Digital transformation is all about changes and the integration of digital technology into all areas of a business. Let's see why digital transformation is so important, what does digital transformation look like, who is responsible for that process, and how can you get started on digital transformation.
What is digital transformation?
Digital transformation will look different in each company. There are many different definitions - each of them focuses more on a different aspect of digital transformation.
Digital transformation is the application of digital technology into all areas of a business, like processes, products, and assets to improve efficiency, manage risk or discover new monetization opportunities. This leads to many important changes in organizational culture, how a business operates, and how it delivers value to customers. Digital transformation doesn't enhance traditional methods. It helps to discover, apply, and enable new types of innovation and creativity, and offers new ways of organizing processes.
Digital transformation is not only about digital technology, but also about people and solving traditional problems in a new way. It helps to improve the experience of an organization’s employees, customers, suppliers, and partners. It also involves a change in leadership, developing new ways of thinking, and encourages innovations in all areas.
Why digital transformation is important?
Digital transformation is a buzzword these days, but it's also a real chance for growth. Being fully digital is no longer optional in the 21st century. Today, a vision for a company’s the future must include digital transformation. Why? In order to grow, compete effectively and not stay behind other, more innovative companies. There are many benefits and arguments why digital transformation is so important. Read on to learn about some of them.
The rapid adoption of new technologies, like IoT and multi-cloud environments, has dramatically increased the possibility of cyberattacks. A well-executed digital transformation will demand more data, but will also help you keep it secure and adjust the approach to security to ensure there are no gaps in protection.
Digital transformation will also help to improve processes in companies. This includes better control and transparency of business finances, improved customer services, and optimized workflows.
According to report by McKinsey, digital transformation can reduce costs by up to 90 percent.
“Examples span multiple industries: one bank digitized its mortgage-application and decision process, cutting the cost per new mortgage by 70 percent and slashing time to preliminary approval from several days to just one minute. A telecommunications company created a self-serve, prepaid service where customers could order and activate phones without back-office involvement. A shoe retailer built a system to manage the in-store inventory that enabled it to know immediately whether a shoe and size was in stock—saving time for customers and sales staff.” - writes Shahar Markovitch and Paul Willmott in McKinsley report.
How does digital transformation look like?
A real digital transformation involves fundamentally rethinking business models and processes, so it's not simply about implementing more technology into existing models. Digital transformation should create new models, for example, improving customer engagement, using insights from data to offer new products or going paperless.
What does it mean in practice? Let’s take Porsche as an example. Although these cars are known for their classic looks, great performance and the long tradition they refer to, the company is a very good example of a well-executed digital transformation.
Porsche's digital strategy focuses on customer experience. The German company has invested in understanding the Porsche driver. Their central CRM data center collects all customer data and allocates it to a unique ID. They know about every customer interaction at every touch point. This system helps Porsche to know their customer’s expectations for each touchpoint. What's more, the collected data helps them to maximize campaign success. For example, the company contacts directly only those customers who are really interested in purchasing a car at that moment. Such use of data leads to a huge increase in overall sales conversion rate.
Who is responsible for digital transformation projects?
The most popular answer to that question is Chief Information Officers (CIOs), who have a big impact on digital change projects. Yet, the increasing pressure for change in many organizations has led to the rise of new C-suite specialists, like Chief Digital Officers (CDOs). Good CIOs have the experience of integrating systems and they work together with CDOs to employ advanced technology, developing digital transformation in their organizations.
On the other hand, the modern CMO shouldn't be just a user of technology. The digitally transformed CMO should be a leader with a strategic plan, who wisely chooses the proper technologies and can understand which will help the company to grow and yield the biggest benefits.
Digital transformation - is it not too late?
No, it’s definitely not too late for digital transformation. Worldwide spending on digital transformation technologies reached 1.3 trillion dollars in 2017 according to IDC. By the end of 2019, spending will reach 1.7 trillion dollars worldwide. We can expect that in 2021, the total amount spent on digitalization globally will surpass $2.1 trillion.
For example, according to the McKinsey Global Institute's Industry Digitization Index, "Europe operates at only an estimated 12 percent of its digital potential, compared with the United States’ 18 percent". Same reports highlight enormous variation between Europe’s countries digital potential: France is at 12 percent, Germany reaches only 10 percent, while the United Kingdom is at 17 percent.
This report shows clearly that even advanced economies are really struggling with exploiting the full potential of digital transformation. The good news is that if you know how to start a digital transformation and do it well, you have a big chance to improve and grow fast.