An Introduction to the Latest Buzz Word: Digital Transformation
Many of you have probably noticed a new buzz word being thrown around the office lately; digital transformation. Digital transformation is not merely a trend, nor would we throw it into the bucket of “corporate buzzwords.” Digital transformation is a foundational change in how an organization delivers value to its customers. “It marks a radical rethinking of how an organization uses technology, people and processes to radically change business performance,” says George Westerman, principal research scientist with the MIT Sloan Initiative on the Digital Economy. “Digital transformation, which should be led by the CEO,” Westerman says, “requires cross-departmental collaboration in pairing business-focused philosophies with rapid application development models.” (CIO, What is Digital Transformation? A Necessary Disruption, December, 2018)
Another definition of digital transformation according to Techopedia; “Digital transformation is the changes associated with digital technology application and integration into all aspects of human life and society.” In simpler terms it is the move from the physical to digital. Think about how many things require you to use your phone or computer several times a day. Without technology most businesses could not operate properly. After the internet era, businesses had to shift their internal operations and keep up with the advancements in their respective industries. The whole “evolve or die” phrase really proved to be true at the time. However some companies didn’t entirely make the switch. Either it was too labor intensive, too expensive, too time consuming, or not a priority There are a ton of companies out there who still use paper files, or paper applications and house all this important data on paper in file folders in a filing cabinet. Digital transformation comes in many forms and can help almost every industry.
There are several types of digital transformations. Some examples below:
Artificial Intelligence (AI) / Machine Learning (ML)
Blockchain
Internet Of Things (IoT)
Cloud Platform
Conversational UIs
AI, Big Data & RPA
AgTech
AR/VR
Cyber Security
Content Management
ERP
Fintech
HR
Retail, Restaurant & Hospitality
Noting the list above, it’s clear that digital transformation applies to almost any industry these days, and if you are in business, it is more than likely digital transformation is something your organization should be looking into. Digital transformation is usually something companies either turn to for new business lines, increased revenue streams, a change in customer expectations, and more. Almost always the primary reason companies turn to digital transformation is not by choice, but by fear of being disrupted or already losing out in some form in their business. A great example is Amazon. They have far exceeded customer expectations across the retail industry when it comes to the expectations of delivery time and stock of items. Amazon digitally transformed their business model to exceed their customers needs, resulting in high ratings in customer satisfaction and increased revenue. Afraid of disruption, retailers such as Wal-Mart and Target began using algorithms to supplement their logistics and ensure that all items were quickly delivered from their local warehouses when their storefronts ran out.
The consumer goods/retail industry is definitely an ever evolving one due to its heavy dependence on customer expectations and satisfaction. This particular market is so heavily saturated that it only takes one company to make their process a bit more efficient to force others into digital transformation as well.
Another example of a digital transformation is Uber. Uber disrupted the transportation industry by providing ride-sharing and on-demand transportation services. Furthermore, they have even added scooters and bikes to the mix for the inner city/younger age demographics.
Where to begin digital transformation? The leadership team should evaluate one very imperative question; What business outcomes do we want to achieve for our customers? From here you work backwards and ask what business models you are going after. In addition to this, it also takes knowing the customer journey from start to finish to be able to pinpoint at which step digital transformation can help improve or solve an issue.
Exploring digital change is one thing but driving digital change and actually making it happen is an entirely different beast. C-suite leaders tackle many hurdles before they can have a digital transformation project up and running. One of them being cost. CIOs in almost every industry are currently under pressure to figure out the best cost-effective paths to digital transformation. This means they must either first fix their “financial house” and get it in order or get creative and come up with very strategic plans to shift money around to invest into digital transformations for their companies and show the value it would bring to the organization.
The trick here is for CIOs to figure out where the legacy investments are tied up and shift that money into innovation by showing the benefits and value it would provide to the company. They have to learn to control costs but also at the same time invest and learn to be strategic. There is a pain point here in this process which can be solved by… you guessed it… digital transformation. The major problem CIOs have had in the “cost” process has been trying to figure out where the money was being spent. A solution to this is technology business management tools, which helps CIOs identify contracts to phase out in favor of say cloud services or other forms of digital transformations.
There are some serious pitfalls when companies of any size try to take on digital transformations either to create new lines of business, improve existing processes or to simply be competitive in their respective market. But if leadership teams turn to prime seasoned consulting agencies, specializing in this space, they can avoid many pitfalls all together.
Some common issues are lack of communication or understanding between internal departments such as the CIO and the company’s IT team or a disconnect between customer success teams and the internal operations team. Or high expectations of C-suite leaders from their CIO and the digital transformation teams to complete the project and show results within a quick time frame, thus making the digital transformation not a part of the company's process or goal but rather an outside project.
All these issues are quite common in almost any organization, but to be able to know and understand the pitfalls of digital transformations before a company embarks on a project can help alleviate a lot of costs, cut the time in half, and receive results much faster. Luckily, consulting agencies are the knowledge glue that can come in and help avoid such issues when implementing digital transformations and take the majority of the process off of the company’s plate.
Almost 66% of CIOs are pursuing digital transformation to create new business lines for their companies resulting in increased revenue and approximately 85% are utilizing digital transformation to optimize their current business processes. This statistic proves that digital transformation is a growing disruption.
If you are interested in digital transformation and how our team can help you understand this growing trend and implement solutions, please reach out to Capital Innovators today.