What is digital transformation and why does it matter?
Posted on: November 20, 2020
Digital transformation represents a dramatic reimagination of the ways an organization utilizes people, processes and technology to alter and enhance its performance.
It is the use of technology to fundamentally change businesses or services by automating manual processes or replacing older digital mechanisms with newer solutions. In addition to reducing costs and increasing efficiency, it can enable new kinds of innovation and creativity, rather than just supporting or enhancing prevailing methods.
Companies are adopting new and advanced ways of doing business based on inventive technologies. This is across-the-board change through the implementation of digital tools and a top-down organizational culture of improvement, risk-taking and continuous evolution. According to CIO, digital transformation, or DT, requires “cross-departmental collaboration in pairing business-focused philosophies with rapid application development models.”
There isn’t one common definition, but an International Journal of Innovation Management article synthesized various descriptions of digital transformation as: "The DT framework includes the networking of actors such as businesses and customers across all value-added chain segments, and the application of new technologies. As such, DT requires skills that involve the extraction and exchange of data, as well as the analysis and conversion of data into actionable information. This information should be used to calculate and evaluate options to enable decisions and/or initiate activities. In order to increase the performance and reach of a company, DT involves companies, business models, processes, relationships, products, etc."
Digital transformation is different for different companies, but in general it’s about much more than just “going paperless.” It means having the ability and ambition to do more with less, the capacity and commitment to really change – to let go of traditional practices and the way business has always been done, to welcome new processes that are still being established but could revolutionize your work.
Why does DT matter?
The idea of digital transformation has been around for a while and incorporated in different ways, but it’s only recently begun to gain popular traction and is now happening faster than ever. Historically, the concept has often just referred to technological applications within a business. However, it is increasingly about automating the whole business – processes, workflow, mindset, talent, revenue model – and even getting into wholly new businesses.
According to the International Data Corporation, global spending on digital transformation technologies and services increased 17.9% in 2019. While the coronavirus pandemic slowed that pace, DX spending is still expected to grow by at least 10% in 2020 to $1.3 trillion, proving its economic might and unflinching future. Indeed, an IDG study reported that 59% of IT decision makers say COVID-19 is accelerating their digital transformation initiatives.
Undeniably, digital transformation marks a significant shift in how organizations deliver value to their customers. Technology allows companies to be more agile and effective in the way they respond to rapidly changing customer needs and expectations, as well as the decisions and actions of rivals. One of the most vital indicators of business performance, customer service is a motivating factor and foundational element of digital transformation.
Companies change not only because of a fear of losing existing customers and revenue, but also because of digital FOMO – or “fear of missing out” on new growth opportunities. Domain transformation is an area that typically receives less focus but offers huge potential to create new value. Digital technologies redefine products and services, blur industry lines and provoke disruption, opening up entirely new businesses for companies beyond their current markets.
How do you get started?
No matter the type, size or maturity model, digital transformation needs to start with a company asking itself some critical questions:
- What are your pain points?
- How do you feel you’re not keeping up or being inefficient?
- Which parts of your business aren’t leveraging technology and utilizing data enough?
- Where are the cracks in your operations now that you’re scaling?
Once you determine the problems – for example, costs, competition, customer experience, productivity or revenue – you can see where you are in the process, develop answers to those questions and pursue opportunities for growth.
Importantly, companies should understand that digital transformation is not a one-size-fits-all solution. Every business is different and begins at a different place, so there’s no single framework, simple roadmap or universal playbook. Successful digital transformation necessitates a team approach, sustained effort and talent in four interconnected areas: technology, data, process and organizational change.
Resistance to digital transformation often comes from a company’s general reluctance to change and a pervasive worry that new technology – artificial intelligence, robots, etc. – threatens employees’ jobs. Businesses must cultivate an environment that encourages creative thinking and comfort with uncertainty. Doing that requires leaders to have a compelling vision, a coherent plan and the soft skills to clearly communicate to their personnel that executing and actually achieving effective change still comes down to real people.
Calance can help
The march of technology is inexorable, the demands of the market are insatiable and change is inevitable. Companies that don’t accept those realities, fail to adapt and avoid innovation are doomed to disruption and likely demise. But for those that embrace digital transformation as a long-term, integral strategy, rather than a short-term obligation, change can mean progress, competitive advantage and enduring business success.
Digital transformation starts with an awareness of and willingness to evolve, organizationally and culturally. Once you’ve recognized where you’re deficient and need to improve, Calance can help your business prepare, implement and get people on board for change.
A global IT Services firm specializing in end-to-end solutions for development, managed service and more, we provide clients insights and guidance on how to align and optimize talent in their technology, data, process and change capability domains to become more cost-effective and future-proof. Contact us to begin your company’s digital transformation today.
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