastructure. It is, however, the foundation for any digital changes.
Digitalization refers to changes in business processes tied to technology advancements. The business starts to apply digital technologies to change, streamline a workflow. For example, sharing a Microsoft Word document with your colleague using OneDrive, editing the document together, and sending it to the boss by email is a simple digitalization example.
While it seems easy, It can be challenging to implement digitalization. Implementation requires a certain level of digital competency as well as flexibility in business structure. The benefits are tangible. Increasing the level of automation can help to cut costs, skyrocket efficiency and impact overall productivity.
While it is relevantly easy to go from digitization to digitalization, the journey to digital transformation is far more complex. Why? Because it requires cultural change.
How to understand Digital Transformation?
Digital Transformation is the process of connected changes in a business as could be illustrated by the upscaling of skills of a propeller plane pilot to fly a jet plane.
Let’s assume that your business is a propeller plane and you are a pilot of this aircraft. If you want to fly higher (grow faster) and reach new territory (expand), it is not enough to add another tool in the cabin of a propeller plane.
You can add a GPS, or more advanced electronics to a propeller plane (Digitizing), or some additional systems to maybe make it more efficient (e.g. Digitalizing), but the plane won’t go faster or higher. To achieve the next level, your business should become a jet plane (Digital transformation).
But the reactive plane has totally different technologies (tools, systems), different processes, and different individuals who are responsible for them. Management (pilot) of such a plane must act differently than if flying a propeller plane. Digital transformation starts with a commitment to change by Management.
The Real Nature of DT
The competitive nature of business requires companies that want to succeed and thrive to implement innovations. The right innovations can attract customers to a company and create a competitive advantage.
Unfortunately, businesses quickly evolve and innovations lose their competitive edge as other companies copy it. Only a company with a culture of innovation can continuously improve, inventing and implementing new innovations.
Innovation and transformation must become a part of the corporate vision and strategy. From the C-suite down, the organization should promote and encourage an innovative spirit and empower individuals and departments to constantly evaluate every aspect of the business. Ultimately, technology and communications work together as the means by which digital transformation strategy is executed.
The Definition of Digital Transformation
Digitalization is a key component of DT, but not all of it. DT is about developing strategies that create a sustainable competitive advantage; it is about creating a culture of innovation. The Enterprisers Project made it clear:
Digital transformation is the integration of digital technology into all areas of a business, fundamentally changing how you operate and deliver value to customers. It’s also a cultural change that requires organizations to continually challenge the status quo, experiment, and get comfortable with failure.
Why Should You Care about DT?
Let’s be honest, there is no way to escape the digital world. We used to think that technologies develop quickly, but not at a rate that would impact you. COVID 19 and the subsequent shift to remote, online work impacted users’ interaction with the digital world. Now, to simply keep pace, your business must adapt and transform or it could be gone forever. Digitalization is just a starting point.
Unfortunately, digitalization can not help you find new ways to deliver value, change customer experiences or switch business models. Digitalization, as we discussed above, only impacts routine processes.
The long-term strategy should include adaptability and scalability. That where DT comes in. It changes the strategy across every aspect of the business and helps to stay relevant over the long-term.
You cannot influence digital technologies, and, no matter your opinion, DT is happening. The question is will you proactively implement it as a strategy or reactively as a rescue necessity when the time comes?
The Approach to Digital Transformation
It is difficult to define a one-size-fits-all approach to digital transformation that fits every business. As an example, let’s review the framework given by David Rogers, author of “Digital Transformation Playbook”. He suggests rethinking assumptions across 5 broad domains of business:
Customers. It is important to understand that today’s competition is so fierce that mass-marketing approaches no longer work. Think deeply about customer pain points and behavior. Look to innovate your approach to sales and marketing with an eye towards personalization.
Value. Value is a dynamic variable. Continuous adaptation of it based on the needs of the market is a necessity.
Competition. Competition today could look differently tomorrow. To win, rethink your business model. Try to look beyond your current state and find ways for your business to become a platform that solves the same problem but either more efficiently or for a broader audience.
Innovation. As we defined earlier, digital transformation is not possible without a culture of innovation. It is important to rethink your approach to the process of innovation. Use the power of technology to experiment and analyze. That will help you to create a continuous process of improvement.
Data. Data is a source of value creation. By using and growing this powerful strategic asset your business will be able to uncover and create future opportunities.
The Current State of DT
The complexity of digital transformation makes it difficult to rely on any statistics. But it is important to identify 2 main points:
First, In 2018 Tech Pro research showed that 70% of companies either have a digital transformation strategy or planning to create one. In the same year, IDG reported that 89% of organizations have plans to adopt a digital-first business strategy. However, only 44% have fully adopted this approach.
Most of your competitors are aware of DT and attempting to implement it. While you may not be the first driving a digital transformation, be the first who will do it right.
Second, in 2017 McKinsey shared an interesting finding. The success of digital transformation attempts is around 30%. In most cases, the transformation fails due to resistance from employees. Staff is not ready for innovation, or management cannot create a culture of innovation in a company.
Change is difficult, and there will be employees who resist digital transformation. You should be prepared for it and develop strategies specific to handle objections.
To Sum Things Up
Digital Transformation is an ongoing process. Your business will never stop innovating. The idea of digital transformation is to always stay relevant even in the face of changing markets, economics and customer behavior. It is about flexibility, adaptability and scalability. Don’t be afraid to transform your business, start today by contacting Maven Ecommerce. We know how to help you successfully navigate digital transformation.