The digital transformation of the business world is happening, and there's no stopping it. Companies that don't keep up with the times will be left behind. Digital transformation means more than just a website redesign or mobile-friendly design. It is an organisational change to how businesses operate to take advantage of growing opportunities in the digital age. Digital Transformation includes four key components: customer engagement, analytics and intelligence, process automation, and innovation capability creation. These four components are crucial for all businesses looking to increase and stay competitive in today's marketplace - but what does your company need? What should you do?
This article will summarise what you need to know about Digital Transformation and its implications for your business.
Digital transformation is reorganising businesses and business models to reflect changes in customer behaviour brought about by the internet and digital technology. This journey means transforming your business, but it also has consequences for every aspect of how we operate when harnessing digitally-powered advanced capabilities.
Digital transformation is the process of creating a change in an organisation or business to introduce digital solutions that address changing customer demand. For example, retailers may meet customers on multiple channels, and financial brands may offer transactions through online or mobile apps.
Some excellent examples of digital transformations include retailers who keep up with changing shopping habits by adapting their methods and structures for serving customers across various channels or banks who are slowly shifting from using branches to providing transactions entirely through online and mobile applications. The common theme in these examples is recognising the need to adapt old ways of doing things to suit new customer demands.
The need for businesses to adapt to changing circumstances is not a new concept in itself, but the 'digital' part of the term reflects the vast changes brought about by the internet and the tech used to access it.
New trends and technologies can change an entire market overnight, opening up new markets or threats. For example, mobile commerce is a fast-growing trend that followed after introducing the first iPhone model, and internet connection speeds increased to meet people on the go.
New competitive pressures and threats can arise. The entrance of a new competitor, such as Amazon or Airbnb, may force an existing company to adapt and stay ahead of the competition.
Companies need to always react in response to rivals' tactics by adjusting their strategy accordingly.
Why? New competitors' introductions provide more challenges for current companies that will lead them to either adopt innovating strategies if they can or fall behind due to missed opportunities.
Technology has had a significant impact on customer behaviour and expectations. Technology causes customers to change their habits, but changes in society can also affect them. If businesses don't keep up with these changing standards, they become less relevant and less competitive.
It's often the convergence of these three factors that bring about change in a company and its business models. New technology brings about changes in customer behaviour, which can create new business opportunities.
For example, if competitors can adapt faster in a changing market or offer what customers want more quickly than you are, your company is at risk of failure. Ultimately, customer behaviour demands attention- if they don't buy from you, there is no business!
Once the dominant provider of on-demand video rentals, Blockbuster collapsed when Netflix and other tech companies entered the market. Now it's dead thanks to evolving technology.
Netflix (and Lovefilm in the UK) offered more choices and convenience for customers by providing DVD rental by mail to rent DVDs even if they didn't live near their local Blockbuster store. Online downloads made Blockbuster almost obsolete, but its recent death sentence came from streaming movies online through Netflix or Hulu Plus--which offer a growing number of TV shows full episodes available at any time with no commercial interruptions.
One key focus when thinking about digital transformation is customer-centricity.
Technology and competition helped create the need for transformation, but it's customer behaviour that ultimately matters.
Beyond convenience, the customer experience has never been more critical.
Customers expect to interact with companies through a variety of channels and in real-time.
They want an individualised approach that's tailored to their needs at any given time--and they don't want to be asked for information again and again.
Many organisations are still stuck figuring out how best to use technology as part of this transformation process while also trying to make sense of data from disparate sources - which often comes up short because it's not rooted in context or personalised enough.
It is the sheer speed of change that makes the digital transformation so critical. Here's an example from Harvard Business Review:
"In 1958, corporations listed in the S&P 500 had an average stay of 61 years. By 1980, numbers from research firm Innosight revealed that the average stay had declined sharply to 25 years. In 2011, the average tenure dropped to 18 years. At the present rate of churn, research estimates three-quarters of today's S&P 500 will be replaced by 2027."
This is why digital transformation matters. It can be the difference between life and death for businesses.
For even relatively established, successful businesses growing stagnant over time due to a sustained failure to adapt to changing trends - before it's too late - could lead to their demise.
Transformation begins with the recognition that fundamental change is needed. This realisation may come from a downturn in performance or perhaps the entry into the market of a new competitor.
Regardless of the cause, transformation must be a strategic response to change in market conditions.
Transforming your business to meet the digital marketplace requires a personalised, pragmatic strategy and approach that varies by industry.
The first step is deciding what you want your company or business unit to achieve from digital transformation. Once this has been established, it's time for an inventory of potential risks and opportunities arising from these changes (what matters most). The goal should constantly be identifying ways in which the risk can be mitigated while capitalising on any opportunity presented by new technology innovations.
One key factor is leadership. Transformation, especially at scale, needs to be driven from the top. This can be hard in businesses where decision making has been slow and reliant on the input of many different stakeholders.
A comprehensive plan will also need to cover organisational readiness - how best are human resources being readied for leadership roles? What about IT infrastructure and data management? How do we ensure compliance with regulatory requirements?
The plan needs to outline who does what, when. What's the timeline for change? How will success be measured and evaluated?
Who is responsible for these changes in approach? Who has authority as a decision-maker or influencer on how they are implemented at an organisational level?
How do we mitigate resistance from our employees while executing this transformation successfully and quickly enough so that it doesn't become a toxic environment rife with politics, mistrust, and fear of failure?"
Here are some key areas to consider when setting strategy:
Be aware of new technology and how it might help you and respond to changes in customer expectations - digital transformation is a continuous journey.