Is digital transformation effective?
The Advantages of Digital Transformation
Digital transformation ranges in complexity but at its heart is a desire for simplicity. There have been countless success stories for brands that have transformed their technological capabilities – and there are specific elements that contribute to effective digital transformation.
What’s initially clear is it’s important to have a holistic mindset when approaching your strategy. There is no ‘one size fits all’ formula to digital transformation, so yours will need to be designed according to your sector and business. With that in mind, digital transformation delivers many advantages.
Improves customer satisfaction
Not only does digital transformation modernise your company, increase positive brand perception, create more efficient workflows and deliver a range of security benefits, it can make a tangible difference to your bottom line.
Research has shown that digital transformation improves customer satisfaction thanks to the quicker, more efficient nature of automation. Whilst people like to interact with humans when working with businesses, swifter processes and less room for human error combine to create better experiences.
Improves internal communication
Amongst colleagues, digital transformation can improve collaboration and communication processes. Digital tools can help reduce long-response times, miscommunication and unimaginative idea-sharing. Digitalised communication within businesses can help boost productivity and give you the edge of your more cumbersome competitors who perhaps haven’t undergone a digital transformation yet.
Helps generate data insights
In terms of data collection and analysis, digital transformation enables businesses to generate more insights at scale, converting numbers into meaning in a much quicker, more efficient manner. If you imagine data as thousands of tiny jigsaw pieces, digital processes can solve the puzzle by providing you with a clear view of everything from operations to revenue, customer experience to production. What’s more, in an age when customer data is a precious and monitored commodity, digital transformation enables you to collect, store and share in a secure manner.
Looking beyond the advantages it’s important to have a holistic mindset when approaching your strategy. There is no ‘one size fits all’ formula to digital transformation, so yours will need to be designed according to your sector and business.
An understanding and buy-in from the whole company is imperative, too – but regardless, digital transformation involves several key ingredients.
What does effective digital transformation look like?
According to a McKinsey report, less than 30% of digital transformation attempts succeed. The data also highlights that effective tech integration can be dependent on a company’s structural size.
In fact, it found that businesses with fewer than 100 employees were 2.7 times more likely to say they experienced success than those that employ over 50,000 people.
Size wasn’t the only factor – the companies that did report a productive process all shared common ground. McKinsey found 21 best practises were reported for fruitful digital transformation – all of which can be grouped into five key categories for success:
- Capability building
- Empowering workers
- Upgrading tools
Of course, the pandemic has supercharged business tech adoption, but the key components of productive digital transformation remain.
What is the difference between digitisation, digitalisation and digital transformation?
No, this isn’t a trick question and yes: the addition of a handful of letters can make a big difference. When it comes to digital transformation, it is important that we understand the distinction between the various terms.
In its simplest form, digitisation is the process of converting the analogue into the digital. For example, converting a written document into a PDF, or uploading a photograph into a digital album. The data itself hasn’t changed; it has simply been altered into a digital format. As such, no optimisation or transformation to the data has occurred.
Digitalisation, however, is the process of using digital technology to automate an operation or process. Digitalisation ultimately leads to a more efficient process that enables revenue increases and business growth. For example, a written report can be converted into a digital presentation – that is digitisation; digitalisation would involve changing the way the report is created in terms of data collection, analysis and insights.
Going one step further, digital transformation is a comprehensive overhaul to a company’s business strategy. It is a company-wide transformation of processes and operations. Whereas digitalisation might occur to an isolated process – think the example above of the report – digital transformation is a combined change across all facets of a business. It is the application of digital technology to improve workforce quality, optimise processes and automate operations to improve the performance of a business.
Now that we understand the key differences between the three concepts, it is important to know that each one can have a hugely positive impact on business performance. Converting pen and paper into digital tech opens up a world of possibilities for collaboration, automation and better insights. Digitalising an operation can lead to a much more efficient business that can find time to concentrate on other areas of business growth, whilst digital transformation will fundamentally change the way a company operates and deliver untold benefits, namely a stronger bottom line.
Effective digital transformation in practice
Leslie Willcocks from the London School of Economics backs up the McKinsey findings in an article written for Forbes. She says execution failures often occur due to misunderstandings of what digital transformation actually is and what it involves.
Professor Willcocks explains that not only is digital transformation an expensive process, but it’s difficult – and great results rely on approaching the process as a whole organisation.
She uses this specific example:
“For example, automating a procurement process, and using algorithms to make procurement decisions and analytics software to provide insight. But this only impacts procurement; it is not digital transformation, though many might think, or hope, it is.”
For digital transformation to be a success, every facet of the business needs to have buy-in and involvement. By definition, digital transformation is the ‘integration of technology throughout your business and its processes.’ This means you’re unlikely to achieve positive results by focusing solely on particular processes or departments. Digital transformation requires a full immersion.
It’s not enough to simply add new digital technologies to your existing processes. A transformation means just that – it may require a redesign of your business model, or a reframing of processes. Your people then need the appropriate communication and training to ensure all the cogs fit together and work in harmony to successfully execute your new digitally-enabled landscape.
Both the McKinsey data and Professor Willcocks’ findings show enhancing your digital portfolio across the board can be a difficult task to undertake – but can it be effective?
Yes, absolutely – and there’s proof. Not only is there proof, but there’s a blueprint that your business can refer to and adapt to fit to your circumstances.
Once the pieces are in place and you have the appropriate buy-in from your people across the brand, digital transformation can provoke powerful and positive business generation.
Industries affected by digital transformation
What digital transformation means for your brand won’t just rely on your business model. How it plays out in reality will also heavily depend on the industry you operate within.
We’ve discussed the need for approaching a strategy holistically – and much of this necessity is down to unique industry evolution and specific pressure points.
These eight examples aim to offer a better understanding of what digital disruption might look like for your sector.
Banking and financial services
Even before the pandemic, in-branch banking was in severe decline and linear financial services options were less popular. Growing disruption from non-traditional players was a likely cause. However, as of March 2020, the banking industry needed to evolve – and quickly.
The increased presence of fintech companies (64% in 2019, up from 16% in 2015) has shaken up the industry. Meanwhile, investment app usage grew 88% in 2020 and payment app sessions also grew by almost 50% in the same period.
In a space where tech has increased the number of competitors and created more consumer choice, it’s essential to be agile and stay firmly on the pulse. Reimagining a brand’s digital capabilities in this industry can:
- Remove outdated processes through automation
- Heighten efficiencies both internally and for customers
- Refocus financial experts for more complex tasks
- Speed up problem-solving capabilities
- Remain competitive in the space and retain customers
- Increase ROI.
Not only this, but tech tools such as AI and blockchain are being used for security purposes and ensure our finances are protected against online fraud.
Therefore, businesses within the banking and financial services industry have had to – and will keep having to – embrace the power of digital transformation.
The infusion of technology within education has been transformative for many institutions – especially during the pandemic. When teaching was managed virtually, it was technology and the online systems used by schools, colleges and universities that made imparting knowledge possible.
Dig a little deeper, and data collected from work and tests can be utilised to personalise learning experiences, craft tailored lesson plans for individuals and educate more holistically. VR can even enhance in-class lessons with more practical, visual experiences to help students that learn in different ways.
Long gone are the days of manual registers, too – tech such as Bluetooth can automate the process.
When utilised effectively, digital transformation can have incredibly positive outcomes for patient care.
However, digital help isn’t being sought by organisations in many instances where having a strategy in place could transform what’s possible.
The range of tech that could be used in this industry is eye-opening. Medical records can be maintained using cloud-based software which could help with wholesale efficiencies.
To help contain the spread of coronavirus in hospitals, disinfection robots have been used. The global situation with the pandemic has also forced many in-person interactions to go virtual – so smartphones have stepped in to help with therapy. Apps are available to manage appointments and send reminders, whether that’s for an eye test, dental appointment or time with a GP.
There are digital technologies to help with diagnosis – cholesterol tests using a phone, for instance – and AR and VR is used to train budding surgeons.
Automating the study of papers using AI can even help speed up diagnosis and put a patient on the correct course of treatment.
Media and Entertainment
With each passing year, the idea of traditional media and entertainment consumption is reimagined in a fresh way thanks to advancements in technology. The successful organisations are those that stay ahead of this curve.
This industry is probably the most impacted, influential and also the one with the most potential for growth. There’s a whole load to unpack – from online or mobile gaming, the rise of streaming platforms such as Disney+ and Netflix and the rapidly changing idea of ‘entertainment on the go’.
Tech also makes personalisation a possibility for content recommendations, targeted advertising and more.
The value of the global industry is also rising again after the pandemic-inflicted fall in 2020 – revenue is set to rise from $2.2 trillion in 2021 to $2.6 trillion in 2025.
While the future of print media is uncertain, online publishing is consistently proving itself to be an exciting space featuring countless opportunities. From blog content to social media platforms creating space for users to download publications, there’s lots to consider. E-reading is also on the rise, with more and more magazines and books being consumed in digital form. In fact, eBook revenue is set to reach global heights of $17,036 million in 2022 and $18,693 million by 2026.
Digital disruption has shaken the retail industry, redefining what’s possible in the sector. It’s not just the Covid-19 pandemic that’s showed consumers they can purchase in different ways, there are entire brand teams devoted to accelerating tech capabilities. It’s an incredibly competitive industry that demands customer service excellence, after all.
The customer has a wealth of choice for where, when, what and how to buy products and services – and the industry has to keep pace by enhancing its tech. A brand might call on AR, VR, AI, IoT or Big Data – or all of the above – to make this happen. Whatever it is, though, it’s certainly an industry demand to digitally transform what the brand can offer a customer.
For example, the cosmetics retailer, Lush, has achieved digital excellence thanks to decades of devotion to matching its brand values with its technical proficiency. In a conversation with Computer Weekly, Lush co-founder Claire Constantine explains the commitment the brand has to being cruelty-free and sustainable – and how this is woven into the fabric of everything it does. From inventing, manufacturing and selling its own products to using a server operated on clean energy. Lush has even created an app called ‘Lush Lens AR’ to which helps customers scan products via their smartphone to remove the necessity of packaging.
Tech services and products
Though it’s the developments coming out of the tech industry that are driving performance in other sectors, the digital world is taking its own leaps forward. Key technologies already touched upon are continuously at the centre of innovation, updates and enhancements which can further transform what your business can achieve.
- Cloud tech
- Augmented reality (AR)
- Virtual reality (VR)
- 3D printing
- Internet of Things (IoT)
- Cloud computing
- Big Data and Analytics
- Artificial intelligence (AI).
There’s been an incredible amount of disruption within the transportation industry thanks to technology – and much of it is centred around data.
For instance, fleet management has been made easier with more efficient route planning, minimisation of supply chain hazards and improved fleet service history logging. GPS technology serves the industry in a variety of ways, too.
Through the use of tech-enabled vehicle automation, drivers can also benefit from assisted driving, self-parking and hazard detection. There are also self-driving models.
Meanwhile, the way consumers purchase vehicles has been shaken up in recent years. Companies such as Cazoo and Cinch remove the need for a car showroom by allowing you to purchase online, offering a trial period and delivering a car straight to your door.
Benefits and barriers to digital transformation
When any business embarks on a journey of transforming its processes, there’s an expectation of both benefits and barriers to come. Knowing how to identify these can make a difference when crafting and executing your strategy.
Below are some of the key benefits and barriers to embarking on a digital transformation journey for your brand.
1. Enhanced data capabilities
It’s standard business practice to collect customer data – your brand probably has access to mounds of it. But is that data being used effectively? Digital transformation has the power to revolutionise data collection and analysis for the benefit of your future business practices. In order to move your business forward, utilising data is key – and using digital tools can also help with data-driven customer insights. Better serving your customers’ needs in a more effective way? It’s a win-win.
2. Improved collaboration
Benefits are generated when you get cross-business buy in. As soon as all employees feel empowered as a part of the digital transformation process, suddenly a fully digital culture becomes possible. With this comes improved collaboration opportunities and upskilling that sets your business on the path to digital excellence.
3. Productivity benefits
Through engaging in a well-planned and strategised digital transformation journey, your teams can ensure they have the correct tools in place for productive working. Streamlining processes through exciting tech can free up time for your experts to concentrate on more intricate tasks. The automation of time-consuming manual tasks can help your business become more efficient and get more value out of each day.
4. Ability to be agile
The impact of the pandemic shows that agility is incredibly important. The integration of tech throughout your business processes ensures that you can be agile, quickly adapting to changes in the market and your industry. Manual ways of working or over-reliance on external parties can block progress and impact what you can achieve.
As a result, time-to-market can be optimised, as can strategies that will inform continuous improvements in your business.
5. Better customer experience
When combined, these internal advancements can improve your customer experience offering. It’s increasingly possible to create frictionless experiences at all touchpoints – no matter how your customers interact with your services. More than ever, consumers demand excellent service, both in-person and digitally and digital transformation can facilitate this.
The success of your digital transformation efforts are often limited to the people you have within the business. A lack of appropriate talent can be a huge barrier to the effective execution of your plans. Therefore, upskilling, training and recruitment could be essential to filling skills gaps and having the right talent in situ for your plans to come to fruition.
It takes money to completely transform your business and a lack of budget can be one of the biggest barriers. In fact, global digital transformation spending is set to reach $2.8 trillion by 2025. Therefore, the appropriate investment in the project is required for it to be completed successfully.
3. Siloed teams
When a business model is siloed, there can be significant power struggles that create barriers for the effective execution of a digital strategy. Lack of inter-team communication can also generate problems. This offers up multiple issues – not only will it provide a huge barrier for bringing your plan to fruition, but siloed businesses aren’t conducive with digital agility.
By definition, a digital transformation is a strategy that operates throughout the whole business.
4. Resistant culture
A Harvard Business Review report found that 47% of businesses felt one of the biggest barriers to digital transformation was the company being risk-averse. Only when all employees of a business are open to embarking on the digital transformation process, is success possible. It requires open-mindedness and a positive attitude to innovation.
5. Cyber security capabilities
Cyber breaches are unfortunately a risk of becoming a more digitally advanced business. This means that a business’ cyber security capabilities need to match the tech enhancements you’ve permeated throughout your business processes.
To avoid digital threats, it’s essential to have security measures that can keep pace with the speed and complexity of your technological progress.
Looking to the future
Digital transformation is transitioning into a new and exciting phase. We’ve moved past the stage of businesses clinging on during the pandemic. While innovations in digital capabilities saved many companies in the depths of lockdowns, the movement is now focused on improving tools rather than replacing them.
As tech marches forward, what it can offer your business continues to grow. For instance, AI is taking a leading role in the development of digital transformation, from integrating with the cloud to facilitating hyper-automation.
Additionally, 5G deployments are set to rise, broadening potential across the board and the working landscape is irrevocably changed.
By staying on the pulse of trends in a post-pandemic world, the digital possibilities for your brand could be extensive.
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