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.
There are four main types of digital 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.
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 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.
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.
To ease the digital transformation process, organizations should follow these six steps:
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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