The Ultimate Guide To Digital Transformation and Why It Is So Crucial For Today's Businesses
TABLE OF CONTENTS:
- What is Digital Transformation?
- Why Digital Transformation is Essential for Your Business’s Success
- What Generated the Need for Digital Transformation?
- The Four Main Types of Digital Transformation
- A Flowchart to Implementing Digital Transformation for Your Business
- How to Build a Digital Transformation Team
- How to Prepare Your Business for Digital Transformation
- Digital Transformation Hurdles
- How to Determine a Budget for Digital Transformation
- The Benefits of Digital Transformation
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What is Digital Transformation?
Digital transformation (DX), in simplified form, is enlisting digital technology to replace manual processes using computers, electronics, software, cloud computing, and other electronic methodology. For businesses, this means changing traditional business operations by integrating digital processes or upgrading current digital practices with new technology. The ultimate goal is to offer better products, streamlined customer service, and provide businesses better value and profitability.
The World Economic Forum is a group of more than 1,000 leading global companies partnering to support worldwide enterprises in areas such as technology. One of their reports on digital transformation forecasts the potential value. “To date, this work has confirmed that digitalization has immense potential: we estimate it could deliver around $100 trillion in value to business and society over the next decade.”
Many business owners, CEOs, and management are confused as to what qualifies as digital transformation. Software used such as Zoom, Skype, Slack, storing data in the cloud, and e-commerce are all digital business practices; however, digital transformation goes beyond the scattered use of technology. Digital transformation is the all-encompassing integration of technology in every business area, changing operations to align with and remain relevant to global transformation.
Not only is this an important time for enterprises and large corporations, but startups and small businesses are at risk of being out-performed and out-sold by competitors who have already embraced digital transformation. While companies may be hesitant to do away with the old way of doing things and may not realize the value, digital transformation cannot be ignored.
Where To Begin?
There are countless industries and companies already aware of digital transformation, with some at the planning stage and others halfway through their implementation of new methods and technology. Where a business is at in the process matters based on the type of industry and size of the company. True digital transformation applies to every aspect of a business, such as data management, marketing, inventory, supply chain, workflow, customer service, and employee training. There isn’t simply one piece of digital transformation; it’s a multi-level, multi-departmental, and multi-process upgrade.
Digital technologies change how we live, improve our lives, facilitate communication and partnership, and how people and businesses engage globally. Digital transformation is monumental and affects all areas of life and business. This ultimate guide provides information and guidance for your business to go forward with digital transformation based on industry, size of operations, customer base, and future growth prospects. One example is 5150 bringing digital transformation to the financial services industry through data-driven digital marketing processes.
Why Digital Transformation is Essential for Your Business's Success
When the pandemic spread throughout the world in 2020, daily living and how businesses operated faced a massive transformation to survive. Companies had to make use of telecommuting, teleconferencing, and remote administration using software such as Zoom, Cisco Webex Business, Google Meet, and Microsoft Teams.
These digital communication and file-sharing platforms are only one portion of an actual digital transformation strategy. Implementing them was essential during the pandemic if businesses wanted to make it through the interruption of work. Those companies faced deficiencies in digital technology and realized how essential a digital transformation strategy is for their business’s success. According to Statista, the number one global business data platform, digital transformation is the top technology concern for companies.
“This statistic shows the top priorities for IT technology initiatives in global companies in 2020 and 2021. Respondents were asked to rank the tech initiatives according to priority. Digital transformation and cybersecurity took the first and second spot with 56 and 50 percent respectively, proving to be the most important initiatives.”
Digital Transformation Makes Work Better and Customers Happier
Companies have to revisit all their business practices from inside operations to customers and customer satisfaction to implement digital transformation. The main driver for any business making significant changes is to increase their customer base and ensure their customers are happy. Competitors are already using digital transformation to streamline production, increase distribution, and improve their customer experience. The time is now to keep up or end up falling behind and losing business.
Today’s customers and consumers are connected to technology through computers, cell-phones, laptops, tablets, and even computerized appliances with internet access. These connected consumers see new methods of business and innovative offerings and expect the same from all industries. Comparison shopping takes little effort, and if a potential or existing customer finds your business is not up to par, they’ll move on to the company that is.
From 24/7 customer service, ordering, scheduling of services, and communication, customers want a fast and efficient way to do business with a company. The goal of a company instituting digital transformation is to change business processes to enable better decision-making, improved efficiency, and superior customer service. It’s not about how fast things can get done; it’s about doing business in a way that makes the most of technology to increase profits and retain existing customers while also attracting new customers.
The world is entrenched in technology, and companies are making use of clever and effective ways of using this technology to provide their business with stability and exponential growth.
What Generated the Need for Digital Transformation?
The new world of technology embeds itself in every area of life. From family homes to small businesses, schools, healthcare, and countless industries, technology is not avoidable. It may seem counterintuitive, but technology even increases customer service’s personalization by allowing employees to be more efficient and providing instant access to current data stored in the cloud. From employee productivity to accurate data, digital transformation provides companies with increased chances of surviving and thriving.
Keeping Up With Digital Progression in All Areas of Business
Digital processes afford companies automated computability in core business functions such as finance, payroll, HR, accounting, inventory, manufacturing, and collaboration with other businesses. Data and analytics are key business elements, and utilizing digital processes allows companies to use big data to reach their profitability goals faster.
The conversion in 2020 from in-office employees to domiciled office settings dispersed a workforce that may never return to their offices. Digital technology allows employers to improve communication, data sharing, and productivity for remote workers. Once a company’s operating procedures are all digital, the integration makes business practices a streamlined and highly efficient machine that delivers quicker and better-informed decisions.
Millennial employees already have a digital-first mindset. These younger employees grew up with digital toys and tools and expect to use technology in the workplace. They thrive in a technological work environment that allows them to work from anywhere at any time. Empowered employees use 24/7 social media connections, chat capabilities, and other digital channels to interact with customers, vendors, suppliers, and other essential business connections. Being able to quickly and remotely access information and data creates a powerful workforce.
The pervading force for companies to undertake digital transformation is driven by a worldwide shift of business practices. Activities such as consolidating data processing centers, adopting an agile cloud-based business model, and new ways to measure outcomes and profit are now entirely digitized and propelling companies into the future. This digital way of business uses the cloud to even further a business’s reach.
Using cloud-based software allows employees to view real-time supply chain statistics, gives marketers the information to tailor geographical campaigns, and customer experience feedback mapped by machine-learning provides insights for planning and change of product configurations. A business that is not ready for this accelerated digital age will lose to competitors already taking advantage of digital transformation. Organizations must move past planning for digital transformation and actively formulate and execute the changes.
The Four Main Types of Digital Transformation
DX is the modish acronym representing digital transformation in many corporate arena’s, and although it’s not a new concept, the race is on to implement these digital technologies. Digital transformation is multi-dimensional, requiring team effort from the Chief Information Officer (CIO), Chief Digital Officer (CDO), and the Chief Executive Officer (CEO) who lead the strategy and business leadership divisions. There are four main types of digital transformation; process, business model, domain, and organizational.
Business processes include data processing, analytics, APIs, machine learning and other technological methods. The result is to create new ways to accomplish more while lowering overhead, increasing employee productivity and improving quality.
One example of process transformation includes customer experience and foodservice industries during the pandemic. Restaurants changed how customers purchase their food from in-house dining to utilizing delivery providers such as Grubhub and DoorDash. Some eateries created their own ordering apps and hired outsourced drivers. Another area includes robotic technologies to take care of mundane accounting and legal department tasks relieving employees to focus on more critical office duties.
Business Model Transformation
A business often performs business model transformations alongside traditional business practices. These transformations involve a wider area of business and include areas such as the service and entertainment industries. When Netflix added streaming to its DVD delivery, its business model reached many more customers while satisfying the need for instant entertainment. Various auto insurance companies broke down insurance rates, now basing the cost on tracked-miles-driven instead of one contract for all drivers.
These are business model transformations launched while the traditional models continued. This type of digital transformation opens pathways for significant business growth.
Domain transformation is under-appreciated but offers some of the best growth opportunities. This transformation leads to companies implementing changes leading to an entirely new product. An excellent example of domain transformation lies in the process of digitizing business operations.
For a large construction equipment manufacturer, upgrading to digital technology for manufacturing provides the technology for other service acquisitions. Clients who purchase equipment can now use the manufacturer’s digital services for job sites. The company provides electronic monitoring of job site activity, equipment tracking and supply chain inventory, all seamlessly implemented.
Long-term digital transformation is a complete business transformation requiring changing organizational mindsets, capabilities, processes and workforce capabilities to meet the digital world. When Marc B. Lautenbach, chief executive for Pitney Bowes, saw the demand for mail decrease exponentially, he realized the company had to change its 20th-century services to meet the 21st-century.
Launtenbach guided the company by consolidating core services to save money while developing a digital transformation. This switch added capabilities to provide credential verification services and services on eBay for sellers to calculate the cost of shipping packages overseas. These are only a small representation of the services added through digital transformation.
“Every business needs to continue to transform itself and move into new markets.” Wall Street Journal
A Flowchart to Implementing Digital Transformation for Your Business
A digital transformation includes many operation areas. Frustration and chaos can sneak up and disrupt more than just operations. Proper planning is an all-important part of a digital transformation strategy.
There are three questions an executive must consider concerning digitizing.
- Where is the company now?
- Where does it need to go?
- How is this going to happen?
There are three competencies necessary to minimize digital disruption and successfully navigate DX.
- Awareness of the changes needed
- Informed decision-making to achieve a smooth transition
- The ability to execute a fast yet error-free transformation
The following steps will facilitate a smooth digital transformation.
- Agreement from Top Players in the Company – DX is an extensive process that affects every area of a company. Approval and agreement from leadership are essential. They’re the ones who will share the vision of digital transformation with the organization and need to present it unified and confident. A united team is a must, or the DX will fail before it begins.
- Secured Financial Resources – It’s essential to figure the cost for this undertaking. Leadership may be on board, however, the DX budget can make or break the deal. Digital transformation is not a one-time switch. It’s a lengthy process with many tentacles that touch every organization’s department, employees, and customers. (Section 9 of this ultimate guide discusses a DX budget.)
- Analyze and Assess the Current State of the Company – A starting point determining where the company sits, is the foundation for a DX flowchart. There needs to be a breakdown of the company culture, workforce skills, existing operational processes, structure and possible problem areas.
- Outline Goals and Desired Outcomes – Now is a great time to create goals for transformation and identify digital outcomes to enhance the company’s value. Focus on the company’s future vision, including areas such as digital goals, employee satisfaction with room to be creative, better customer service and ultimately, the growth and success of the business. Think big!
- Create a DIgital Transformation Road Map – With the initial evaluations done, it’s time to create how to get from the company’s current state to a completely digitized operation. Each company will have a different map, but generally, areas to consider include employee reskilling, adjusting the tech stack, reassigning processes and procedures and key players for DX roles. (Section 6 of this guide discusses building a DX team)
There are many ways to format a DX flowchart and create a seamless transformation based on each individual company.
How to Build a Digital Transformation Team
A DX team is the functional part of a digital transformation. Several steps are needed to create a solid, well-prepared team.
- Internal Employees – Choose a core of employees inside the company from various business and technology departments. The best choices are people deeply engaged in their department. They will lead the transformation and pass the training on to department staff.
- Choose a Balance of Business and IT Staff – There needs to be a good ratio of input from both areas. Too much business ignores critical areas of IT, and too much IT may ignore business operations. Building a cross-disciplinary team means working out which employees work together well. There is always tension between business staff and IT.
- Systems Integrator (SI) – A systems integrator such as 5150 helps bridge the gap between digitization and successful deployment. They possess the experience and resources to work with an internal DX team, even as an external member. Be sure to prepare as you work with a systems integrator by resolving any internal issues. Stall points will only hurt the process and delay implementation.
- Engage and Inform Your Technology Partner – If an outside technology provider manages IT, be sure to include them in the DX process and introduce them to your SI. Work closely with the team to keep the IT provider apprised of any change in direction or modified goals.
The three elements of digital transformation for any company are People, Process and Technology, with people being the most critical piece of success. Determine which executives to involve and add to the DX team, the skills required for departmental staff, and consider an extended digital transformation team. Choose developers, entry-level designers, engineers with specific skills related to the DX, data scientists and any other employee to improve the team.
Keep in mind a digital transformation likely affects every employee and executive and the way they work. The key team members will ultimately need to train and educate their staff concerning the changes and offer insight into adjusted departmental procedures resulting from digital transformation. Identifying and creating new policies and job descriptions ensure continued DX success.
How to Prepare Your Business for Digital Transformation
Digital transformation is on most businesses’ minds, and the phrase DX is an everyday topic among executives. DX allows companies to deliver superior customer service, engage competitive procedures, and ultimately raise the business’s value.
Executives who are slower to create their DX strategy and begin the process often cite the disruption of business inner workings as the disinclination. Although established business practices may temporarily be disrupted, the opportunities are worth the temporary interruptions. Due to the 2020 pandemic, digital transformation is already in place, but too often, it’s not a planned and coordinated process. Remote teams and digital technology are set to remain in place.
Preparing your business for digital transformation starts with examining the state of the company, designing a digital transformation roadmap and flowchart and creating DX teams. These topics make up sections 5 and 6. Now is the time to prepare for the real thing.
How to Prepare Your Business for Digital Transformation
Use staff and department heads to brainstorm the following questions:
- Where will the new digital applications be used?
- How will operations change after DX?
- What job descriptions will change?
- How will the new technology affect current and future employees?
- What areas should take priority for transformation? Accounting, customer service, production?
- How will customers be affected?
These are subcategories of your flowchart defining more details for each area. It’s advantageous to compile the nuts and bolts of each department and distribute the analysis for feedback for staff and department heads. These items are more far-reaching than the overall DX.
Team members and other staff members may feel anxious or insecure about the upcoming changes. They may fear not being able to keep up, leading to their termination. Some employees may need a boost of confidence and would benefit from some outside training. Evaluate their skillset and find deficiencies that, once improved, will provide confidence in their outlook.
Avoid choosing software, technology and tools that may be more than the company needs. Simple solutions to transform company operations to digital are better suited than shiny, exciting products. Too many fancier digital solutions offer complex learning curves and procedures.
If positions are unfilled, hire based on the new employee’s ability to adapt quickly to an all-digital organization. Digital onboarding is an introduction for the prospective applicant and easier on HR as they handle many applications.
Preparing a company for digital transformation provides support for staff and executives. Don’t be afraid to hire a digital transformation specialist. Partnering with an SI allows a better focus on the DX progress and helps to meet completion dates.
Digital Transformation Hurdles
Many companies are still going through the digital transformation process or haven’t begun. It’s rare to undertake this massive change and not come up against hurdles. Similar challenges occur during a digital transformation from companies with a handful of employees to corporations with up to 5,000. The least troublesome area is having access to the needed technology. Below are the top hurdles encountered by companies going through digital transformation.
- Employees resistant to change even after proper preparation and education
- IT providers or in-house staff lacking in updated technology knowledge
- Ill-prepared DX flowcharts not correctly matched to the company’s needs
- Inadequate employee and staff communication during the process
- Changes and shortcomings in budgeting
Change can make it challenging for leadership, staff and customers. Resistance can come at any time, even after proper preparation. Any opposition may derail the digital transformation. Still, these unwanted interruptions and hurdles may unknowingly highlight problem areas not identified in the original plan. DX is not a one-person job. Finding out about issues during the process can help avoid more significant problems later.
Choosing employees to work on a DX plan means matching their skill sets and knowledge for their department. Without the proper expertise, these team members may make critical mistakes in the change to digital technology.
An article by Harvard Business Review makes a simple to-the-point statement concerning matching team members to DX areas. “If the focus is on transforming customer relationships, for example, the data talent on the team may have particular expertise in customer data, the process talent on sales and marketing processes, and so forth.”
Unusual situations Causing Hurdles
It may seem impossible, but when planning a flowchart and creating a DX roadmap, some unlikely situations can happen. If you plan for these unique hurdles, there will be only a slight interruption. The following list is interruptions not typically considered.
- Storms causing an extended power outage
- Old equipment not able to handle new technology
- New equipment ordered for the DX is delayed or canceled
- A team member or several team members suddenly quit
- A team member is terminated for an unrelated reason
- Budget funds are reallocated for another purpose
- Holes in the DX flowchart cause confusion about who decides what
As this list illustrates, almost anything can cause a glitch, a hurdle, that delays or halts the digital transformation. Get a small creative team together in the early stages to think of strange but challenging situations that could be a problem. Then devise backup plans in case the unusual happens.
How to Determine a Budget for Digital Transformation
Defining a budget for digital transformation comes with unique challenges. It’s imperative to budget for the complete DX process while keeping a realistic budget in mind. There are many moving parts to a DX strategy, and the rock-solid foundation for success involves sufficient funding. Budgeting for DX is likely the most troublesome part of planning and preparing for this complete transformation. Use the following tips to help obtain an adequate budget leadership approves.
The Top 5 Tips for Your Digital Transformation Budget
- Show Value – The key behind a successful DX is showing it will deliver value to the company. Spending too much time on the features desired by department heads will side-step the primary goal of establishing an acceptable budget. Be sure to illustrate the end value of such a transformation.
- Provide a Shared Vision – Although a budget may be tightly crafted, there is still the need for a sign-off from the leadership above. It’s essential to provide a comprehensive vision that outlines the need, benefits and long-term value of a digital transformation budget. Think of it as being similar to a new business plan. Not everyone in leadership may understand the full impact of not completing a DX change.
- Leave Room for Changes – A digital transformation will take a period of time that may include rapidly changing technology and software. These advances and modifications may mean needing an agile budget that can offer more or less flexibility to accommodate shifts in the DX climate.
- Incorporate Hidden Costs – There may be areas in an organization that present additional operations needing to be part of the DX. Be sure to gather extensive data about every department of the company and break these departments down into smaller bits of information about procedures, operations and staffing.
- Prepare and Involve – Prepare a budget and once the basic skeleton is formulated, involve other department heads to offer ideas on areas of cost. Often, the person preparing the DX budget will not have enough information about every company department. Enlist the help of staff familiar with the ins-and-outs of that area.
There is much to juggle and identify for a DX budget. Give this crucial element the most attention to avoid a complete halt to the digital transformation process.
The Benefits of Digital Transformation
The time for digital transformation is here and includes exciting new software and hardware along with innovative ways to secure and sort data, share information effortlessly, better employee work environments and provide multi-level customer service. DX elevates manufacturing to a more streamlined and efficient operation and expands manufacturing company’s products beyond their initial venture.
Companies have more ways to improve connections with their customers through the Internet of Things (IoT) and new, efficient technology. The IoT embodies a network of physical objects or things equipped with sensors, software and technology that allows companies to connect and easily share data over the Internet.
Cloud computing provides flexibility for organizations to work remotely and securely from anywhere in the world. Robotics are already in place, and new robotic technology evolves every day. The speed of digitization and progression of new technology means companies have to take the time and make digital transformation a priority. The initial investment offers a long-lasting ROI to ensure the success of many businesses, big and small.
With competitors already completely digitized, companies are running out of time to implement digital transformation. Don’t get left behind.
This ultimate guide to digital transformation provides information and explanations to assist company leadership and business owners tackle the DX process successfully and with the best outcome. Contact 5150 for more information about our services and how we can help you traverse digital transformation in the financial services industry.