10 Sep What is Digital Transformation?
The process of adapting existing business practices to new digital methods to increase efficiency and keep up with rapidly-changing market demands.
Ask your CIO what digital transformation is, and you’ll almost certainly get a different answer to the one you’d get from the CIO sitting in the organisation in the next building.
The definition is often synonymous with themes such as ‘radical shift’ or ‘change management’. We’re here to tell you that embracing new technology in your business doesn’t necessarily mean an overnight, dramatic or sweeping shift, new business models or loss of jobs.
Digital transformations focus on overhauling the organisation with a customer-focused goal in mind. These projects are often driven by changes in customer expectations, affect the whole organisation at once and have aims of involving enhancing processes, and business-decision making with customer and operational insights.
According to IDG, “89% of organisations have plans to adopt a digital-first business strategy, however only 44% have fully adopted this approach”. So why is this?
Transformation through digital vs optimisation through digital
Deloitte reports that organisations say their biggest obstacles in achieving success with digital business initiatives include lack of sufficient budget (39%), lack of staff and/or correct skill sets (36%), the need to replace legacy systems (34%), and cultural issues (33%). This underscores the huge business and cultural challenges that must be overcome to even begin digital transformation.
Gartner analyst Hung LeHong states that they “reserve the term ‘digital business transformation’ for companies pursuing net new revenue streams, products and services and business models.” Digital transformations do not begin with technology.
Digital optimisations, on the other hand, start with a problem, and then look at which technologies can offer a solution. These are more often a discrete implementation at business-unit or departmental level where digital capabilities are added to processes, products or assets to improve efficiency, enhance customer value, manage risk or enable new revenue opportunities.
This perspective of digital as a ‘support service’ for existing business operations and processes means the impact on the whole organisation is often far less, with no requirement to change organisational structures and processes and no requirement for a reinvention of the business.
Organisations benefit from the application digital tools to improve operational processes whilst avoiding the long laundry list of things to do under a ‘digital transformation project’ such as:
- IT skills assessments
- Developing a business case for a committee to approve
- Change management strategy
- Data security audits
- Data management strategy
The economies of digital
Digital initiatives are expanding business capabilities and delivering efficiencies alongside top-line revenue growth.
Forrester reports that digital improves both the economics and capabilities of every business. Using software, hardware, algorithms and the internet, digital business leaders find that it’s 10 times cheaper and faster to engage customers and deliver outcomes that their customers value.
Organisations have been leveraging digital optimisation opportunities within every industry since corporate records and transactions were put on computers in the 1970s. And not surprisingly, 55% of startups – who have technology natively designed into their business systems and processes – have already adopted a digital business strategy, compared to 38% of traditional enterprises.
Technology is empowering businesses to leverage the full value of their own business data; with access to reports and insights from within the technology, that inform how you further optimise and continue to meet client and organisational needs.
The stages of digital optimisation
There are four key phases to optimising business processes and operations through digital:
- Research – understanding the problem to be solved and evaluating technology options that might answer to that
- Integration – establishing which existing systems in a tech stack the new software needs to integrate with; and if not now, what potential systems integration is required in the future
- Execution – mapping processes and data into a new platform, complementing the existing ways of working and identifying ways to enhance those through technology
- Maintenance – avoid set and forget with a technology partner who offers regular platform upgrades as part of the annual investment cost and works alongside the organisation to identify opportunities for further optimisations.
IDG’s 2018 Digital Business Survey reported on the top five digital technologies that organisations were implementing in order to evolve into a digital business model:
Top Five Digital Technologies Already Implemented
Benefits of digital optimisation
The poor cousin of the more talked about digital transformation; optimisation creates a number of similar benefits for organisation, albeit it at a smaller scale or more localised within the organisation.
- Implementing a digitised, rules-based workflow increases security when dealing with sensitive documents.
- Digitisation provides a platform for the application of digital signatures when accessing documents to confirm approval, providing an elevated level of trust and compliance to the approvals process.
- Speed of retrieval and distribution of documents and information across multiple stakeholders in different geographies
- Access control and permissions settings which create a solid structure for participants to work in a controlled environment.
Developing a business strategy for digital optimisation
Almost half (45%) of IT and business leaders say their companies are in the very early stages of becoming a digital business – either gathering information or just beginning to formulate a digital-first strategy. 85% of enterprise decision makers agree that they have two years to integrate digital before failing behind their competitors; but with discrete implementations it’s not necessary to wait until the entire organisation is digital-ready.
Ways of working have become less stable and change is faster. This is translating into a modification of outdated procurement processes. Contracts for technology are not given based on term length and low unit costs. This means that businesses are no longer ‘stuck’ with a business model that is enabled by an out of date piece of software. Vendors are now offering a ‘try before you buy’ with a Sandbox or trial version of software for organisations to pilot the solution in-situ, in one practice area, or with one initiative.
CIOs are reporting shorter strategic planning cycles. This doesn’t necessitate an abandonment of the existing strategy, but rethinking aspects of it and how technology can support your processes.
Organisations are never ‘optimised’
There is no past tense for digital optimisation. A significant misconception is that digital optimisations are “complete” at a certain stage or point in time. Digital optimisation is a journey; achieving one success is more-often than not a precursor to the next stage. As emerging technologies and market forces place new demands on organisations, they company must adapt to meet these requirements.