Digital transformation has proven to be an effective tool for dealing with the everchanging market conditions. Organizations have used it to transcend in their field including sales, marketing, accounts, and customer service.
But sadly, digital transformation is another one of the buzzwords like AI or Big Data that you can hear almost in every business conference. Small business owners usually set up the processes first, transform them later as and when needed. While there is nothing wrong with this approach, it’s always a better idea to future-proof the processes, so that the transformation becomes smother.
We will try to demystify this topic and look at some of the use cases of it in this article. We will see what Digital Transformation exactly is, what are the essential components of it, and why it becomes necessary for most organizations to go through it.
TABLE OF CONTENT
- SUMMARY
- WHAT IS DIGITAL TRANSFORMATION?
- COMPONENTS OF DIGITAL TRANSFORMATION
- WHY IS IT NEEDED?
- CLASSIFICATION
- EXAMPLES
- CAUTION
Summary
Long story short, digital transformation is the use of the latest technologies to improve the performance of a business. According to the application, it can be divided into two subcategories – vertical transformation and horizontal transformation. Many business processes such as accounts, HR, and IT perform much more efficiently when they have been digitally transformed.
What is Digital Transformation?
In simple terms, the digital transformation (often, abbreviated as DT or DX) is the use of new, cutting-edge technology for improving the available machinery of a business – be it hardware or software. Using digital technologies to create new (or upgrade the existing) business processes can result in improved business metrics and customer experience.
It is evident that it lacks a general definition as it looks different for every organization. Nothing is written in stone – you apply it keeping in mind the needs of your organization. That being said, digital transformation is more than a mere technological overhaul. Beyond the technological advancements, it also aims through a cultural overhaul.
This requires the organization to challenge the status quo, experiment continually, and get over any failure that they face. This also implies the organization needs to walk away from log-standing business processes if needed. The organization needs to prefer new practices to the old, long-standing ones – change is the name of the game.
Digital transformation is an umbrella term that is used to denote the number of different technologies including cloud computing, Artificial Intelligence, and numerous fields related to it, Big Data analysis, Quantum Computing, Blockchain technology, and many others.
Components of Digital Transformation
Digital transformation consists of several smaller components. Although there are still arguments about what should be the most necessary components, the following are some of them.
- Leadership: The importance of having an apt leader is unimaginable. The full advantage of digital transformation could barely be taken in the absence of executive vision and adept leadership.
Apt leadership plays a huge role in the successful execution of the digital transformation. It’s the leader’s job to think about what the transformation would mean, how it would commence the journey, and which rout to take.
At the center of the transformation lies leadership and culture. You might have everything else – the product, customer view, and technologies, but nothing works out ultimately in the absence of the right leadership and culture.
Digital transformation doesn’t simply stand for blind modification – the change is closely related to what is required and what should be changed. Likewise, the focus should be on improving the organization’s hierarchical exhibition just as the end-client experience. These are simply impossible to achieve without a clear vision and the right work culture.
- Strategy: Any large-scale modification is all about the right planning and execution. Likewise, having the right strategy makes the transformation task a lot smoother; it can be done without any major hiccups.
The strategy should include everything, from the individual milestones to the final goals. Having a clear vision of what the goal really helps a lot in the long run. Similarly, knowing the possible pain points is another crucial point. At the end of the day, the strategy becomes much more important than the technology itself.
- Disruption: Disruptive elements are like the life force running through the veins of the organization. Disruptive elements like digital automation, various collaborative tools, and analytics tools can help immensely transform and evolve the total value chain of the business. These business disruptors help enterprises upgrade the old, manual labor-based processes to become faster, more efficient, and more integrated.
Disruption at the end of the day is a shift in power in relationships. It is caused mainly by the change in the way people use technology, along with their behavior and expectations. The change, however, can have a broader context. The change might have nothing to do with the technology. Despite that, in many cases, digital technology could be used for addressing the aforementioned changes in behavior.
- Technology: The actual technology is the heart of the transformation. A well-planned transformation might not work out as planned, despite having all the qualities mentioned above, due to lacking in the technological division.
The evaluation process is an important part of this stage. Knowing what is already out there and what exactly needs to be changed is crucial. That being said, there are no silver bullets. You only realize what works for your organization and what not through tests and failures. So make sure to keep enough room for mistakes. The cycle of failure, evaluation, and adaptation keep going on as long as it’s needed.
- Customer Experience: At the end of the day, customer experience plays a vital role in any organization. A crucial aspect of transforming digitally is to improve the customer experience, go from good to better, and from better to even better.
The customer experience could be improved in many possible ways. Social media engagement, various text analytics, and data mining tools help us accumulate relevant information. The final aim is thus to use this information to create an effective roadmap.
Why is it Needed?
Charles Darwin said this centuries ago: “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.” Quite astonishingly, it holds true for even the 21st-century businesses.
Each business evolves as time passes by, structurally, operationally, and most certainly technologically. That is the norm of the corporate world. But those companies that cannot keep up with the current trend most certainly lags behind. These are the businesses that need to go through a forced digital transformation.
The digital transformation could be induced by a number of factors – technology, customer-behavior, or ecosystem. Technology-induced transformations are pretty common, and thanks to the newest innovations, they are more impactful than ever before.
The customer-induced transformation is caused by the ever-changing customer behavior and demands. While the technological aspects are not directly related to it, it is indeed strengthened by it. In combination with other factors like the demand of the customer and simplicity of dealing with business
Businesses are not isolated entities. They are part of a much bigger ecosystem that includes both the business and us. The ecosystem-induced transformation could be caused by a plethora of external factors such as economical changes, geopolitical changes, and regulatory changes.
The so-called digital transformation is a costly affair – both financially and time-wise. It also involves a lot of risks. But why do the companies then go through such a process? Simple, because they FAILED to evolve naturally over time.
Classification
Digital transformation is the process of gradually upgrading the machinery of a business. Keeping that in mind, the transformation could be broadly classified into two categories: the vertical transformation and the horizontal transformation.
The vertical transformation aims to implement everything from scratch. As it does not usually involve reusing the earlier technological resources, they are mostly scrapped. The downsides of vertical automation are that it involves high acquisition cost and risk. It’s usually suitable for smaller organizations.
The horizontal transformation aims to reuse the existing technology as much as possible making it an integrative procedure. It’s a real challenge for the bigger organizations to employ vertical automation – most of the times it might not even be feasible. Horizontal automation, on the flipside, tackles the processes one at a time and gradually.
Examples
As digital transformation is usually a platform and industry agnostic process, you could utilize it in many different sectors. Human resources, for example, is an indistinguishable part of almost every organization. Oftentimes they need to handle large databases that need manual inspection. An automated resource management tool can make the task of the human resource managers a hundredfold easier.
Another use case could be field services. Many businesses nowadays offer the COD (cash on delivery) service. Businesses that offer such door-to-door service is another good candidate. A good personnel management software or an inventory management tool could help boost up the performance.
Caution
When all is said and done, the digital transformation is still an overhyped subject. It’s a subject (just like Artificial Intelligence or Machine Learning) that is fueled by overhyped advertisements. This is still a pretty iffy topic that involves a lot of risk for corporate entities.
Well, digital transformation is neither about the technology nor the companies n the technological industries. It’s good to learn from the other stories, but beware to not overestimate them as it’s a common trend these days.
The best advice is to implement it wisely. The most crucial thing to understand is that it’s not about finding the best automation software or a fancy natural language processing technique to sort out the letters automatically. It’s all about creating a robust roadmap and crafting the right digital culture. For that, you would need all the ingredients – an adept leader, a proven strategy, and the right technological tools.
