The 4 Main Areas of Digital Transformation
— January 15th, 2021
Digital transformation can be defined as the process of utilizing modern technology to create new - or modify existing - business processes, culture, and customer experiences.
This re-imagining of business in the digital age equips organizations with the tools necessary to keep up with competitors and to meet changing market requirements.
This type of transformation transcends traditional roles like sales, marketing, and customer service, and is primarily concerned with how organizations think about, and engage with, customers. With the incorporation of new technology, organizations have the opportunity to re-examine how they carry out business.
This will open doors for significant growth and can allow them to greatly increase their customer experience and branch out into industries that were never before possible.
If an organization planning to embark on a digital transformation project, then there are four main areas they should consider:
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1. Process Transformation
Process transformation entails modifying the elements of a business’s processes in order to achieve new goals. Most companies engage in a business process transformation when they require a radical update. Undergoing such a transformation will modernize an organization’s processes, integrate new technology, save money, and better incorporate core systems.
Important steps in Business Process Transformation
Business process transformation follows similar steps to business process management but attempts to make bigger and more drastic changes. Some steps to take when it comes to process transformation include:
- Identify the goals of the transformation – Is the company primarily trying to upgrade systems? Incorporate new technology? Adapt processes to a new organizational structure? What has caused the need?
- Establish baseline metrics – Organizations should collect the data needed to show that the business process transformation will be a success. This should include cost, time, number of errors, and other metrics that can be measured.
- Bring in all stakeholders – This includes approaching all those involved in the process for their feedback on what worked well in the prior process and what they expect out of the new one.
- Map out the best scenario - Using a diagramming tool, businesses should create the ideal workflow path including human and system tasks that need to take place.
- Set live and monitor – Companies should introduce small teams at first to the new process, and closely monitor the progress and any changes that need to happen in order to see success.
2. Business Model Transformation
Many companies are pursuing digital technologies in order to transform their traditional business models. In today’s business world, there are numerous examples of this kind of innovation, from Netflix's reinvention of video distribution to Apple's reinvention of music delivery (I-Tunes), to Uber's reinvention of the taxi industry.
These well-known names are not the only companies to incorporate such big changes into their business model. Insurancecompanies like Allstate and Metromile are using data and analytics to un-bundle insurance contracts and charge customers by-the-mile—a wholesale change to the auto insurance business model.
By reinventing and adding to their current model for success, corporations can achieve a renovation that leads to significant new opportunities for growth. This is why more companies should be trying to follow a similar path.
3. Domain Transformation
An area that doesn’t receive a large amount of attention, but which has proven itself to have enormous potential, is domain transformation. New technologies have the ability to redefine products and services, blur industry boundaries, and foster opportunities for non-traditional competitors. This form of wholesale transformation offers incredible opportunities for businesses to create new value.
An excellent example of how domain transformation works is the case of the online retailer, Amazon, which expanded into a new market domain with the launch of Amazon Web Services (AWS). Currently, AWS is the largest cloud computing/infrastructure service provider in the world, in a sector that was previously dominated by high-profile behemoths Microsoft and IBM.
While it may not have appeared to be an obvious play by Amazon, its move into providing cloud services saw the online retailer leveraging capabilities and services it was already using. For example, it had already developed massive storage capabilities as it sought to underpin its global business while at the same time it provided key computing services to start-ups and other growing businesses that were part of the Amazon family. So all the capability was there, it just required the vision and confidence to make the move into the cloud space.
All businesses undergoing a digital transformation should be mindful of the new opportunities for domain transformation that present themselves with the incorporation of new technology.
4. Cultural/Organisational Transformation
A successful digital transformation demands more than just updating technology or redesigning products. If an organization fails to align its digital transformation efforts with its internal values and behaviors it can have a knock-on effect on an organization’s culture.
Negative repercussions range from slow adoption of digital technologies to loss of market competitiveness and inevitable failure of the initiative and lost productivity and revenue. On the other hand, a comprehensive and collaborative effort can help shift the culture to understand, embrace, and advance digital transformation.
Leaders should formulate a clear vision of the transformation and effectively communicate it throughout the organization on an ongoing basis. They need to be clear about what the smart risks are and why they’re worth taking.
Core elements of digital culture:
- Promotes an external, rather than an internal, orientation
- Prizes delegation over control
- Encourages boldness over caution
- Emphasizes more action and less planning
- Values collaboration more than individual effort
Key Takeaway on Digital Transformation
Through the use of modern technology, businesses are constantly evolving and undergoing digital transformations that better their efficiency and competitiveness in the marketplace. But digital transformation does not end with the implementation of new technology. Organizations should think beyond technology to embrace true digital transformation. It is only with a complete overhaul of an organization that businesses can realize the benefits of digitization: enhance operations, create collaboration opportunities, expand their service offerings, and revolutionize their approach to the customer experience.