Digitalization and the changes that follow it are discreetly changing our daily lives. Today, the biggest technological advances and digital improvements occur online or on the cloud. Digital transformation is the new industrial revolution, and it’s worth keeping your finger on the pulse to reap its benefits.
This article discusses the benefits of digital transformation, 4 main areas of digitalization, and examples of digital transformation.
Key points
What is digital transformation?
Digital transformation is a term that has been around for a long time. Still, many people interpret it in different ways. For IT Directors, it will mean company-wide changes. For managers, it will mean the implementation of Agile methodologies. For SME managers, it may mean another technology irrelevant to their business.
Digital transformation involves using modern technology to optimize and efficiently manage key business processes. Although each organization must approach digitization individually and define its needs according to its business model and strategy, it is most often associated with the following areas:
- Business processes automation
- Digital tools integration
- Deployment of IT tools and systems for working with data
- Migration of systems to the cloud
Digital transformation interferes with the most time-consuming processes in a company. A great example of digital transformation is implementing AI in e-commerce. To successfully carry out digital transformation, it is essential to plan activities in 3 areas:
- People. People are the key to effective digital transformation. The organizational culture (a set of norms, attitudes, and behaviors, a way of operating, and a system of values) determines openness to change and determination to carry it out.
- Processes. Modeling the new way of doing business with IT solutions in mind is the key stage that determines their subsequent effectiveness.
- Information systems. Prioritization and selecting optimal cost and performance rates are crucial for effective digital transformation.
The starting point for building a digital transformation strategy is to identify the organization’s current state and challenges.
What are the benefits of digital transformation?
Digital transformation helps unleash the potential of an organization. It detaches key employees from performing repetitive tasks in favor of building a company’s growth strategy and increasing its value. Digital transformation opens up new opportunities for organizations in streamlining and optimizing their processes and exploring new directions of development or testing completely new elements of the business model. It allows instant access to the data processed in the organization and links it to external sources of information influencing the business and its trends.
Digital transformation is a key component of the overall business transformation strategy. The right technologies, employee attitudes, processes, and operations enable you to respond quickly to disruptions and opportunities and meet new and changing customer needs.
Digital transformation creates new business opportunities for organizations. Here are some of the most important ones:
- Streamlining communication and resource management. Integrating company operations with comprehensive platforms like Office or Google unifies and collects all basic software into one place, including email, online meeting schedulers, calendars, etc. In addition to basic tools, cloud technologies bring all the information and data together in one place and make them available at any time.
- Real-time decision-making. Thanks to tools such as ERP, Big Data, and machine learning, we can analyze the collected data in real-time and observe changes in the market and within the company. This allows us to make real-time decisions and respond to declines in the quality/number of services provided.
- Improving the quality of customer service. Service providers are now outdoing themselves in implementing the latest customer service technologies, from bots talking to customers over the phone or chatbox to personalizing orders and resolving inquiries and problems in real time. Digitization is virtually synonymous with putting the customer first. This increases not only potential sales but also customer loyalty.
- Faster and more efficient operation. Digital processes ensure faster operations in the company: from electronic contract signatures to quick access to data in the cloud. What’s more, devices and machines in the IoT network continuously transmit data. Advanced analytical tools support decision-making, cybersecurity systems analysis, and reduced downtime. Digital tools are based on algorithms and AI, so human errors can be excluded.
- Creating a system that is open to innovation. Building new business models based on digital transformation values facilitates introducing new digital solutions into the company’s process system. In a model that includes an open innovation culture and a flexible system that is ready for new implementations, the process of introducing innovations is noticeably shorter and templated.
- Development of organizational culture. As mentioned earlier, the open attitude of employees to the implementation of technological solutions is one of the main factors determining the success of change. Investing in education can significantly accelerate and facilitate the digital transformation process.
- Increasing the competitiveness of the organization. Digitization is currently one of the few organizational development areas with enormous potential and directly affects market performance. The development of this segment is also quickly appreciated by customers. Increasing facilities, development of applications, and accessibility to services are key in customer relations. Examples can be seen in the banking sector, where mobile applications, payment methods, and cyber security are developing at a dizzying pace, regularly providing users with new functionality. A company’s involvement in the digital transformation trend is a benefit in itself.
It’s important to note that the specific benefits of digital transformation may vary depending on the industry, organization size, and the extent of digital integration.
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What are the 4 main areas of digital transformation?
The process of digitization, seemingly reduced to the implementation of a few solutions and tools, completely changes the functioning of a company. For digital transformation to fulfill its role and bring the expected changes to the company, it must be embedded in the business model and strategy. It is a change in employees’ foundations, values, and attitudes. 4 digital transformation pillars describe the business areas where change occurs.
Process transformation
Automating existing company processes means changing, adapting, or creating new processes and workflows focused on delivering business value more efficiently, quickly, and cost-effectively. This could be moving the entire bureaucracy to the cloud, creating systems for cross-departmental inquiries, or using Big Data and advanced analytics to monitor the state of the company on an ongoing basis. New processes are built to realize new business models. They are created and used by existing and new employees. This shows that digital transformation can be a failure without the right transformations in a company’s culture and business models.
Business model transformation
If digital transformation surrounds us from all sides, it’s high time to include it in our model. This can include taking advantage of digitization internally, but it can also involve changes in product development, service delivery, and functionality. Changing the business model is an extensive and time-consuming process that considers restructuring in all company sectors and departments. Nevertheless, it is necessary to carry out a successful digital transformation and, subsequently, to maintain the company’s competitive edge.
Domain transformation
Domain transformation refers to the fundamental changes that occur within the specific industry or market in which a company operates as a result of digital transformation. It involves reshaping the core domain expertise, practices, and dynamics to leverage the potential of digital technologies and stay competitive in the digital age. Domain transformation is an ongoing process that requires organizations to constantly reassess their strategies, adopt emerging technologies, and adapt to evolving customer needs. By embracing domain transformation, companies can position themselves as industry leaders and drive sustainable growth in the digital era.
Cultural/organizational transformation
A successful digital transformation strategy is not only based on integrating technology into business processes. It can be said that implementing new tools and processes is the final stage in the digitization of a company. The foundation behind the successful transformation is changing the culture and developing the organization’s intelligence. This means building a systemic, open-to-change attitude among employees. It is worth noting that cultural change is an often underestimated and ignored part of a company’s digital transformation.
What are examples of digital transformation?
The most common IT systems that support digital business transformation are:
- ERP systems (Enterprise Resources Planning). They allow organized accounting and finance, sales, warehousing, production, and personnel management.
- CRM systems (Customer Relationship Management). They are designed to manage customer relationships by being a database of customers and their relationships with the company. They also help to identify key customer segments, the chances of success of commercial projects, and select customer groups for marketing campaigns.
- EDM systems (Electronic Document Management). They allow you to automate accounting and data collection processes to analyze sales and cost structure.
- BI systems (Business Intelligence). They support the management and presentation of data in the form of accessible graphs, tables, and dashboards, which allows the use of advanced analytics.
- Marketing automation systems. They are responsible for automating marketing processes.
- Databases/Data Warehouses. They are responsible for storing and exchanging data in an organized and structured manner.
To prove the success of digital transformation efforts, leaders must calculate the return on investment. This is not easy for projects that have cross-functional and business boundaries and change the way a company goes to market, often even changing interactions with customers and employees. Mobile banking app development may yield short-term benefits, but most other projects seek long-term business value.
Digital transformation trends 2023
The digital transformation process is long-term. Individual solutions are introduced gradually. We distinguish 5 digital transformation trends for 2023:
- Cloud storages. These are currently the fastest-growing branch of IT. An April forecast from Gartner expects public cloud service spending to grow 21.7% to $597.3 billion in 2023, up from $491 billion in 2022. The reason for this is primarily remote work which has forced many companies to implement such solutions.
- Democratization of innovation. To meet the needs of consumers, the approach to innovating in particular areas is changing. Innovation is increasingly oriented not to the supplier but to the user. As a result, everyone has a major contribution to making effective innovations.
- Real-time data processing. Thanks to the development of IT technology, it is now possible to process data instantly. The result is reliable and automated solutions to track customer preferences and behavior to tailor offerings to their needs immediately.
- Automation and robotic process automation (RPA). Automation technologies are expected to become more prevalent, enabling organizations to streamline repetitive tasks, increase operational efficiency, and allocate resources to more value-added activities. RPA, in particular, is likely to see increased adoption across industries.
- Edge computing and Internet of Things (IoT). As more devices become connected, the volume of data generated increases exponentially. Edge computing, which processes data closer to the source, and IoT integration are expected to gain momentum. This trend enables real-time data processing, reduces latency, and supports the growth of smart applications and services.
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Conclusions
It is important to remember that the biggest mistake is to assume that all competitors are much more advanced. This is due to admiring the fastest popular transformations of the biggest players in the market but failing to mention how difficult the transformation is or how long it can take for a typical smaller company.
As companies formulate their own digital transformation strategy, there is much to learn from IT directors and IT leaders who have already begun the process. Digital transformation is a huge undertaking, especially for larger and established companies. However, if done properly, it will transform the company to be more responsive to customer demands and resilient to a rapidly changing digital future.
Our experts can assist you in developing and implementing digital transformation strategies.
