Digital Transformation, a word so widely used in the past few years and phrased way too many times that every other company that wants to topple its competitors wants it. Yet, one of the biggest issues is that barely anyone knows what it is to a point that almost every business except for the ones who have understood Digital Transformation in its actual basic sense have either failed or are still paying hefty amount for it compared to the return they are making.
Digital transformation if applied withou understanding is going to be like a boulder tied to your business while you are making it run to win. Not only are you bound to fall back but might have to even stop running because of the exhaustion it can create. This is why it is very important to understand digital transformation as clearly as you can.
While this article can simply talk about what digital transformation is; doing just that will only add up to the confusion. This is why this article will be extensively covering various aspects of it so that you can get an overall understanding of what the term exactly means no matter what business you do, what position you hold, whichever business models you follow, or whatever processes you have within your company. Digital transformation works beyond all of these factors because it comprises of two independent words that have bonded to create the biggest technological revolution of the century i.e. digital and transformation.
We all know about the word transformation but it is in the vagueness of the word ‘digital’ that everything goes in vain. Unfortunately, just like the word ‘application’ this word as well has become synonymous with software.
If you ask Google the meaning of digital transformation, it will show you the first few lines from the wikipedia article on Digital Transformation within a box on the right. Each and every page listed on the first page of google for that search term has clearly stated what it is in every way. They are well-researched and well-written. The problem is that most of them are quite clustered and either full of examples and citations from too many people talking about or are so full of paradigm shifts that one fails to get a part by part image of the whole thing.
This is why this article is carefully divided into different sections along with a ‘table of contents’ section for you to easily navigate through while trying to get the gist of digital transformation. The first step that we are going to take here is in understanding the phrase itself.
Table of Contents
What is Digital Transformation?
Digital transformation in its broadest sense means to change or convert any existing processes, business models, cultures, and ecosystem of an organization, enterprise, or business in a well-planned manner in order to provide greater value to the customers with the help or support of digital technology.
While I have said what digital transformation means, one needs to understand that it’s not exactly a definition of the term. This is because digital transformation works and seems different for every company. What makes digital transformation so varying is that it takes into account all the parameters that are needed to succeed, depending on every business’ own strategy, roadmap, goals, stakeholders, context and so forth. Hence, it can be hard to enclose the term in a definition that applies to all.
People sometimes make the mistake of equating digital transformation with simply an update in technology.
Digital transformation means adapting to not only new technologies that are available but also changes in customer expectations, societal shifts, and industry disruptions. Businesses, in responding to these shifts, are needing to become more customer-focused, agile, adaptive to new opportunities, and efficient in order to stay competitive. Digital transformation is how they can rise to meet these expectations at scale.
Why is Digital Transformation important
A business may take on digital transformation for several reasons. But by far, the most likely reason is that they have to: It’s a survival issue. In the wake of the pandemic, an organization’s ability to adapt quickly to supply chain disruptions, time to market pressures, and rapidly changing customer expectations has become critical.
Consumer behavior has quickly shifted in many ways since the start of the pandemic and although it’s early to guess which long-term consumer behavior changes will stick, business cannot be waiting while this happens or they might end up loosing everyone. In 2020, seamless customer experience has become the most important discriminating factor for how a business will perform.
That’s why businesses will either match the pace of change, fall behind, or lead the pack. That’s the existential issue at stake in today’s digitally-infused times, where bold action must be actively supported by out-of-the-box experimentation and pathfinding. This must be done while managing the inexorable daily drumbeat of operational issues, service delivery, and the unpredictabilities, such as a major cyberattack or information breach.
Three primary and invaluable things that digital transformation brings in are:
- Revenue Generation
Companies with stronger digital intensity derive more revenue from their physical assets.
Companies with better transformation management are more profitable.
- Market Value
Companies with stronger transformation management intensity go on to have higher market value.
Areas of Digital Transformation
Key areas to consider as the CEO
Framing the digital mindset
As with all transformation, CEOs first need to ensure that their senior leaders have a common vision of how to proceed. They need to understand why to change, and how the future will be better than the current situation. The first step is to understand the threats and opportunities that digital represents to the organization. Will existing ways of working continue to be effective in a digital world? Are there new opportunities available in customer experience, operational processes or business models? Assess your firm’s digital maturity – both digital initiatives undertaken and leadership capabilities to drive transformation. Then, you can take steps to move depending on your current maturity level.
A critical input to driving change is a transformative digital vision. Without a vision of change, employees tend to do what they have been doing for years, even if it is no longer useful in the digital world. Executives typically build visions with a focus on operational effectiveness (inside-out), superior customer experience and sales (outside-in), or a combination of
the two. P&G, for example, uses a clear inside-out vision: “Centralization and digitization will improve productivity and create deeper, more sustainable organizational capabilities.” Whatever the focus, the senior team should have a common vision of how to proceed. Only then can they
help to drive change throughout the organization
Investing in the right areas
To make the digital vision a reality, executives must ensure their organizations invest in the right areas. This requires cutting back in unproductive areas while ramping up investment where it needs to occur. Digitally empowered businesses differentiate themselves by excelling in a few areas – customer experience, social media, mobile, customer analytics, process digitization or internal collaboration – but rarely in all.
Executives must identify where the company should excel now, based on its existing capabilities and strategic assets. Then, as capabilitiesimprove, they can refocus toward new areas of excellence.
An important question is to decide if you need to adapt your business model. In some industries, there is no choice. The structural changes in postal services, for instance, are calling for a radical rethinking of how organizations do business.
Companies in other sectors, where the pace of change is less rapid, have the opportunity to create value by adapting their business models – adding value to products and services, reaching new customers, linking operational and customer-facing processes in new ways, and even launching entirely new businesses.
High-performing companies have strong enterprise-level governance around their digital initiatives. These governance mechanisms aim to increase the level of coordination and sharing across silo-run digital initiatives.
Three key governance mechanisms are common: dedicated committees, shared teams, and new roles including digital officers.
Engaging everyone in the digital transformation
Putting the organization in motion early is essential. CEOs and top teams of digital leaders often send an unequivocal signal that change is necessary, and that it needs to start immediately.
Leaders can use a wide array of digital channels, such as broadcast, web, video, and social networks to generate continuous two-way communication at scale.
Equally important is to encourage employees to identify new practices and opportunities that will advance the vision like holding activities through which employee teams can suggest new initiatives.
Sustaining the transformation
Successful digital transformation is built on a foundation of core skills and capabilities. Although a lot of executives believe their firms have the necessary digital skills, nearly all believe that they need to improve in some areas.
To fill skills gaps, consider hiring some experienced executives who can make an impact quickly and coach existing employees. Redesign your training programs to develop skills your company needs.
Where useful, partner with vendors to gain skills and cross-sector experience that complements your capabilities. Some companies even acquire small firms to gain specific digital skills such as mobile marketing or analytics. Beyond skills, executives must focus on building and sustaining momentum for change.
Quantify and monitor progress toward the digital ambition hrough KPIs or digital scorecards. Scorecards such as these have power beyond just measuring the impact of major investments. They help to change the culture.
Areas according to silos
Process automation and management
One or more connected operations, activities and sets to achieve a specific business goal, whereby business process management, business process optimization and business process automation come into the picture. Business process optimization is essential in digital transformation strategies and in most industries and cases is a mix of customer-facing goals and internal goals today.
Streamlining business models
How businesses function, from the go-to-market approach and value proposition to the ways it seeks to make money and effectively transforms its core business, tapping into novel revenue sources and approaches, sometimes even dropping the traditional core business after a while.
Management of business ecosystems
The networks of partners and stakeholders, as well as contextual factors affecting the business such as regulatory or economic priorities and evolutions. New ecosystems are built between companies with various background upon the fabric of digital transformation, information, whereby data and actionable intelligence become innovation assets.
The focus lies on traditional assets but, increasingly, on less ‘tangible’ assets such as information and customers (enhancing customer experience is a leading goal of many digital transformation “projects” and information is the lifeblood of business, technological evolutions and of any human relationship). Both customers and information need to be treated as real assets in all perspectives.
Change in company culture
There must be a clear customer-centric, agile and hyper-aware goal which is achieved by acquiring core competencies across the board in areas such as digital maturity, leadership, knowledge worker silos and so forth that enables to be more future-proof. Culture also overlaps with processes, business activities, collaboration and the IT-side of digital transformation. In order to bring applications faster to market changes are required. That’s the essence of DevOps: development and operations. In order to make IT and OT work together in businesses/processes/activities, change is required too (it’s not just the information and operational technologies, it’s the processes, culture, collaboration), etc.
Customer, employee and partner management
Digital transformation puts people and strategy before technology. The changing behavior, expectations and needs of any stakeholder are crucial. This is expressed in many change subprojects whereby customer-centricity, user experience, worker empowerment, new workplace models, changing channel partner dynamics etc. (can) all come in the picture. It’s important to note that digital technologies never are the sole answer to tackle any of these human aspects, from worker satisfaction to customer experience enhancement. People involve, respect and empower other people in the first place, technology is an additional enabler and part of the equation of choice and fundamental needs.
Disruption through Digital Transformation
On top of being one of the most hyped terms of the last few years (as is digital transformation as such), digital disruption is mainly used in the sense that an industry, way of doing business or ecosystem (e.g. societal) is significantly challenged by existing (mostly tech) companies, newcomers or incumbents who have mastered digital business skillsets and came up with solutions, business models and approaches that cause a significant shift in customer behavior and market context, requiring existing players (which can include ‘digital businesses’) to change their strategies as well.
However, disruption is certainly not only about those initiatives by newcomers or incumbents with disruptive approaches. Disruption in the end is about people, customers.
Disruption, as a human phenomenon, is caused by shifts in, among others, the way people use technologies and about changes in their behavior and expectations. These changes can be induced by new technologies and how they are adopted or leveraged by disruptive newcomers. However, the change can also have a broader context that has nothing to do with technologies. Is that still ‘digital disruption’? No. Yet, in some cases digital technologies could be leveraged to address those changes in behavior or expectations/needs and so forth.
As a matter of fact, disruption often happens in the last mile of customer experience. We would say that, in general, disruption often happens at the various edges of the business; those same edges we just mentioned: the last mile, the customer, the broader ecosystem, etc. In the scope of the broader ecosystem it’s essential to look at the disruptive effect changing economic realities and regulations, for example, can have, again emphasizing the need to put digital transformation advice in perspective.
The fact that digital transformation often focuses on the edges as we mentioned seems obvious when you look at the disruptions and growing expectations at the edges (customer expectations, the knowledge worker at the end of a business process, etc.) who then drive digital transformation.
We always say that technologies are never disruptive. But, to be honest, it’s a bit to challenge people.
Key Players of Digital Transformation
CEOs (Business Leaders)
Business leaders who embrace transformation have to consider current operating models, processes, and technologies. They have to be willing to both innovate and experiment to outpace rivals who are also adapting.
This mindset comes only from a proper goal-oriented perspective where the end motive is clear. Modern business leaders have understood that business processes aren’t rules to be hanged on to they are only ways to attain the desired result.
Digital transformation is the mapping and rooting of the journey towards the result and in order to do so, the destination needs to be defined first and it is always the job of a CEO/business leader to do so.
Technology Partners and HR
Digital transformation has forced IT to get out of the break/fix mindset and instead become a strategic business partner responsible for facilitating change across the organization. And with customer and employee experiences being so tightly intertwined, technology development partners and HR now share a joint stake in a company’s digital transformation.
It’s no longer just about providing the latest technology. It’s about making sure that technology makes work more efficient and meaningful so the company can attract the people it needs, keep them engaged, and improve business results too.
DTOs, CIOs and CHROs must work in close collaboration to make sure the technologies in place thoroughly support people’s needs while adhering to both HR and security policies. This requires shared objectives, planning processes, cross-functional skillsets, and new KPIs.
While technology partners and HR share the responsibility of planning and rolling out employee experience and digital transformation initiatives, it’s important that they’re clear on employees’ needs and wants. One way to do this is by conducting regular employee surveys or focus groups on an ongoing basis.
At the end of the day, they are the backbone of any company and no technology or strategy can help a business in progressing if the employees are resilient towards change.
Digital Transformation Checklist: Things to understand and take care of
Inclusivity of employees in transformation
Organizations that seek transformations (digital and otherwise) frequently bring in an army of outside consultants who tend to apply one-size-fits-all solutions in the name of “best practices.” This is most often bound to fail if they are not inclusive. Your approach to transforming your respective organizations can happen only if you rely on employees — staff who have intimate knowledge about what works and what doesn’t in their daily operations.
Digital awareness among employees
When employees perceive that digital transformation could threaten their jobs, they may consciously or unconsciously resist the changes. If the digital transformation then turns out to be ineffective, management will eventually abandon the effort and their jobs will be saved (or so the thinking goes). It is critical for leaders to recognize those fears and to emphasize that the digital transformation process is an opportunity for employees to upgrade their expertise to suit the marketplace of the future.
Integrating digital technology
While we have been emphasizing that digital transformation isn’t just about the technology, it is obviously still a component. Digital technology can optimize efficiency in most businesses. However, when adding new technology to your business it’s important to consider what your intended business outcomes are. Don’t add additional tech just for the sake of innovation. All additions or changes to your tech stack or new software added to your business operations should be outcome-focused.
Improving customer experience
In addition to improving business operations, a good digital transformation is customer-driven.
A great user experience is now needed to get sales. Focus your advancements on the things your customers value.
The goal of your transformation should be to streamline your teams, processes, and operations to better service your customers and provide them the effective and connected customer experiences that will differentiate your brand from competitors.
Keeping core business needs in mind
Your business teams and resources only extend so far. Don’t waste energy or talent on nice-to-have features and operations. This again goes back to focusing on your desired business outcomes.
Look to the core business functions that will help you achieve those outcomes when preparing your roadmap of transformation initiatives.
Strategizing based on tech/digital landscapes
Strategic thinking needs to change to a more digital focused strategy. Disruptive business models will continue to overturn industries. Your digital transformation efforts should take into account what your competitors are doing, what customers are expecting, and what the current emerging technology landscape is capable of.
Key Practices for Digital Transformation
A vision to transform
A strong vision helps to frame in people’s minds a picture of how the company will be different in the future. It also helps people understand what former assumptions may no longer be valid.
Ability to administer the transformation
Effective investment rules and coordination mechanisms improve efficiency and ensure digital efforts are moving in the right direction.
When employees are engaged in a shared vision they help to make the vision a reality. They offer less resistance to change and often identify new opportunities that were not previously envisioned.
The right technological partnership
Digital transformation is about re-defining big parts of the business, and a compatible IT consultant is essential in doing it. In some companies, the CIO is responsible for building digital maturity; but when it comes to the digital agenda, it should be driven by the collaborative efforts of businesses and technology partners. In any case, shared understanding between IT partners and business executives is critical to the successful transformation.
Nurturing the digital culture
Although IT will play an important role in driving digital transformation strategy, the work of implementing and adapting to the massive changes that go along with digital transformation falls to everyone.
Information technology partners and consultants like us find ourselves working in cross-functional teams more than ever. Digital transformation initiatives often reshape workgroups, job titles, and longtime business processes.
When people fear their value and perhaps their jobs are at risk, IT leaders will feel the pushback. For this reason, digital transformation is a people issue. Inclusivity, Folks!
Primary goals of businesses in 2020
Need for maximum mobility
Not only do consumers spend several hours a day on mobile devices, but employees are tied to smartphones, tablets, and laptops. Agile companies need mobile solutions that deliver the same experience people have in the office. Many digital transformation projects take mobility as a central theme. Broadening end-user experiences to include mobile platforms is essential for the modern enterprise. Across industries, companies take advantage of mobile capabilities to increase productivity, enhance operational efficiencies and improve satisfaction rates.
Complete data security
Effective digital transformation projects can support an organization’s commitment to data security, especially in an era of connected devices and big data. Taking into consideration any relevant data sovereignty responsibilities, stakeholders must be vigilant about protecting user information, especially when entrusted with large quantities of sensitive information. Globally, companies may be subject to a number of international privacy laws. These should be reflected in any transformation strategy.
Overall ability to nail the user experience
Businesses are beginning to adopt new technologies not only for their functionality, but also for their ability to enhance worker productivity through simpler interfaces and more intuitive interactions. Enterprise applications with cumbersome user interfaces can make work more difficult for employees, even if the backend is efficient.
Challenges that might stand in the way of Digital Transformation
The inability to envision
Digital transformation is not a one-and-done project. It’s an ongoing process that must be constantly nurtured and evolved. Implementing technology without looking at how it fits in the big picture can create more challenges than benefits. Digital transformation should begin with a vision, and any projects should stem from that vision. When thinking about your vision, it’s imperative to keep in mind business goals and objectives and how a digital transformation strategy can support them.
The absence of a leader
Any business transformation, digital or otherwise, is more likely to succeed when leadership is engaged. And leadership is more likely to be engaged in initiatives that are directly aligned to the business strategy. When proposing any new project, it’s important to demonstrate how it supports the business and will impact the bottom line. With leadership buy-in secured, you can avoid any budget challenges that will impact your project.
Focusing on individual silos
While in the past, IT was solely responsible for digital transformation, that’s no longer the case. It’s become a cross-functional effort across the organization, and as such, both leaders and employees need to be involved.
When leaders implement a new piece of technology without engaging the people who actually use the solution on a daily basis, they risk investing in a tool that does not actually meet the company’s needs. Leaders require insight into end-user experiences to ensure that the solution works properly and does not introduce new challenges.
During the early stages of a new investment, decision makers should ask employees about their experiences with the existing system and get insights into how the process could be improved. Then, during the implementation of the new solution, stakeholders should continue to solicit feedback from the people who actively use the technology. Over time, the insights gained from this feedback loop will aid additional transformations, contributing to a cycle of continued improvement.
How can Archisys shape your Digital Transformation journey
Digital transformation is no longer a nice-to-have. In the digital age, it’s an imperative for everyone from small businesses to enterprises. Understanding what that means and how to implement it for your business is the key to competing in the current technology and customer-driven landscape.
One of the biggest misconceptions about digital transformation is that all businesses are much further ahead of the game. In reality, this is exactly the time where you learn from all your competitors i.e. the ones who are ahead of you as well as the ones who are behind. This holds true for the pharma industry as well which has been notoriously known as a digitally-challenged industry and yet we have been helping the healthcare sector grow digitally in 5 areas. It is crucial to see what the ones who are behind have been doing while focusing on the ones ahead of you because they have a story to tell as well since information in this day and age is available to all equally.
If all of this makes you feel woefully behind, fear not. Archisys is here to help you. How?
How Archisys approaches the transformation process
Implementation of digital technology into business processes is only a parameter of digital transformation and without a goal-aligned strategy, it is only bound to fail. This is why we always keep a checklist throughout the digital transformation process right from strategizing to its implementation and execution.
Is the business leader receptive to Digital Transformation?
As mentioned earlier, the business leader is the driving force of transformation within a company. They are the primary enthusiasts upholding the company’s vision while the change happens. Hence, it is the most important point for us to know that we are being well-supported by the leader in bringing in the much-needed change.
Is the vision of the company client/customer-oriented?
A company cannot exist without a vision. But for it to sustain and succeed, it needs to have a vision that is centered around its customers i.e. the ones they are providing. The digital transformation process is directed from outwards to inwards and that is why whenever we begin our discussion with any company that approaches us with three questions:
- What are the pains and problems that your customers come up with the most?
- What is it that your customer needs in order to get those problems solved?
- How have you been solving those problems until now?
What are the goals a business wants to achieve through Digital Transformation?
Every company that intends to be a part of the digital transformation process needs to understand that it is a continuous process and not a one-time solution. That’s why digital transformation cannot be totally preplanned in advance. It’s a very systematic and strategic execution done in bits from time to time through rigorous observation and honest feedback.
This is why a business needs to define its goals in every area so that they are streamlined accordingly while orchestrating the digital change.
Are the goals aligned with the vision of the company?
Most of the digital transformations fail to happen because digital implementation occurs individually in different silos. Businesses make this mistake because they fail to see that any business isn’t run by individual teams but through coordinated efforts of all the teams that are driven by the vision of the company and that is what serves as the mission of all the employees. That is why it is important to make sure that the goals created not only boost but also drive the vision forward.
Is the need for transformation backed by research and data or just intuition-based?
Making assumptions is a basic human trait and is driven by the need for reason. Humans cannot function without the presence of meaning in things. Companies are founded, managed, and run by humans and it is quite common to see a lot of companies implementing the exact same technology that their competitors are using based on the assumption that their success is solely based on the technology implemented.
This is why you would see apps and software being sold in bulk to companies and clone apps being in high demand.
Whenever a business goes through a setback or is willing to bring in the wave of digital transformation, it becomes our duty to make sure that the problems stated or the solutions asked for do not come from the ‘we think’ zone and is backed by their own market research and business data.
How disruptive is the transformation required?
The purpose of technology is not to make business processes easy but to bring in change by pushing the boundaries. Easing the problem never helps. It has to be eliminated. The aim of digital transformation is not to ease your existing business processes but to provide value to your customers more efficiently than all your competitors.
It might end up changing parts of your old processes or even ruling out all the old processes entirely so as to bring in a new one that can drive your business vision in the most efficient way.
Is the business ready to be agile enough to go through the adaptation?
For a business, being agile means being able to adapt, change quickly, reinvent itself, and succeed in a rapidly changing and ambiguous environment such as in 2020 and beyond.
Digital transformation requires the company to be agile enough to go through the adaptation process since it will demand constant and rapid changes until a working model is formed.
Are the enablers of digital transformation aligned with the idea and need?
These include all the employees within the company beginning with the ones at the top. Resistance to change is quite common since most employees have this fear that technology might replace them. This is why they need to be made aware that technology is not to replace them but make their lives more meaningful by taking repetitive and meaningless processes out of their lives.
Inclusivity in the ideation and shaping of the transformation will not only boost their morale but also help the company get a better and clearer picture of their organizational issues as well. This is where the honesty and transparency come from that will help make concrete transformational models.