Digital transformation is a term that’s been on everyone’s lips for a while now. And many business leaders understand (or think they do) that transformation is the future of their business.
I recently delivered the everyday transformation journey, along with real case studies and the pitfalls along the way to a C-suite board from Jeddah in Saudi Arabia of 12 experience professionals in Dubai and it really go me thinking how there is a lot of misunderstanding of terminology, and I wanted to create some common language with you.
According to a recent Market Analysis Report by Grand View research, the global digital transformation market was worth 608.72 billion USD in 2021.
Yet research published by the Boston Consulting Group, also from 2021, indicated that around 70% of digital transformations are falling short of their objectives.
Why are so many organisations still getting it wrong? This is the big question.
What is encouraging is that over the past five years we’ve seen a massive shift in willingness to start getting it right instead of wrong.
One of the big shifts in attitude is the realisation that a company culture is not ready for digital transformation, or the technology just doesn’t work. These are two examples of barriers to successful digital transformation that we hear over and over again.
In this blog I’m going to look at the three steps towards true digital transformation and highlight a few examples of companies who have successfully navigated them.
Step 1: Digitization
Digitization is the process of applying technology to replace a process that was previously done manually. That could be any kind of transaction from a customer going into a retail store to make a purchase, or manually filling in a form in a branch.
If you enable that customer to fill in the form online, or purchase goods online, that’s digitization.
It’s often the first step towards digital transformation, but ONLY the first step.
Just because a company now has a website and an app, or using digital channels for marketing, it doesn’t mean they have digitally transformed just yet. All they have done is digitized a few processes.
The next step is digitalization – applying technology to improving a previously manual process. Let’s say that customer has filled in a form online, through a website or app. How is that form processed?
Does it still move manually from place to place – maybe as a hard-copy printout or by someone emailing a PDF? If a customer has ordered goods online, is that order still manually processed?
For digitalization to have happened, that form or that order need to be handled digitally throughout the whole process. Every department from order to despatch has to be connected digitally, with one single interface for the customer to interact with the organisation.
If that’s all-in place, the company has been digitalized.
But they still haven’t digitally transformed!
Step 3: Everyday (Digital) Transformation
Digital transformation is actually a misnomer, because the word ‘digital’ is redundant! Hence, it’s everyday transformation as it becomes business as usual.
In true digital transformation, the business model has changed to exploit new technologies, true. But it goes far, far deeper than that. It’s a total business transformation across culture, working practices, operational processes, and the customer proposition as well as technology. It involves finding new ways to create value, or attract and serve a new generation of customers in a new way.
Digital technology allows it to happen, but not as an ‘add-on’. Change has to come from within the core of the business.
Digitization and digitalization have created a better version of the past. They may have delivered improved efficiency, or reduced costs. But they are based in what the business was like historically.
Digital transformation, or perhaps better ‘business transformation’ creates a new business with a new future, enabling innovation to keep ahead of the competition and opening up new opportunities and markets.
Digital transformation is really business transformation.
Why digital transformation matters
Technology continues to develop, grow, and infiltrate every aspect of our lives, at an exponential rate.
Whether we notice it or not, we are constantly adapting to new ways of exchanging communications, and we expect everything to be available to us anywhere and at any time.
Businesses who fail to recognise that, and to keep up, are at high risk of failure. Those who get it right are those that will still be around in the second half of the 2020s.
- 50% of CEOs have seen increase in revenue because of digital initiatives.
- 23% more profits are made by digitally mature organisations.
- 89% of all companies have already adopted some kind of digital strategy
- 40% of all technology spending goes into Digital Transformation
Transformation demands that a business emerges out of incremental progress into Everyday Transformation. The strategy for achieving that demands that the technology becomes invisible to customers and that people do what they can every day to help the business transform and better serve their customers (internal or external).
What has to happen to avoid being one of the 70%?
Digital transformation is a fundamental mindset shift.
- Vision and ambition must come from the top. This isn’t the sole responsibility of IT, or Marketing! The CEO and the rest of the C-level need to drive the transformation.
- Create a culture of decision-making informed by qualified data. Are there any patterns in customer behaviour that could indicate where and what their future needs will be?
- Look at what analytics and AI systems could provide maximum flexibility
- Create a business model that as more agile, lean and customer-centric.
This all comes with challenges. Gartner has looked at the top-ranked challenges for Government CIOs when it comes to implementing digital solutions, and these will be familiar to many other types of organisations, not just government.
How can digital transformation done right bring huge benefits?
The pandemic events over the last couple of years have driven some big developments for organisations across virtually every sector.
Government organisations are increasingly using electronics and sensors to collect data including pedestrian and vehicle movement and improve services. Leeds City council, for example has managed to overcome some of the budget challenges faced by non-corporates by using an open-data model to create a pool of data available to third-party organisations and create a range of services and applications, including the Leeds Bins app for iOS and Android which allows residents easy access to waste management information.
Ordering a product from a mobile device or PC and picking it up mere hours later at a local brick-and-mortar location became both a safe and convenient option for customers and was adopted by countless retailers during the pandemic.
In many cases, it is still in its infancy, with retailers needing to use automation technologies improve data collection and integration to understand the customer experience.
Automated inventory control systems are becoming increasingly common replacing manual processes including supply chain management, tracking inventory, shipping, and fulfilment. These solutions allow businesses at any scale to predict and manage consumer demand along with providing excellent customer experiences.
Customer Data Platforms (CDPs)
Fragmented data from multiple sources is difficult to use effectively. CDPs from companies like Adobe and Microsoft help solve this problem by collecting data from all sources, organising it, tagging it, and making it usable.
Smart work from home technologies
Enabling remote working at scale has remained on many business agendas and many companies large and small have extended their work from home capabilities even now that people are able to return to work as it allows more flexibility and cost savings.
Smart work from home technologies are part of facilitating this. These days, we’re all familiar with Zoom and Microsoft Teams, among others.
A consequence of this is likely to be population migration as more people move from larger cities to more cost-of-living and lifestyle friendly areas.
Whatever your industry, sector or business size, your business can benefit from digital transformation, and indeed must in order to retain, regain or build your competitive advantage.
The key thing to keep in mind is that for digital transformation to be successful is must happen across the whole organisation and, crucially, redefine how everyone in the business does things – looking to the future, not to the past.