As digital technologies radically reform industry after industry, many companies are putting in considerable change efforts to reap the benefits of these trends. According to a survey by Altimeter, companies undergoing a digital transformation have likely enjoyed increased customer engagement, increased market share, and customer revenue as well as higher employee morale.
But let’s take a moment to pause and understand – what exactly does it mean to undergo a digital transformation for an organization?
At its core, digital transformation is about integrating technology into a business, with the clear goal of maximizing and innovating what that technology can do to improve business results. Digital transformation can include any function from back office and supply chain applications to social media for marketing outreach, from production process automation to data analytics, and so much more. With unmatched benefits in business efficiency and productivity, digital transformation seems like an exciting idea for your business growth.
However, every company is different in terms of its strengths, weaknesses, capabilities, and organizational structure. There cannot be a one-size-fits-all formula for successful digital transformation. Therefore, asking the right questions is crucial for any organization thinking of embarking on a digital transformation journey. Questions, such as:
Why does digital transformation matter?
There might be several reasons organizations decide to undergo digital transformation. However, by far, the most likely reason they must is for survival.
Especially in the wake of the coronavirus pandemic, an organization’s ability to quickly adapt to supply chain disruptions and rapidly changing customer expectations have become critical to survive.
From the consumer side, digital is accelerating in just about all the categories. Pandemic has forced even the non-technical users as well as senior citizens to shop online, which was not anticipated.
With forced and huge changes due to the pandemic, organizations witnessed how optimized automated systems in several industry areas broke down when faced with rapid shifts in both demand and supply thereby reaffirming the need for digital transformation.
If you were starting your business now, how would your technology be different?
To know how much your business and processes will change due to digital transformation, your organization needs to ask this question.
For example, a finance company just starting out is more likely to keep all the customer data online with cloud storage options providing online access for relevant stuff to both the customers as well as the employees. However, a 20- 30-year-old company with a massive archival room may be reluctant to get rid of the system to move online. In addition to the expense involved in moving, there is also a fear of the unknown that resists the move, at the expense of making the company more efficient.
Similarly, a travel company with an established telecommunication channel may resist adopting an AI-powered chatbot in an attempt to preserve what’s already there.
So, if you feel your organization is not ready for the move, ask yourself the hypothetical question and imagine launching your business today. Think about the technologies you would be using for maximum efficiency. Think about how differently you would engage with your customer and what would you do to crush your competitors.
Change can be crucial for survival. And companies that do not digitally transform themselves are at risk from companies that are ‘born digital.’
What are the digital transformation elements?
Each organization has its specific needs and its digital transformation will vary widely based on specific challenges and demands. However, there are a few common themes and published frameworks that organizations should look at as they move towards digital transformation.
For every organization, digital transformation should begin with a problem statement, a clear opportunity, or an aspirational goal. Also, it is crucial for technology leaders to combine digital activity with strong leadership to turn technology into transformation.
Some common digital transformation elements applicable to all the industries are:
- Customer experience
- Operational processes
- Business models
- Culture and leadership
- Workforce enablement
- Digital technology integration
What role do culture and people play in digital transformation?
In recent years, the role of IT in organizations has fundamentally shifted. From just being a set of tools focusing on cost savings, IT has now moved to playing a crucial role in business innovation and driving digital transformation strategy. The onus of implementing and adapting to the massive changes that come along with the company’s digital transformation falls on everyone.
The transformation often reshapes workgroups, job titles, and long-running business processes. When people fear that the transformation may reduce their value or perhaps put their jobs at risk, technology leaders are likely to feel the pushback.
Therefore, digital transformation is not just an organizational but also a people’s issue. Without an organization that is supportive and completely on board with the transformation efforts, it is impossible to succeed. Therefore, you need to have leaders with good soft skills who can build trust and make people understand the reason for the changes you are undergoing.
A good idea is to divide the company’s workforce into micro-segment and craft messages and programs targeted at each segment to hit the right starting point.
Which KPIs you should track?
Quantifying success is crucial to continued investment. Simply implementing digital technology is not enough. It is crucial that the technology is specifically tied to monitoring the Key Performance Indicators (KPIs) on business process effectiveness and customer insights.
This is easier said than done because digital transformation is not tied to any one aspect of your company. It brings cross-functional change and often fundamentally reshapes business boundaries, how a company goes to market, as well as the interactions with customers and employees.
Therefore, when determining how the investments in digital transformation are performing for your business, it is a good idea to take a portfolio view rather than a project level view. The underperformance of one project should not negatively impact the overarching efforts of IT.
Best practices to measure digital transformation KPIs
- Set initials KPIs in advance
- Focus on micro-metrics
- Take a holistic view of digital change efforts
- Look at strategic impact, operational impact, and cost impact
- Be open to learn and change performance-metrics if needed
What competition is doing right?
Your competitors are not only your business’s rivals but can also be your best reference point.
Chances are few of your competitors have already undergone the digital transformation. Being able to analyze the technology your competition is using, what they are doing right, and how they are operating can be an excellent way to begin your digital transformation journey.
You can also take lessons from the competition’s mistake to know the technologies you should avoid.
Armed with information about the best steps your competitors took, you work on your brand’s weakness to match and surpass customer’s success.
How is the market behaving?
In a rush to integrate the latest technologies into your company’s infrastructure, do not forget to take into account the market data. Just like tracking the right KPIs is important for your transformation, it is also equally important to know how the market is behaving. What your customer expects from you and what more you can do to add value.
Market data is important and without sufficient data (analytics), you won’t successfully transform in the digital age.
And finally –
How to get started on digital transformation?
When it comes to digital transformation, there is no perfect method. One of the biggest misconceptions CIOs have is that their competitors are way ahead of them. While there is much admiration for the fastest transformers, leaders need to understand that it is not a race. You should begin your transformation journey when your organization, its leaders, and people are ready for it.
And as you formulate your own digital transformation journey, there is a lot you can learn from industry experts, such as TheDataTeam. To know how TheDataTeam can help your company make an easy and successful transformation, contact us here.