Digital Transformation

Digital Transformation: What it is and Why it Matters

Arman Ghosh
Written by: Arman Ghosh

Everywhere you look, businesses large and small seem to be doubling down on technology. Almost every job now has an IT component. Even small businesses are exploring the applications of artificial intelligence and IoT technology, and most businesses have replaced manual, repetitive tasks with automation.

Or, so it would seem.

According to a recent survey by Forrester, the state of digital transformation is not as impressive as you might think. Although 56% of firms are in the process of transforming, 21% believe (incorrectly) they are finished transforming — another 22% are either investigating digital transformation or are not transforming at all.

If you’re wondering what the big deal is, it’s important to recognize that “digital transformation” is more than just a buzzword or a trendy business concept. In the coming years, the ability to transform from a legacy business model to a digital-first business model will determine which companies stay relevant and which are left in the dust.

What is Digital Transformation?

Digital transformation goes beyond implementing new technology, although technology plays a central role. It is not a tech trend so much as it is a necessary step which businesses must take to achieve business growth in the digital age.

Digital transformation fundamentally changes how a business operates, from its internal processes to the way it generates business and serves its customers. To transform, businesses must integrate digital technology into every area of their operation, achieving every possible efficiency.

For example, twenty years ago, most businesses were reliant upon paper documents. Plenty of companies had computers, but they still transferred important documents with fax machines and paper printouts.

These days, there’s almost no need for paper documents because of the abundance of digital tools we have at our disposal. And yet, consider the number of businesses you know that are still using paper. How many do you think still use fax machines instead of email or secure document sharing software?

This is only part of the equation. Digital technology can touch almost every part of a business, from HR to accounting. It’s not the technology itself but how technology is implemented and leveraged that determines whether digital transformation is successful — and in most cases, a company will never stop transforming.

Essentially, a company that undergoes a digital transformation will jettison its old, cumbersome processes and replace them with new, digital ones to become more agile, more efficient, and to respond to customers and competitors more effectively.

Digital Transformation as a Cultural Shift

Not surprisingly, startups and new businesses tend to have an easier time with digital transformation. In fact, they may not need to transform very much at all. Originating in the digital age, the newest companies can easily adopt the digital tools and processes available to them.

Established companies that are still dependent upon legacy systems have the most work to do regarding digital transformation. This includes many Fortune 500 companies. Their workforces are accustomed to their existing processes, so implementing new technology and changing those processes can be a shock to the system.

The larger the businesses, the more work it will take to transform.

Digital transformation typically starts from the top. But it requires buy-in from the entire organization. It requires you to make tough decisions about technology, how your business is structured, and how each of your business units relates to each other.

For example, something as simple as adopting a new project management program could have a dramatic impact on your operations. Your employees will need to be trained on the new system and grow accustomed to it before it can start producing value.

And that’s just one piece of software.

For the technology to do its job, you can’t just bring it onboard. You need to change your company’s mindset.

If your employees are used to working in siloed environments, the technology designed to break down those silos won’t work until your employees are ready to commit to the process. Technology that helps your business become more customer-centric must be backed up by people who are more customer-centric themselves. And if you want to use technology to become more agile, your team needs to be well-versed in the Agile methodology.

Familiarize your employees with your new technology and help them understand why the changes are important. If they can see the benefits, such as how the new technology will make their jobs easier, they’ll be excited at the prospect of digital transformation.

The Benefits of Digital Transformation

There are numerous benefits to digital transformation, some of which are tangible and some of which are not. The benefits experts cite the most often are:

  • Increased agility
  • More innovation
  • Deeper analytics
  • More efficient operations
  • Better systems orchestration
  • Improved customer service
  • A more universal customer experience
  • Reduced costs
  • New products, services, and capabilities

Some companies pursue digital transformation as a way of fixing their broken systems. But going digital-first opens new opportunities as well.

According to one report, 51% of firms said growth opportunities in new markets were their key driver of digital transformation — more than any other driver.

Growth Drivers of Digital Transformation Graph

(Source: Marketing Charts)

Nonetheless, evolving customer behaviors, competitive pressure, and the changing workforce were also key drivers of digital transformation. Today’s customers expect a seamless experience from businesses, and today’s employees expect to work with the latest technologies.

Starting Your Digital Transformation

Digital transformation will shift the way your entire company operates. To start the process is no small feat. It cannot be implemented by a single team or department.

To evolve your operations, start with your leadership. You’ll need buy-in and a serious commitment from every stakeholder. If anyone on your leadership team doesn’t understand the importance of your transformation or is reluctant to help, issues of authority could get in the way.

Next, go after “low-hanging fruit.” Get some quick wins and start small to show the benefits of integrating new technology. It may be a slow process, but if you can clearly demonstrate why digital transformation is important, it will be easier to get buy-in from the entire organization.

Inevitably, there will be some people who are reluctant to change.

Finally, don’t be afraid to reach out for help. According to one 2018 survey, 95% of digital decision-makers believed digital transformation seemed like “an insurmountable task.” If you’re overwhelmed, you aren’t alone.

Many companies work with outsourced service providers to help them select and implement the technology that will fuel their digital transformation. If you need help empowering your employees and implementing your technology stack, contact Growth Panda for a consultation today.