An organization or industry can undergo the process of digital transformation when digital technologies, processes, and competencies are integrated across your organization, industry, or ecosystem. This type of integration usually occurs through a strategic and progressive approach often referred to as digital transformation strategy.
Digital transformation of your business is a very important process that has a far-reaching effect. Businesses can leverage digital transformation to create new products for a variety of stakeholders where all customer groups can be broadly defined. As a result, organizations can quickly respond to changes in the marketplace and adapt to these changes in a speedy manner.
Digital transformation became the prevalent tendency in the business world. This tendency can be observed in the public and non-profit sectors through the use of existing and emerging technologies. As part of the digital transformation, the society can also address issues such as pollution and eldercare.
Disruption and technology are not the only components of digital transformation. Value, people, and optimization are the other important components of digital transformation that can be achieved with intelligent technologies and proper information use.
A number of countries, including Japan, believe that the digital revolution will force overall changes in society. Developing digital strategies, capabilities, and models for the effective implementation of digital technologies is vital for companies to take full advantage of the opportunities and changes that these technologies can bring.
The ability to acquire and utilize big data, unstructured data, and revenue-driven service delivery is essential as organizations develop new competencies. Digital transformation is more likely to be needed in commodity markets.
Also, underlying economic needs, societal shifts like for example aging populations and ecosystem disruptions, like for example new digital technologies can occur simultaneously.
Among the most important elements of digital transformation are building new revenue streams, creating integrated information ecosystems, and creating innovative business models. Most importantly, customers should feel satisfied with the entire experience. It is essential to achieve these goals, but it is equally important to address internal challenges, such as legacy systems and disconnected processes.
Business must leverage the right bridges to achieve ubiquitous optimization of business processes and business ecosystems in the hyperconnected era. A company's journey to digital transformation includes interconnected mediators that range from front-end and back-end systems, data from smart devices, decision-making, people, organizations, technologies, and various ecosystem partners.
At all levels of digital transformation (collaboration, ecosystems, skills, culture, empowerment, etc.) as well as in achieving its goals, people are indispensable. Human interaction will always be valued as long as 'digital' is not the ultimate goal.
However, digital transformation also provides greater control to anyone involved in non-digital interactions and transactions.
The use of new technologies can provide an organization with greater and more innovative benefits. Digital transformation must be staged in collaboration with a variety of stakeholders inside and outside an organization, removing silos and limitations.
This blog post discusses the underlying principles of digital transformation, its evolution, and its implications across a broad range of business processes and industries. Let’s trace the major stages of digital transformation and the impact it has on the productivity of your organization.
A holistic approach to digital business transformation
It is crucial that leaders examine all 'digital' initiatives and changes taking place throughout the organization if they want to make any progress with their digital transformation program.
Technology has changed the face of business, both in our personal and professional lives. This trend will continue. Even though this has been happening for a long time, it is now happening at a faster rate than most organizations can transform themselves.
Despite its wide-ranging meaning, "digital transformation" is an inadequate term for what it entails. Some describe the process as digital business transformation, but this is more aligned with the business perspective. As a general term, "digital transformation" covers various elements other than businesses. These include changes in government and societal regulations, economic conditions, and technological advancements.
Holistic analyses of transformations show that social changes can have a profound impact on organizations, leading to highly disruptive outcomes. There is no business, no industry, no economic actor/stakeholder, and no sector of society operating in isolation.
It is important to look at digital transformation as a general term. Although digital transformation maturity models may be useful for defining visions, they are in practice too simplistic and/or general.
Through digital transformation, various business units can develop new capabilities. The factors listed above can impact the digital transformation process when taken together.
Digital transformation encompasses many aspects, including processes, interactions, transactions, technological developments, industry dynamics, stakeholder engagements, and so forth. Keep this in mind when reading digital transformation reports and explanations.
Despite the similarities and differences of businesses and organizations worldwide, each faces unique challenges, goals, and characteristics. Based on the same factors, a regulatory environment cannot be justifiable in one region but not in another.
In this blog post we will accentuate our attention on the process of digital business transformation. Transformative business means decentralizing and refocusing attention to the edge of the enterprise ecosystem. The customer-centric approach, employee satisfaction, stakeholder value, and outcomes are all essential elements of the equation (internal and external).
Cloud computing, big data, advanced analytics, artificial intelligence, machine learning, mobile/mobility (a game changer) to the Internet of Things are the newest technological innovations.
Digital transformation is a very important and far reaching process. Usually, it leads to the following outcomes:
1) enablers of digital transformation
2) the drivers of digital transformation requirements (for example, shaping the behavior of consumers or industries as a whole).
3) accelerators of innovation and transformation
Digital transformation: focusing on the edges
Digitization drives customer and customer experience, as well as use cases and end goals, partners and stakeholders, last-mile processes, and disruption. A mistake made by some organizations is focusing solely on the customer experience aspects of digital transformation.
Customers, stakeholders, and business objectives drive agendas. It is essential for organizations to eliminate internal silos and connect dots across all departments; interconnectedness is the norm nowadays. The edge is the focus of the shifting focus, which enables the central capabilities to work faster and better for the edge. Cloud-based, as-a-service delivery, which advances agility, requires integrating organizations (integrated, ecosystem-based), as well as cultures (complementary, complementary).
In addition to edge computing, the move to the edges can be seen in the decentralization of work and business models.
You might wonder how the edge is handled when real-time demands are increasing, cloud computing is growing, data management and analysis are taking place at the edge, and more on how data is handled centrally, how security is handled at the edge, and so on.
Digital transformation does not just impact organizations with "new" organizational models or where strategic decisions are made at the edge, which makes the center less able to make them. For enterprise-wide digital transformation, a holistic approach is necessary rather than focusing on internal silos or perceived gaps. Pilot projects, which can lead to a more holistic and enterprise-wide approach, tend to take place bottom-up, ad hoc, or in specific departments.
These issues usually arise during the early phases, but if they aren't addressed on a larger scale, they can cause long-term problems as well. In addition to data proliferation, growing attacks, and increasingly complex technology environments, it is also important to view security from a holistic perspective and even develop cyber resilience strategies.
Digital transformation areas
Integrating and interconnecting are key to digital transformation:
Customer service, human resources, and administration make up the business operations.
A business process is one in which individuals and organizations involved with managing, improving, or automating the process (such as robotic process automation) come into view. Almost all industries and cases involve optimizing business processes as part of digital transformation strategies, which combines customer-facing goals with internal processes.
Business models: A business's system of operating, from how it approaches markets to the way it makes money. It may experiment with new revenue streams and methods, even if it has to completely abandon its traditional core function.
Business ecosystems: Relationships between stakeholders and partners, as well as economic and governmental factors determining a business' success. With the help of data and actionable intelligence, companies from diverse backgrounds are building new ecosystems.
Business asset management: Maintaining both 'tangible' and intangible assets, such as information and customers (enhancing the customer experience is a cornerstone of many digital transformation projects, and information is essential for business, technological advancements, and relationships). The customer and information need to be viewed as valuable assets from all perspectives.
Organizational culture, comprising a culture of customer-centricity, agility, and hyper-awareness, along with acquiring core competencies in areas like digital maturity, leadership, knowledge worker silos, and others, makes it possible to be more future-proof. Collaboration, culture, and IT are also important factors in driving digital transformation.
Ecosystem and partnership models, such as co-opetition, collaboration, co-creation, and, last but not least, entirely new business ecosystem approaches, leading to new business models and revenue streams. Ecosystems will determine the success of digital transformation in the as-a-service economy.
Customer, worker and partner approaches In digital transformation, people and strategy come first. Stakeholders' behavior, expectations, and needs must be considered. Customer-centricity, user experience, worker empowerment, new workplace models, and changing channel partner dynamics are among the factors that (may) be present in many change projects. Even with recent advances in digital technologies, it's important to recognize that they are not the only way to improve any of these human aspects, such as worker satisfaction and customer satisfaction. First and foremost, people include, respect, and empower one another; technology offers choice and vitality.
Disruptive approaches do not just apply to new entrants or incumbents. In the end, disruption is about people, customers.
Charlene Li defines relationship disruption as a shift in power. Human disruptions are caused by changes in people's behaviors and expectations, as well as how they use technology. Newcomers can influence these changes by leveraging new technologies or adopting them themselves. Similarly, technology can also contribute to change without actually involving technology. Is that still considered 'digital disruption'? The answer would be no. It is possible, however, that digital technology might be useful for addressing these changes in behavior, expectations, needs, etc.
It has always been said that technologies won't disrupt anything. People still find it a bit challenging.
Using technology and adopting it can result in disruption, as previously mentioned. Although some technologies have been more disruptive than others, despite the comment that these technologies are not disruptive. We've already mentioned some of them. With the advent of social media, everything has changed. One of the changes is the ability to 'be mobile' through mobile devices. The analysis of big data was also important. During a company's development of information and artificial intelligence, the use of third platform technologies and their accelerators plays a critical role.
During the last few years, the evolution from Internet of Services to the Internet of Transformation, which will be what the Internet of Things or IoT will be in the end, has become one of the most important factors in digital transformation.
Audiences are the last mile, so who owns them owns them. Most disruptive customer (Sameer Patel)
However, the Internet of Things, whereby we move to the next stage of Internet development, is still in its early stages. Therefore, the Internet of Things, as yet another umbrella term for the connection of devices with embedded or attached connectivity and the possibility of sending, receiving and analyzing data using Internet technology, has no meaning whatsoever. However, it will also be the glue for most transformational evolutions. So far, IoT hasn't contributed much to innovation or value in consumer applications. Manufacturing and logistics sectors are becoming leaders in digital transformation through the Industrial Internet of Things. Also contributing to this disruption are technologies like additive manufacturing and advanced robotics, which are just beginning to show the tip of their disruptive potential.
Is there another stage after that? That's for sure. As of now, we are going full hybrid, also in terms of integrating digital technologies in our daily life, which is what the 4th platform will be. The next few years are going to be scary for many. We'll get there, though.
We believe that data analytics, cognitive computing, big data, and the deployment of artificial intelligence will be the most disruptive technologies over the next few years (as we discussed earlier). In the meantime the hybrid stage is already here, for instance in an industrial context where the cyber-physical system and, thus again, (industrial) IoT is a key component of Industry 4.0 and the Industrial Internet. Yet at all times the human value and element remains key.
The goal of digital transformation is to manage the existing business as well as build for the future simultaneously, similar to changing a plane's engine while it's flying.
Causes of disruption and transformation
There are many factors that can cause disruptions and digital (business) transformation, including:
Today, there are more technological innovations (technology-induced) than ever before. Technology does not drive disruption and transformation. A customer, partner, competitor, or other stakeholder uses and adopts it.
As a disruptive technology, blockchain can affect many fields, including AI, IoT, and edge computing. The convergence of AI, IoT, and big data analytics allows them to be combined and enabled to enable new applications, which is their most disruptive potential. IT and OT convergence is a major force in industrial transformation as well.
Customer behavior and demands. In terms of customer-induced transformation and disruption, technology is not necessarily involved. Technology is often a facilitator of or, as mentioned above, a cause of business challenges when adopted and turned into them. A force that drives digital transformation is primarily driven by other factors, not by technology alone: customers have always been looking for ease of use and simplicity in dealing with businesses. It dates back to a time before even the Internet existed. As a result, businesses have no choice but to embrace digital transformation since they recognize how important it is for interactions with customers to be easy and frictionless (they didn't realize it decades ago). Customers' behavior and needs can also be affected by disruptions on a societal level.
Innovation- and invention-induced. Disruptive innovations increase the possibility for new products, technologies, and theories to be developed, and even change the way we think about these things. Medicine changes healthcare and society (as it has several times in the past), printing presses, trains, what is next? It is probably best for you to study life sciences and technology applied to the human body and mind.
Ecosystem-induced. Our organizations are part of a broader ecosystem that includes business ecosystems, social ecosystems, and natural ecosystems. The forces driving business and technology transformation are economic changes, evolutions towards collaboration, regulatory changes (like the General Data Protection Regulation, GDPR), geopolitical changes, societal shifts, or even natural disasters. A lot of research on the acceleration of digital transformation in the new normal has shown that COVID impacts digital transformation and society more generally, and that they all have the power to influence and drive the need for digital transformation.
In addition, aspects such as these remind us about the essentials of digital transformation: networking and interdependency - and thinking holistically and broadly across industries as well as keeping the shifts of today and tomorrow in mind.
In the organization as well as in its broader ecosystem, disruption does not differ from business processes, models, or activities. Butterfly effects are at work here. The interconnection of business activities as a result of customer interactions, the way information flows through all digital transformations, the economic effects of events, and more should all be considered. Here, planning scenarios is crucial.
We have just given a few examples of digital (business) transformation, but it's crucial to get a holistic view.
Technology has always presented challenges and opportunities, business environments have always evolved, and regulations and ecosystems have always changed. That’s nothing new.
Digital (business) transformation is more than just a buzzword with multiple dimensions of interconnectedness and accelerations, both of which require an enterprise-level change for organizations to achieve their core business competencies. Various phenomena can contribute to rapid change, from technological innovations and new business models to unexpected events or new customer demands.
For us to speak the same language, we must emphasize that digital transformation is not just about:
It is common to use digital transformation outside the context of digital marketing, even for businesses that focus on it.
The digital behavior of customers and their preference for mobile devices play a significant role.
The fact that new technologies can disrupt markets does not negate technological evolutions and the fact that new technologies can be disruptive in the future, but throughout history, disruption was mainly driven by stakeholders, customers, workers, competition, and market forces.
Business information (flows) and processes aren't being digitized as originally intended, which is the sine qua non of converting paper into digital information.
Lastly, we believe that digital and physical or offline and online will become synonymous in the future. For this reason, we prefer to speak of accelerated business transformation rather than digital business transformation. For example, customers don't think about these terms at all, nor do they understand channels.
Beware of hype surrounding digital transformation and the usual suspects
Technology isn't the only factor in digital transformation, nor are tech startups or businesses in technological industries. In part, this is due to the fact that "usual suspects" (Uber is probably the most well-known - and controversial - example) use digital technologies to disrupt existing models and markets and - more importantly - do so with a lot of attention.
However, we make a mistake when we only look at the tech companies we show as examples of digital transformation. There has indeed been disruption, as some of these start-ups forced major players to adapt or die, and we can learn from their success stories. It's easy to overestimate that these organizations are as successful with digital transformation as organizations that have used the technology in 'less sexy' but more interesting and challenging fields.
With the attention media and fans give disruptors like Uber, there is danger and hype associated with it. The leadership of digital transformation in nearly all industries does not mean that they are digital technology darlings or enterprises as such. Business goals, challenges, customers, and context should be taken into consideration when designing a digital transformation strategy.
The incumbent companies are also undergoing transformation, though they are not all changing at the same rate, and in numerous industries, such as finance, there are partnerships between the incumbent and a 'disruptive' newcomer. Last but not least, these disruptive companies are also susceptible to any potential evolution. Purely digital competitors have a hard time succeeding since human interaction is needed sooner or later.
The digital world is changing everywhere
Digital transformation impacts every industry. Since it can affect the business model as a whole, it can also affect all activities, divisions, functions, and processes of the organization.
Below is a digital transformation framework devised by BitsOrchestra, a pioneer in digital transformation. The company defined an effective digital transformation program as one that addressed both the what and how as part of a three-year study conducted with the MIT Center for Digital Business.
Digital transformation can be beneficial in the following areas:
(Digital) customer experience is a critical aspect of digital transformation (a combination of optimizing the customer experience, improving processes, and saving money).
Product and service development can benefit from co-creation.
It is also common knowledge that marketing, sales, and distribution are among the first departments to undergo digital transformation (along with customer service).
Digital fulfillment, enhanced corporate controls, risk optimization, etc.
Others we can add include:
Information and data are key elements of intelligent information management (with a focus on activation and information as the key driver).
Customer relationship management, customer experience management, and customer relationship management.
Work management, human resources, and new ways of collaborating (agile work, social collaboration, enterprise collaboration, unified communication).
Learning and education.
A procurement process (including the creation of digital supply chains) and supplier relationships.
It is basically the case that every component of a digital transformation (or, for that matter, of digital business) is interconnected, with silos having little (or no) significance, not only from a technological standpoint, but especially from the viewpoint of the people involved in the process.
Myths and realities of digital transformation
Digital transformation is a focus for organizations. It is important that companies and consumers identify the real challenges they face, develop a coherent approach - often staged - and prioritize all stakeholders in order to reap the benefits of digital transformation.
Four digital transformation realities that matter:
A good business/IT relationship (closing the gap, focusing on the same goals, and NOT overlooking IT's role) is essential.
There are certain traits that characterize great digital transformation leaders (no matter what the context may be).
You are affected, as are all industries. Regardless of the industry, its customers, employees, partners, or new disruptive players will not wait for the company to catch up.
If the digital transformation is to succeed enterprise-wide, management and all stakeholders need to be involved (although it can work both from the bottom up and within specific projects). CEOs, chief digital officers, and chief information officers are often mentioned, but the CMO is sometimes mentioned too.
5 stages of transforming technology into economic transformation
Given the caveat about technology and IT, there is certainly a link between digital technologies and technology. Consider the evolution of the digital transformation economy.
Stage 1: Digital business and the 3rd Platform
IDC introduced the 3rd Platform in 2007, which consisted at the time of four technological/business pillars: cloud computing, big data/analytics, social (business), and mobility.
Gartner describes it as the 'Nexus of Forces', and others have discussed the SMAC (social media, mobile, analytics, cloud) technologies. As important as the fact that these technologies were changing the way business was conducted was how they were being adopted by consumers, employees, and businesses, and how they were leveraging them.
Stage 2: Innovation accelerators for the third platform
Innovation accelerators, which IDC refers to as a third platform, including many other technologies have been bundled with the 3rd Platform.
In addition to robotics, natural interfaces, 3D Printing, the Internet of Things, and cognitive systems, the list includes next-generation security. This is primarily a technical level, with an emphasis on business and customer innovation (as well as the traditional goals of optimization, etc.).
3rd Stage: transforming digitally to become innovative
The foundation, goals, strategy, culture, and vision necessary for enterprise innovation become possible when companies develop mature initiatives and have a long-range vision (e.g., new business models, customer engagement strategies, establishing ecosystems for new revenue).
Digital transformation is characterized by digital customer experiences, innovation, competition, differentiation, automation, cost reduction, optimization, speed, and stakeholder experiences. IDC believes that this led to an innovation stage, where information is critical. IT and information excellence are crucial for digital transformation.
Stage 4: the acceleration of innovation and transformation
Innovation and challenges posed by disruptive business models will accelerate in the next few years.
In consequence, we (will) see a shift in the pace of innovation and transformation that will result in the disruptive impact of digital transformation hitting every industry as companies dramatically scale up their digital transformation agencies to ensure they realize the value of digital transformation.
Stage 5: Adopting digital transformation as a foundation for a new economy
Moreover, through this 'digital industrial revolution,' what IDC calls the 'digital transformation economy,' digital transformation will become a key driver of growth and innovation.
Even more rapidly than before, they will be able to leave their mark for years to come. This evolution is being driven by the Internet of Things, cognitive computing (Artificial Intelligence), and mobile technologies, along with components of the 3rd Platform (cloud, big data, analytics, etc).