Digital transformation. What is it and why is it so important for your business

Digital transformation. What is it and why is it so important for your business?


Published on: 15 May 2019

By Rahul Jain

Updated June 2021

What is a digital transformation?

A digital transformation is the complete integration of digital tools and technology into all areas of business leading to a fundamental change in operations and customer service. It also refers to a cultural change that requires an organization to continually challenge the status quo, and experiment.

Regardless of the size of an organization, a successful digital transformation is imperative to all companies and meeting business goals. Take any keynote, panel discussion or study related to how businesses need to remain competitive in this day and age. They all point to a technology shift such as the ‘cloud’ or adopting ‘frameworks’ for a digital revolution. But is it really worth it?

Overuse of the word ‘digital transformation’ has diluted its significance. Since the term is rather broad and encompasses a lot of new and old ideas, sometimes it helps to take a few steps back to understand where you stand on the path of digital transformation. Hurdles like budgeting, talent struggles, and culture changes are inevitable for such a change to take place. Change in leadership, fresh thinking, innovation of new business models, incorporating digitization of assets and increased use of technology to improve the experience of employees, customers, suppliers, partners and stakeholders all contribute to digital transformation initiatives.

How do you stay ahead of the competition?

Businesses need to continue evolving to stay ahead of the competition. A digital transformation can ensure the survival of a business, especially in a competitive industry. These transformations aren’t choices because these are expensive and risky decisions. Generally, businesses go through a transformation when they have failed to evolve naturally. Big global consultancies such as PWC, Deloitte and Accenture manage transformation programs on behalf of large businesses. These transformations take a significant amount of time, resources and cross-functional business skills, which are typically found in global consultancies.

In 1958, U.S. corporations remained in the S&P 500 index for an average of 61 years according to the American Enterprise Foundation. By 2011, it had dropped to 18 years. Today, companies are being replaced on the S&P 500 almost every two weeks. Technology has largely influenced this shift with successful companies trying to understand how to merge technology with business strategy. The International Data Corporation (IDC) is a premier global provider of market intelligence, advisory services and event for the IT, telecommunications and consumer technology markets. With over 1,100 analysts worldwide, IDC offers expertise on technology and industry trends in over 110 countries. IDC predicts that digital transformation spending will grow steadily, achieving a five-year compound annual growth rate of 16.7 per cent between 2017 and 2022.

How do digital transformation frameworks work? 

Based on your organization’s challenges and requirements, a digital transformation will have the following features:

  • Customer experience improvement
  • Operational Agility
  • Workforce enablement
  • Digital technology integration

Digital transformations often begin with the customer. Understanding your customers and improving your service levels are a great way to start and then move on to digitizing the entire customer experience. A stage-by-stage approach can be adopted to ensure that this digital framework is slowly enforced, with important areas given higher priorities. Since customers are clearly the most important stakeholders of any organization, it is essential to know them to serve them better. Customer Relationship Management software can help understand purchase patterns and give you deeper insights into customer trends.

Improving business processes and operational agility is also an important element of a digital transformation framework. Digital solutions such as social, mobile, analytics and cloud – SMAC Stack, can help in-bound logistics run more smoothly by tracking product movements; cloud computing can be used to create uniform business processing platforms, and mobile platforms can enable employees to perform their work anytime on any device. Standardized platforms allow for easier global processes, which can lead to substantial cost reductions. Automation, standardization, and sourcing processes can make an organization more agile, and responsive to changes in demand to increase and sustain profitability.

What are the challenges of a digital transformation?

Leadership – Leadership within the company is crucial when a company is going through a digital transformation. Because digital transformation relies heavily on the business strategy and how people engage with the company, a strong and communicative leader will ensure the process is impactful. 

Strategy – As mentioned previously, strategy is a huge part of the transformation process. Without an effective strategy that can evolve as the business grows, the transformation won’t be a successful project. Every aspect of the strategy needs to be demonstrated in the transformation to reflect the structure of the business. 

Effort – Your IT team shouldn’t be the only employees involved in the process. Those who interact with the technology should be a part of the early stages of development for insight into the digital transformation. Testing the current system and discussing its challenges should be accounted for while determining improvements amongst leaders.

CEOs increasingly want their CIOs to help generate revenue for the organization. Companies that were considered top performers had digital leaders whose top priority was to develop innovative new products. Most startups don’t work with pre-existing software packages, instead, they think out of the box and create solutions where there aren’t any, solving existing problems or problems on the horizon. IT plays an important role in driving a digital transformation strategy, but it isn’t a tech issue alone but also a people issue. Culture and leadership can play pivotal roles when ushering in an age of digital transformation now more than ever.

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Rahul Jain