What is Digital Transformation? A Guide For The Rest of Us
Digital transformation has been around just long enough that everyone claims to be doing it.
Startups, Fortune 500s, SMBs, and digital transformation consultants can all tell you about its vast benefits.
But what does digital transformation really mean? As a technology leader, how do you effectively wrap your head around it? And then how do you strategize, prioritize, and implement it?
The truth is that digital transformation is a complex and debated subject. It encompasses a lot and means different things to different people.
Fortunately, the basics of digital transformation are simple enough to understand, and we’ve taken our best shot at it below.
What Is Digital Transformation?
Digital transformation is a technology and cultural revolution.
It’s the transition from non-digital products and services to digital products and services, leveraging specific methodologies.
If implemented the right way, digital transformation can decrease costs, increase revenue, and improve team collaboration.
Digital Transformation Examples
To understand what digital transformation can do, consider car insurance.
Historically, car insurance companies recorded your age, car make/model, and moving violations. From this, they gave you a monthly premium. You signed up and mailed in a check every month. If you got into an accident, you would have your damage appraised in the shop a few days later.
Think about the advancements the car insurance industry has made via data and digital products.
- Car insurers use more data (credit scores, demographics, income, zip code) to give you a more competitive rate.
- Car insurers have apps that can collect driving data as you drive (like speed and acceleration), which affects your rate.
- Car insurers have online dashboards where you can view your policy and set up auto-pay.
- Car insurers have apps that let users take pictures of the damage and send it digitally for appraisal.
These advancements don’t even touch the internal productivity advancements car insurers have made. Or the massive amount of consumer data they’ve collected and used for marketing campaigns.
- The shift from retail stores to eCommerce
- The shift from CDs to downloads to streaming services
- The shift from faxing to emails to Slack
- The shift from Kanban boards to apps like Trello
The Four Areas of Digital Transformation
There are four main areas where digital can transform your business:
- Internal teams
- Digital products
Internal Teams – Productivity and Cultural Change
Digital transformation affects internal teams in a few ways, some of the obvious being communication, collaboration, and accountability.
Digital Communication: Digital products like Slack, Microsoft Teams, and Zoom all help employees communicate more effectively than before. Today, you can have teams across the world and still be able to communicate in seconds using these digital products. And better communication means better teamwork, ideas, and productivity.
Collaboration via the Cloud: When Google Docs release its cloud-based word processor where individuals could edit simultaneously, it was epic! Today, thousands of software programs are cloud-based, allowing access from anywhere. Being able to share work and provide instant feedback improves your projects.
Accountability: Project-management apps like Trello give visibility into an entire team’s tasks, timelines, and accomplishments. With great accountability comes great success.
But Most Importantly…
Something else that’s essential to successful digital transformation is your workplace culture. Beyond simply implementing digital tools, there are processes and cultural elements that can greatly improve the functionality of your teams.
- Listening to customers and putting them at the forefront of your strategy
- Failing fast and learning from it
- Being open to ideas from all departments and tenure
- Top-down implementation of healthy workplace culture
- Embracing change, even when it’s scary
When teams hear “digital transformation,” they often equate it to, “I’m being replaced by a program.” This is far from true, but it’s important to address this fear and empathize with your team. Otherwise, they may sabotage your efforts, whether on purpose or not.
Data – Use It Across All Departments
The amount of data available to companies is hard to wrap your head around. Types of data include:
- Demographic data
- Engagement data
- Health and fitness data
- Weather data
- Driving data
- Financial data
- Real-time data
- Genomics data
- Machine data
There is so much data available to companies nowadays. If you’re not using it to improve products and predict solutions, you’re falling behind.
One of the easiest examples of using data to strategize business decisions is Netflix.
When Netflix switched to streaming in 2007, it collected data on its users. From this data, it analyzed the type of shows certain demographics enjoyed, how often viewers watched certain programming, and which movies were abandoned mid-way. One of the most interesting reports they took from their data was that people love to binge-watch.
When Netflix began producing original content, they released it by the season, much to the user’s delight. These “binge-able” shows led people to subscribe to Netflix in droves and transformed Netflix into the most successful streaming service, ever.
Digital Platforms – To Support New & Existing Business Models
Whether you build a digital solution for your employees, customers, or both, you’ve already begun transitioning to dashboards, platforms, and cloud-based systems.
Many companies purchase already-built digital products for their team (for example, G Suite or Slack).
But for many companies, custom software is needed to handle their unique business requirements.
What’s interesting about these custom digital products is that they can do a lot. Increase revenue. Decrease operating costs. Streamline processes. Or they can become new business models.
Here are a few stellar examples.
To Support Current Business Models
- Loreal’s Style My Hair App: See how you’d look with purple hair (without the commitment).
- Nikon Snapbrige: Sync the photos on your DSLR with your smartphone–so you can instantly share on the gram.
To Create New Business Models
- Nike Training Club App: An at-home training subscription that includes fitness programs, nutrition, and coaching.
- Adobe CreativeCloud: Adobe Photoshop used to be purchased via single licenses on a CD-ROM. Now, Adobe makes more revenue by charging a monthly subscription to access their apps on the cloud.
Innovation – Fail Fast, Like a Startup
To properly innovate and provide real, lasting value to your customers, you’ve got to transform your thinking.
Instead of, “how can we sell more products digitally?” ask things like “how can we provide a memorable/valuable user experience using digital?”
By thinking of experience over product, your team can better identify and empathize with customers. This way of thinking and problem-solving creates more opportunities and ways to reach your audience.
Many of our ideas aren’t supported by technology–yet. Self-driving cars and carbon capture may not be fully developed for a few more years, but by imagining, collaborating, and iterating, they will get there.
The most important question is: who gets there first? It’s safe to say that the first company to embrace innovation and begin developing against it will have a massive advantage over competitors who fail to innovate.
According to MIT, only 7% of companies reported that they’ve completely transformed their entire organization and a whopping 70% of digital transformations fail.
For something so trendy, most companies are not up to par with the digital transformation standards we frequently hear about.
There is a disconnect somewhere.
It could be cultural, it could be implementation strategy, it could be a lack of knowledge around what’s possible.
If you’re a business that needs a digital analysis, strategy, and implementation plan, reach out to the team at Devetry. We have knowledge across the four pillars of digital transformation (internal culture, data, digital products, and innovation) and we’d be happy to show you what’s possible within your organization.