What does digital transformation mean?
Many business professionals ask themselves this question, since technology leaders by and large agree that digital transformation is necessary.
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Major research firms – such as Gartner, McKinsey, Deloitte, and many more – all discuss digital transformation in depth.
However, before discussing the “how” of digital transformation, we need to learn the “what.”
What Does Digital Transformation Mean?
Digital transformation is a relatively new term, so definitions may vary slightly from one source to the next.
However, the underlying meaning is the same…
Digital transformation refers to business changes that leverage technology in order to make business improvements through organizational changes or a full-scale organizational transformation. A digital transformation initiative is often complex, and can include changes to:
- Products and services
- Business strategy
- Revenue models
- Organizational structure
- IT infrastructure
- Business processes
Also, an organization may have several aims when undertaking such an initiative, including:
- Becoming dominant within their industry. With the right digital technology and the right strategy, it is possible to attain a virtual monopoly on an industry – or at least a significant lead.
- Staying competitive in a changing marketplace. If a single organization leverages digital technology to gain a massive lead, then all of its competitors must follow suit.
- Pursuing growth opportunities. Technology can help in many ways, from improving business process efficiency to opening up new potentials for growth. Accessing new online marketing tools, for example, can help organizations access more customers more easily, increasing their growth potential.
- Increasing overall organizational performance. Technology can be used to realize performance gains across many areas of a business. Automation, for instance, can be used to cut human labor costs, decrease error rates, improve efficiency, scale business functions, and more.
- Actualizing a new vision for the organization. Truly forward-thinking businesses will not stop at efficiency or performance gains. Instead, they will envision a new version of their company – one that can thrive in the coming digital era, which will look quite a bit different from the pre-digital economy.
Digital transformation, in other words, will look different for each organization.
What Digital Transformation Look Like: A Few Examples
Let’s explore some more concrete examples that can help illustrate what digital transformation looks like in the real world.
A digital transformation initiative may involve changes to multiple areas of a business, including…
- Products and services. Digital technology opens up many new avenues for serving customers. Today, for instance, an organization may choose to develop web apps, mobile apps, or other digital products that augment its existing product lines.
- Business strategies. Digital technology can change the way business operates, which can have a drastic impact on an organization’s overall strategy. A newspaper, for instance, may have to dramatically alter its business strategy to counter the falling demand for print news – one way it could do this is by building out an online presence and incorporating digital ads into its website.
- Organizational cultures. Digital transformation doesn’t just impact business processes, it has a huge effect on people as well. Organizational culture can be pro-learning and pro-technology, for example. These traits will significantly aid an organization and its workforce in the digital age – but if the workforce is too resistant to learning new technology, business leaders may choose to change the culture.
- Modernizing the digital workplace. Culture is one factor that can affect employee productivity but it is not the only one. Maintaining a modern digital workplace also requires skilled employees, cutting-edge software, unified technology stacks, modern business practices, and more.
- Training programs. In the digital age, perpetual learning is fast becoming the norm. The modern employee must work with a complex array of tools every day, which requires a continuous, effective training function. To keep up, organizations are investing in new technologies and approaches, such as digital adoption platforms.
A set of changes such as those just listed will typically support an overarching vision of change, the strategic north star that guides the effort.
What Causes Digital Transformation
So far, we have learned what digital transformation is and what it looks like.
However, it is just as important to understand what drives digital transformation. After all, there must be some reason that compels organizations to pursue digital transformation … otherwise they would not be investing millions of dollars globally into digital transformation.
There are a number of underlying factors that drive organizational change, such as:
- Digital disruption
- A transforming digital economy
- A new competitive landscape
- New potentials for growth
- Changing customer demands
In many cases, an organization waits until it is forced to change before developing a digital transformation strategy.
This makes sense, since organizational change is costly and it does contain risks.
However, since the digital economy is changing so rapidly, in many cases it is riskier to do nothing at all.
To avoid the fate of businesses that were buried by the digital revolution – such as Blockbuster or Borders – it pays to research digital transformation in depth.
For more information about digital transformation and adoption, read more articles on our digital adoption blog.