Digital Transformation
What is Digital Transformation?
Digital transformation refers to incorporating digital technology into all business areas to create new or modify existing business processes, culture, and customer experience to fundamentally transform how an organization operates and delivers value to customers.
Types of Digital Transformation
There are four main types of digital transformation:
Process Transformation
Process transformation primarily aims to streamline and simplify internal processes. Organizations undergoing process transformation rethink and digitize existing processes to minimize throughput errors, time, costs, errors, and complexity. Organizations may achieve process transformation by automating manual processes or incorporating Research and Development findings into internal business strategies. Successful process transformation relies on comprehensively evaluating the organization’s existing software.
Business Model Transformation
Arguably the most drastic form of digital transformation, business model transformation involves digitizing an entire organization’s business model. For example, Netflix carried out one of the best-known business model transformations, digitizing home-video services and changing how people consume video content.
Business model transformations can be either proactive or reactive; some organizations will identify an opportunity to innovate and act accordingly, while others will follow suit so they don’t fall behind.
Domain Transformation
Domain transformation is when an organization decides to enter a new market. Company leaders might initiate domain transformation to diversify their portfolio or keep up with technological advances. An example could be an organization selling software they developed to streamline internal processes.
Cultural Transformation
Also known as an organizational transformation, cultural transformations involve a total overhaul of a company’s culture and organization. Organizations may undergo cultural transformation because they have been acquired or face legal action or reputational damage. Companies undergoing organizational transformation often adopt a “digital first” culture as part of the transformation. This means that all new business initiatives should use technology as the primary method of engagement.
Stages of Digital Transformation
To ease the digital transformation process, organizations should follow these six steps:
- Business as usual – At this stage, the company is still operating in its normal fashion. Organizations at this stage are not yet exploring how digital transformation could impact the business or looking to the future. It often takes external technological advances or a decline in business efficiency to spur digital transformation.
- Present and active – This is where an interest in digital transformation begins. While there are no operational initiatives at this stage, employees or company leaders are aware of the benefits digital transformation could bring.
- Formalize – The formalization stage is where those already aware of digital transformation begin further research, evaluating the benefits, and building a business case to present to the Board of Directors, or other managing entity. While some small digital transformation projects may have started, company leaders typically restrict them to the departmental or team level, and there may be some cultural resistance.
- Strategic – By the strategic stage, at least most of the executive team is committed to digital transformation, and the organization has decided to move forward with it. The project will have largely overcome cultural resistance.
- Converged – The entire company is now on board with the digital transformation project, and company leaders have designated resources for it. By this point, the project is company-wide, not restricted to departments or teams.
- Innovative and adaptive – The benefits of digital transformation have now been realized, and company leaders are looking to extend the initiative further.
The Future of Digital Transformation
As time goes on, more and more organizations will undergo digital transformation. Those initially reluctant will see the benefits their competitors are reaping and quickly follow suit. As processes are streamlined and associated costs fall, smaller organizations will be able to initiate digital transformation projects to sustain and grow their business.
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