“We are changing the world with technology,” said Bill Gates, signaling the digital transformation that human society, economic relations and lifestyle are currently undergoing. At the core of it, companies building an efficient digital enterprise all have a digital transformation strategy that guides them along their journey. How can you go about building such a strategy? Let’s find out!
The topic is controversial and disputed, which is why we use expert opinions for reference.
What Is Digital Transformation?
There’s no universal digital transformation definition, so we’ll create one based on our experience.
Digital transformation is the capability of a business to quickly adapt to changing environments — organization-, process- and culture-wise — intelligently implementing technologies, streamlined operations and relevant competencies — all to create value.
Digital maturity is the ultimate goal of digital transformation. This goal is impossible to reach without a fundamental change in mindset, skills and business practices. It not only improves existing methods and technologies, but it specifically encourages innovation — innovation in minds, culture, customs, roles and, finally and only then, processes and operations.
Only too often, people confuse the idea of digital transformation in business with digitalization or digitization and incorrectly use these terms to describe the entire shift. Digitization is just the conversion of data into a digital form that has nothing to do with profound changes, and digitalization involves technology-based shifts within domains. Over the years, digitalization has enabled the emergence of many cutting-edge technologies, such as the Internet of Things, blockchain, Big Data and more.
Digital business transformation can be the result of digital disruption — the emergence of brand-new technologies that cause revolutionary changes across industries and jeopardize other market players. Great examples are Uber, Facebook and Netflix, all of whom have disrupted their domains and forced their competitors to reconsider their business strategies.
Why a Digital Transformation Strategy Matters
According to Deloitte, digital transformation is more about the strategy than about technology. Companies should pay close attention to creating a strong, well-thought-out strategy to gain the following benefits of digital transformation:
- Changing the nature of business and redefined efficiency: advanced technologies and methods of work accelerate, scale up and streamline the workflow, and minimize manual processes.
- Intelligent decision-making: better data management enables real-time insights and a proper overview of the business environment.
- Higher employee efficiency: IT solutions replace many professions without triggering unemployment — instead, repurposing employees so that they can perform new, different tasks.
- Seamless customer experience and higher engagement: customers get what they expect right when and where they want it.
- Business efficiency and profitability: workflow optimization, streamlined information management and automation of manual tasks open the way for wider opportunities, higher profits and greater value.
Of course, the revamping of the corporate IT landscape and the introduction of cutting-edge technologies entails considerable costs. But companies should regard that cost as an investment — the World Economic Forum predicts that digital transformation will create value worth $100 trillion in the next few years.
An Efficient Digital Transformation Strategy: 8 Major Building Blocks
IDC predicts that companies around the globe will spend $1.97 trillion on digital transformation solutions by 2022. At the same time, only 15% of organizations have a clear strategy at the early stages of the shift.
“The lack of an efficient digital transformation strategy is the number one roadblock on the way to a successful digital enterprise. The strategy is a bridge between the business and IT— it helps embed technologies into a company’s operations,” says Alexander Deev, DBD of SaM Solutions GmbH.
Remember Kodak? The leading player on the photography market, who pioneered the digital camera, failed to recognize enormous business opportunities that digital photography was to bring. This caused Kodak huge losses and led to its eventual bankruptcy.
To survive in the cyber era, companies should review their strategies in the context of IT.
Let’s find out what major components must be included in an efficient digital transformation strategy.
People and Culture as the Keystone
“Without addressing culture, transformation will probably fail. At its heart, this is a people challenge,” says Michael Wade, professor of innovation and strategy at IMD.
Indeed, people are at the center of any change, and no change is possible without the right mindset. To ensure a successful business digital transformation, leaders should start with their human resources department and prepare them to adopt the change.
Although the human aspect seems insignificant, neglecting it is the most dramatic mistake a company’s management can make. In the long run, it may hinder the success of the whole initiative and reduce the effect of modern technologies.
“Companies should consider both digital experience and behavioral preferences of different sub-populations within their organization,” says Melissa Swift, Senior Client Partner for Digital Solutions at Korn Ferry.
The understanding and proper consideration of employees’ specifics isn’t enough: management should provide employees with efficient tools that boost their productivity and facilitate working processes.
Business transformation involves the change in corporate IT landscapes and technologies, which requires the reshaping of employees’ skillsets and acquiring new competencies and capabilities.
“The 21st century is about agility, adjustment, adaptation and creating new opportunities,” says Benn R. Konsynski, George S. Craft Professor in Information Systems & Operations Management.
This change concerns not only IT departments but also other staff as today there’s hardly an employee whose work is not affected by technologies. That is why companies should provide talent development and foster the culture of continuous learning to fill emerging skill gaps.
A substantial part of a business transformation strategy is the technology that backs it up, which is something a company should think about carefully. According to IDG’s 2019 Digital Business Survey, the top digital transformation technologies are 5G, artificial intelligence, machine learning, augmented and virtual reality, and the Internet of Things. All these need to be carefully considered by companies building an efficient enterprise.
Clear Business Goals
Company leaders must be clear on the reasons why they and their team should transform their enterprise. These goals should be aligned with the company’s corporate culture, budgeting, policies, mission and other important aspects.
“A major step is connecting digital transformation to meaning,” says Jeff Skipper, a certified change management consultant.
Leaders should share their plans across the company to be on the same page as their employees and make sure that the plan is supported by everyone.
Customer Experience as the North Star
“Every digital transformation is going to begin and end with the customer,” says Marc Benioff, Chairman and Co-CEO of Salesforce.
Getting as many customers as possible is a goal of any business, but companies should prioritize a customer acquisition strategy that is based on quality, not quantity.
The aim should not be just the client base increase, but quality changes in customer generation — customer experience transformation. Also, businesses should take into consideration that conditions and needs change at the speed of light in modern turbulent markets, which requires flexible tuning of the customer experience. Modern technologies help companies with it: they provide an insight into customer expectations and needs by making the most of data collection and its thorough analysis.
Good examples of software for creating outstanding customer experiences: SAP Commerce Cloud and Sitecore Experience Commerce.
Comfort with Agile Adjustment and Risk
“Digital transformation includes changing or breaking processes that have been in place and have worked well at some point,” says Martin Henley, Senior VP, Technology Services, Globality Inc.
The disruption of established processes, technologies, roles and relationships is not likely to bring the expected outcome at first attempt. To insure the entire organization against disturbance that always accompanies the introduction of any new strategy, companies should try different options and adjust their results until they get the desired outcome.
More than 50% of companies aren’t comfortable with taking risks. The ability to do so is of utmost importance in the digital transformation of a company and companies that can adapt are the ones most likely to succeed.
Proper Risk Management
Security and privacy are top concerns nowadays. At the same time, digital business transformation is impossible without quick decision-making in challenging conditions, and the ability to introduce immediate changes and upscaling. That is why data protection should always be among key considerations, and the strategy should provide a thorough risk management design.
“CIOs who have mastered this aspect of disruptive change are more likely to be managing a successful transformation program,” says Barry Brunsman, Principal, CIO Advisory, KPMG US.
Many innovative ideas are the result of proper communication within a company, which is why leaders should create a culture of collaboration and build open organizational structures. Integrated cross-functional teams instead of siloed employees boost teamwork and enable quick and flexible adoption of changes across the whole organization.
“Organizations are creating an increasing number of silos to ease the challenge of managing large enterprises, but ease of management can come at the expense of innovation,” says Paul Leonardi, a professor of technology management at the University of California in Santa Barbara.
On the Way to a Successful Digital Enterprise
A well-thought-out and well-executed strategy is the prerequisite for obtaining the maximum benefits from digital transformation. As this is a game changer for numerous enterprises, it’s crucial to properly think it through and work out how best to benefit from it.
We at SaM Solutions suggest that businesses turn to digital transformation services companies before they start their transformation initiative — to make the most out of a challenging opportunity to revolutionize and improve their businesses.