Digital Transformation

What Is Digital Transformation?

Whether you call it one of the hottest trends of 2015 or simply the future of business, digital transformation is on every organization’s mind – and to-do list. MIT Sloan Management Review defines digital transformation as the use of technology to radically improve performance or reach of enterprises. Forbes has dubbed it “the new black.”

In its report, “The State of Digital Transformation,” research group Altimeter has defined it as the realignment of, or new investment in, technology and business models to more effectively engage digital customers at every touch point in the customer experience lifecycle. The report also noted that digital transformation means different things to different people, and that’s OK.

The one thing everyone can agree on, however, is that investing in new digital technologies -- whether social, mobile, big data, cloud, etc., -- doesn’t in and of itself equate to “digital transformation.” People, not technology, are the most important piece in the digital transformation puzzle, as Capgemini Consulting states.

Where do you start?

Companies across all industries are making advances towards digital transformation in such areas as analytics, mobility, social media, and smart embedded devices, as well as improving their use of traditional technologies to better serve customers, streamline internal processes, and add value propositions.

But with all these options, where do you start? And how do you ensure that digital transformation truly benefits your organization, and doesn’t become an overwhelming ordeal? First, know that digital transformation requires vision, leadership, and collaboration. To drive change, a business needs a unified vision and strategy for digital transformation.

Second, realize that no company has fully achieved all elements of digital transformation. MIT Sloan Management Review studied a sample of 157 executives in 50 large companies in 15 countries, and identified how executives are digitally transforming three key areas of their enterprises: customer experience, operational processes, and business models. Within each of these areas, there are multiple elements. Each organization must focus on transforming those elements that make sense for their business.

Transforming the customer experience

Companies are taking advantage of technology to better understand their customers – by tracking their likes and dislikes on social media, learning to promote their brands more effectively online, and building analytics capability to understand customers in more detail, for example.

Companies are also using technology to transform the sales experience. For instance, integrating customer purchasing data can provide more personalized sales and customer service. And businesses that do location-based marketing can use analytics to send personalized mobile coupons to customers in the area and track uptake in real time. Some retailers are aiming to make life easier for the customer -- say, by automatically loading a customer’s last online shopping list into its e-commerce site and offering them the option to ship their order or pick it up at the store.

Many companies are now offering smartphone apps to enhance customer touch points, as well. These apps can be linked to the customer’s profile, enabling integration across SMS and social media.

Transforming internal processes

Many companies are realizing the benefits of digitally transforming their operational processes. Automating repetitive tasks can take the pressure off employees, reducing labor requirements and allowing them to focus on more strategic and creative tasks. Automation also creates streams of data that can be useful later.

Individual work is also being virtualized. Collaboration and networking tools now allow employees to interact and share knowledge with anyone in the organization from wherever they are – even if they are not in the office.

And performance management systems can give executives deeper insights into products, regions, and customers, allowing decisions to be made on real data and not on assumptions.

Transforming business models

For some companies, digital is changing not only how they do business, but their actual business model. An example is a grocery store that maintains its existing, traditional business but has used digital to transform a new growth business – an e-commerce platform.

Another example of a company that has introduced new digital products that complement their traditional offerings is a sports apparel manufacturer that started selling GPS and other wearable devices that can track and collect data on a customer’s workout.

Digital transformation is also allowing companies to shift from multinational to truly global operations. Global shared services -- such as finance, HR, manufacturing, and design -- promote efficiency and flexibility, and reduce risk.

The bottom line

“Those organizations that invest in new technologies, people, and processes to compete in digital markets realize business-level returns including market share, greater margins and profits, talent, among others,” states the Altimeter report. Digital transformation impacts the bottom line, and improves collaboration, productivity, and better customer experience at the same time.

If you’re still wavering on whether digital transformation matters for your business, consider what Sven Denecken, Vice President of SAP Cloud Solutions and Head of Co-Innovation, told Forbes: companies today have two choices -- disrupt or be disrupted. “[Digital transformation] is a must-have in 2015 for companies to stay connected to the market and customers. If companies don’t disrupt themselves then they’ll be disrupted by entirely new competition.”

As your "digital transformation" partner, we at The Canton Group offer services that are essential to helping organizations transform customer experiences, operational processes, and business models. Get in touch today to find out what we can do for you.