Business success is increasingly being measured against keeping up with technological advances and customer behaviour.
In its FutureScapes 2017 report, IDC has predicted that in 2019, global expenditure on digital transformation projects will be approximately $2.2 trillion. This is a 60% increase from the spending in 2016.
What is 'digital transformation'?
Digital transformation can be defined as the acceleration of business activities, processes, competencies and models to leverage the opportunities presented by technology and its impact in a strategic way.
It is the 'transformation' of an organisation through the use of digital technology to improve the way it performs and serves its customers.
Importantly, implementing technology alone is insufficient to bring about digital transformation and businesses must realise it goes beyond digitalization.
It requires the integration of digital technology into all areas of a business, resulting in fundamental changes to how it operates and enhances the customer experience.
Beyond this, it is also a cultural change requiring organisations to continuously challenge the status quo and abandon long-standing business processes they were built upon in favour of relatively new practices that are still being defined. Many are understandably tentative to adopt such a process.
However, if done correctly, businesses can grasp new and better possibilities, using digital-intensive ways to realise them.
What is the process?
While guides to digital transformation have their recommendations and considerations, there are essential shared themes that businesses should account for when developing digital transformation strategies.
Businesses are digitally transforming three key areas:
- Customer experience
- Operational processes
- Business models
A company rarely aims to fully convert in all areas. Instead, they select the most pertinent among these to move forward in the manner best for their businesses.
By definition, digital transformation is an ongoing process. Many have attempted to articulate the process in steps, and one example is:
- Identify your digital transformation objectives
Every organisation will have a slightly different set of goals and different priorities, but this is a vital first step for organisational alignment.
- Digital awareness
Study technology enablers in the market. Take a holistic view to be fully aware of and leverage the technology enablers in the market.
- Envision the digital vision for your business
Select powerful combinations of technology platforms to achieve target outcomes such as improving customer experience, transforming business processes, optimising infrastructure and simplifying management.
- Master the digital services lifecycle
It is no longer sufficient to have an innovative set of products or services ("what"). You must also master how you design, develop, manage and continually evolve them ("how").
- Organise for digital business innovation
Select an appropriate set of building blocks based on your specific target business outcomes. For example, enhancing digital customer experience requires a new set of capabilities including a persona-driven approach, omnichannel integration and customer-centricity.
- Implement and operate
Execute an agile journey to the future platform
How does digital transformation affect businesses?
Whether it is a business, government agency, utility or service provider, any organisation can benefit from a digital transformation.
Those who achieve digital transformation before their competitors possess a competitive advantage. Not only do they have new experiences and new data to analyse and understand, but they are also able to develop and implement strategies unknown to slower competitors.
In order to digitally transform, an organisation must use technology as a competitive advantage in its internal and external operations. In particular, by understanding customer behaviour, businesses can enhance customer experience.
True digital personalisation should feel like a great experience. It should leverage rich customer information in real-time and deliver messages consistently across multiple channels.
For example, integrating personalisation capabilities into the primary channels accessed by customers delivers relevant experiences that are likely to increase the retention and growth of a business' customer base.
As a result, digital transformation helps avoid a tipping point caused by technological advances and downstream market effects. Its benefits include:
- Increased market share and reach
- Increased customer engagement and better customer experience
- Increased retention and growth of customer base
- Market differentiation
- More efficient and streamlined operations
- A company culture that encourages creativity and innovation
Culture is key
Although technology plays a fundamental role in driving digital transformation strategy, businesses must not overlook an integral part of what makes such an important change successful: the people.
While digital transformation will become the driver of business, many concentrate on technology and fail to recognise the role of culture in these efforts.
Digital transformation is a people issue and accordingly, culture shifts are one of the most difficult aspects of undergoing the process.
To achieve true digital transformation, businesses must manage cultural change as well as technical change.
Without the involvement and cooperation of its people, any digital transformation project will struggle to maintain momentum, as a company's culture is a strong determining factor of its adaptability to change.
As Marc Carrel-Billiard, Global Technology R&D Lead at Accenture says, "finding ways to help people across this digital divide and the culture shock that rapid change brings is just as important as the technology we use to get there."
The challenge to businesses is to collaborate across functions despite disparate priorities, timelines, and lack of mutual familiarity.
In light of the demands of digital transformation, the culture to aim for is one of continuous optimisation, holistic improvement and a focus on what people need beyond the digital context. Without this, fragmented results and disjointed digital experiences are too often the outcomes.
How can a digital agency help with digital transformation?
The process of digitally transforming an organisation requires a significant amount of time, resources and a cross-functional set of business skills.
As such, enlisting the help of a digital agency may be extremely valuable. Digital transformation requires an experimental and technology-led mindset possessed by digital agencies.
Digital agencies can assist with:
- Clarity of vision
Digital agencies can help businesses formulate a clear plan for its future and ensure they are on the right track towards delivering on that vision. They traditionally specialise in being close to consumers, understanding new technologies, working with their clients to see what's coming and help them evolve to meet it.
- New perspective
Michael Krigsman (Founder of CXOTalk) says that digital transformation success comes down to "being willing to experiment and look at things through a new lens." Digital agencies can offer an original perspective and help incorporate that type of creative thinking into their organisational philosophy.
- Customer centrism
Digital agencies take a customer-centric approach to their projects, thus making them suitable drivers of digital transformation. They can help businesses understand the evolving behaviours and preferences of its customers - cited as the number one challenge facing executives during the process of digital transformation.
- Cross-functional resources and skills
Digital agencies can bring new products and services to life in samples and prototypes so that businesses can envision the future and be ready to lead it.
Are you starting your digital transformation journey?
Most businesses are still lagging in their digital transformation process.
While designing a digital strategy is an obvious challenge, cultural adjustments also present unexpected obstacles. Don't forget - there is no one blueprint for success, but culture is vital. A directionally ambiguous culture can prevent your business from achieving its goals in today's competitive marketplace.
In this digital age, digital transformation has become one of the key trends shaping the digital sector. Progressive businesses should leverage this advantage to emerge as a "digitally successful" business.