Digital transformation is a hot topic for every business.
Regardless of the size, industry, or age of your organization, you need the right mindset, processes, and technology to thrive in the disruptive, digital age.
In the FAQ below, the Loomly Team answers all your burning questions on digital transformation.
Table of Contents
- What is digital transformation?
- What digital transformation is not?
- What does digital transformation really mean?
- Who coined the term digital transformation?
- What is a digital transformation strategy?
- Why does digital transformation matter?
- What are the top 3 benefits of digital transformation?
- How do you succeed in digital transformation?
- What are the 3 main components of digital transformation?
- What are the 4 pillars of digital transformation?
- What are the challenges of digital transformation?
- Which factors must be taken into account in order to implement a successful digital transformation?
- What is an example of digital transformation?
- Is automation part of digital transformation?
- Is RPA part of digital transformation?
- How do you make a digital transformation roadmap?
- How do you implement digital transformation?
- How long does digital transformation take?
- Who owns digital transformation?
- Why do companies fail in digital transformation?
- When did digital transformation start?
- How is digital transformation progress measured?
- What comes after digital transformation?
What is digital transformation?
Digital transformation not only concerns how an organization embraces technology but also how it deploys people and processes. It involves a rethinking from top to bottom, that strives to deliver better products and services to satisfy customer expectations.
According to Salesforce:
“Digital transformation is the process of using digital technologies ((such as digital infrastructure, big data, artificial intelligence, mobile technologies, Internet of Things, cloud-based services, robotics, and augmented reality) to create new — or modify existing — business processes, culture, and customer experiences to meet changing business and market requirements.”
What digital transformation is not?
Digital transformation is not just a case of using digital technology, and often gets confused with similar-sounding terms:
Digitization is the process of converting information from analog to digital.
For example, before computers existed, accountants entered handwritten records in paper ledgers and journals. But even after converting to computerized accounting systems, businesses worked in the same way, so there was no change in the business process.
Digitalization is the process of using digital data to simplify how you work.
For example, accountants can use digitized data to quickly retrieve information on a customer’s credit history rather than having to sift through dusty archives in the basement. But notice how there’s still no change in the business process, just a quicker, more efficient way to carry out the same tasks as before.
Digital transformation changes the way business gets done.
For example, accountants might examine how they work to see how they can improve existing processes to serve their customers better.
As a result, they might decide to introduce a new process to proactively inform customers of outstanding invoices rather than jeopardizing cashflow for the business.
What does digital transformation really mean?
Digital transformation is the application of digital technologies to impact all aspects of business and society fundamentally.
Digital transformation is the process of fundamentally changing the systems, processes, people, and technology across a whole business or business unit to achieve measurable improvements in efficiency, effectiveness, and stakeholder satisfaction.
Who coined the term digital transformation?
The consulting firm Capgemini, in collaboration with the MIT Center for Digital Business, coined the term “digital transformation” in late 2011. Researchers from these organizations defined the phrase as “the use of technology to radically improve performance or the reach of businesses.”
What is a digital transformation strategy?
A digital transformation strategy is a plan of action describing how a business must strategically reposition itself in the digital economy. It evaluates the current situation and maps the transformational journey to achieve business goals. As customer habits change, so must the way successful businesses operate. They innovate, change operating and business models, and leverage emerging technology.
Why does digital transformation matter?
Most businesses have to embrace digital transformation to survive, particularly when agile startups disrupt the market.
In the wake of the COVID-19 pandemic, an organization’s ability to adapt quickly to rapidly changing customer expectations has become critical.
Digital transformation should improve revenue and profits. According to research from Gartner, 56% of CEOs surveyed said that digital transformation has already led to increases in revenue.
What are the top 3 benefits of digital transformation?
- Higher employee efficiency
Digital transformation makes processes and workflows faster, easier, and more efficient. For example, digitizing paperwork management to move documents to the right location automatically allows employees to focus on other, more revenue-generating activities.
- Better user experience
Digital transformation enables companies to eliminate more points of friction in the customer journey. For example, digitizing the onboarding process so that new customers can experience all the benefits of your product or service without a customer success representative creates a smoother user experience.
- Increased business revenue
With the higher employee efficiency and better customer experience mentioned above, digital transformation inevitably leads to improvements on the bottom line. According to research from Gartner, 56% of CEOs surveyed said that digital transformation has already led to increases in revenue.
How do you succeed in digital transformation?
To succeed in digital transformation, you’ll need to show strong leadership and adopt new ways of thinking. Brands who quickly understand new models and become digitally mature will have an advantage over their competitors.
What are the 3 main components of digital transformation?
According to K. R. Sanjiv, the Chief Technology Officer for Wipro’s Global IT Business, the three main components of digital transformation are:
- Customer experience
- Operational processes
- Business models
Each of these three core areas has three different elements that keep changing. These nine elements form a set of building blocks for digital transformation.
- Transforming Customer Experience
- Customer understanding
- Top-line growth
- Customer touchpoints
- Transforming Operational Processes
- Process digitization
- Worker enablement
- Performance management
- Transforming Business Models
- Digital modifications to the business
- The creation of new digital businesses
- Digital globalization
What are the 4 pillars of digital transformation?
- Empower your employees
- Optimize your operations
Reshape customer relationships and service models by gathering data and insights to introduce improvements on a continuous, real-time basis.
- Transform your products and services
Adapt products, services, and business models using digital technology and content to capitalize on emerging revenue opportunities.
- Engage your customers
Track, measure, and report on every single customer activity and action so you can provide a more personalized and profitable customer experience.
The four-pillar approach is proven to support small, medium, and large organizations in their digital transformation.
What are the challenges of digital transformation?
Here are three slightly differing views on the challenges of digital transformation:
According to a survey of 300 technology and business stakeholders by Jabil, the top five challenges of digital transformation are:
- Employee pushback
- Lack of expertise to lead digitization initiatives
- Organizational structure
- Lack of overall digitization strategy
- Limited budget
According to Freshdesk, the top five challenges of digital transformation are:
- The changing customer experience
- Employee pushback
- Omnichannel adaptation
- Failing or poor analytics
- Lagging, legacy business models
According to CIO, the top five challenges that large enterprises, founded before the digital age, often face when taking on transformation projects are:
- Organizational resistance to change
- Lack of a clear vision for a digital customer journey
- Ineffective gathering and leveraging of customer data
- Inflexible technology stack and development processes
- Married to a legacy business model
Which factors must be taken into account in order to implement a successful digital transformation?
According to research by McKinsey, the key factors that are likely to improve the chances of a successful digital transformation are:
- Having the right, digital-savvy leaders in place
- Building capabilities for the workforce of the future
- Empowering people to work in new ways
- Giving day-to-day tools a digital upgrade
- Communicating frequently via traditional and digital methods
Their survey showed that when the key factors are in place, organizations are up to 3 times more likely to report successful digital transformations:
What is an example of digital transformation?
A good example of digital transformation is how Nike changed its mindset to reinvent its brand and supply chain.
Nike improved its connection with customers through membership opportunities, more substantial digital marketing, and robust data analytics. Plus, it also opened concept stores and improved its online and app experience.
Nike’s digital transformation is ongoing as it looks for new ways to connect with customers and get ahead of the competition. Its stock price increased from $52 in 2017 to nearly $88 in 2019. At the same time, revenue increased from $33.5 billion to $39.1 billion.
Is automation part of digital transformation?
Process automation is a vital part of digital transformation. Automating day-to-day workflows lies at the heart of successful digital transformation. Without workflow automation, you’re still dealing with manual processes, in which case the threat of being disrupted and becoming irrelevant is a real one.
Here are a few key processes you could automate as part of your digital transformation:
- Onboarding (employees and customers)
- Finance processes
- Human resources
- Approval workflows
Is RPA part of digital transformation?
Robotic Process Automation (RPA) software replicates how a human would interact with an application or system and then automates that task. For many organizations, implementing RPA is one of the first (and most straightforward) approaches to automation in their digital transformation journeys.
How do you make a digital transformation roadmap?
A digital transformation strategy roadmap is designed to answer six broad questions:
- Why do you need a digital transformation?
- What must you achieve to transform?
- What do you need to transform?
- What changes are required to transform?
- What packages of change should you use to execute the transformation?
- How do you sequence the packages of change over a transformation time horizon?
Here’s a preview of a digital transformation strategic roadmap for a toy manufacturing company:
How do you implement digital transformation?
Digital transformation will look different for every company, but some fundamental principles can be applied to each organization:
- Acknowledging change is required.
- Improving customer and employee experience.
- Empowering people to work differently.
- Embracing innovation through new methods and tools.
- Leading from the top.
- Modernizing company culture.
How long does digital transformation take?
Digital transformation is an on-going process with each project or phase lasting up to five years, depending on the size of the organization and the change.
In his digital marketing trends article, Ashley Friedlein says:
“Digital transformation does not happen quickly. Some companies seem to expect it to happen over the course of a year. In my experience, particularly for larger organizations, closer to five years is more realistic. Even then, the task is never over.”
McKinsey’s roadmap for digital transformation in financial services is also a five-year plan:
“Our experience suggests that in IT alone, companies with outdated systems might need to double their current spending over a five-year period.”
Who owns digital transformation?
The fifth annual “State of Digital Transformation” report reveals the following C-level execs own digital transformation:
- CIO (28%)
- CEO (23%)
- Board (14%)
- CDO (11%)
- Chief Innovation Officer (11%)
- CMO (5%)
- CXO (5%)
Why do companies fail in digital transformation?
Fatigue from continuous change is the top reason why more than 70% of digital transformations fail.
Some of the other reasons companies fail in digital transformation are:
- CEOs are often to blame when for failing to define a clear transformation strategy.
- 39% of companies say that the complexity of the current environment and their siloed organizational structure is not aligned to support transformation.
- 32% of companies confirmed too many competing tech priorities, and conflicts of interest act as a hurdle to digital transformation.
- Applying tools and technologies that don’t satisfy customer demands or enable the latest digital business models adds little value.
- The pace and scale of digital acceleration make it difficult for some companies to close the gap on rivals.
- 90% of organizations believe they need new types of talent, and 37% believe that extensive talent structure changes are required for their digital transformation efforts to become successful.
When did digital transformation start?
Digital transformation started around 2011 when the term was first coined by the consulting firm Capgemini, in collaboration with the MIT Center for Digital Business.
Previously, companies had focused on digitizing their old manual and analog systems. But digital transformation took things a stage further as organizations took a holistic approach to transform processes and operations with the latest technology.
By 2014, the digital transformation projects started to show signs of success.
For more info, check out: A brief history of digital transformation infographic
How is digital transformation progress measured?
“Stop looking for a list of digital KPIs everyone else is using because done properly, someone else’s list won’t apply to your transformation. KPIs need to be industry-specific and then organization-specific to be meaningful and useful.”
To create a digital KPI, ask these five key questions:
- What is being measured? For example, the percentage of customer interactions that are virtual/digital.
- Where are we today?
- What is our target goal?
- What is our desired business outcome/benefit? For example, 50% better customer outcomes and 20% lower cost.
- What is our balance point?
What comes after digital transformation?
Experts have always maintained that digital transformation is a continuous process, and therefore it will never end. By the time you complete one transformation project, you will need to address another set of business processes.
It’s impossible for businesses to ‘complete’ transformation or ‘declare’ that digital transformation is done.
In 2018, Gartner proposed a new concept: From Digital Transformation to Continuous Next.
According to Gartner, the formula to achieve success in a continually changing environment (through and beyond digital transformation) is to implement a ContinuousNEXT approach.
CIOs can prepare their organizations by focusing on five imperatives:
- Augmented intelligence, the next step beyond Artificial Intelligence, where humans and machines work side-by-side.
- Privacy and trust, which have become a new source of power.
- Changing Culture in small but powerful ways using what we call Culture Hacks.
- Adopting Digital Product Management as a discipline to help you serve customers better and shift mindsets from projects to products.
- Last an exciting new type of digital twin that goes beyond physical equipment to what we call the Digital Twin of an Organization.
Digital transformation in a nutshell
Digital transformation not only concerns how an organization embraces the latest technology but also requires a change and investment in people, structure, processes, and culture. It’s a company-wide shift in mindset.
Organizations run successful digital transformations to improve their customer experience and future-proof their business.