The Basics of Digital Transformation

Oct 21, 2022
5 minutes Read
Unlock digital transformation, leveraging technology adaptation and strategy to drive agile, customer-focused business evolution.
The Basics of Digital Transformation

Digital transformation used to be for “some” businesses. Companies used digital technology to disrupt their sectors. They’d differentiate themselves by opening an online store, doing business through an app, or shifting to a distributed workforce. We all know the names of the early innovators. Amazon. Airbnb. Uber. Netflix. These are now the brands we associate with digital transformation. Once radical outliers, businesses now look to these digital giants as the models to emulate for the digital future.

These disruptions started many years ago. In their wake, many companies started toying with digital strategies. The pandemic, however, was a catalyst for more rapid technological change. Physical distancing measures and COVID-19 restrictions forced businesses to rebuild the way they did business overnight. Brick and mortar stores that used to be cash-only were building websites so retail sales could continue online. They installed contactless payment terminals and explored new delivery models.

For many businesses, it was a crash course in digital transformation. In a recent Twilio survey, 97% of businesses surveyed confirmed that the pandemic sped up digital transformation in their organizations. As markets recover from pandemic slowdowns, however, digital transformation is ramping up even more. According to IDC, global spending in digital transformation is expected to reach $2.8 trillion by 2025, two times the amount spent by 2020. Judging by these spending forecasts, there’s no turning back the clock. Now that the rules of the game are digital, business leaders are working fast to adapt in ways that bring the most benefit to their operations.

Digital Transformation: The Basics & the Benefits

While many businesses are knee-deep in digital strategy by now, not everyone has the management readiness, the budget or the expertise to transform at the same pace. Whatever stage you’re at, it’s worthwhile revisiting the basics.

Digital transformation is the integration of digital technologies in businesses to improve operations and deliver more value to customers. Companies that undergo digital transformation gain agility, flexibility, and intelligence. Replacing manual, error-prone processes with digital systems, for example, speeds things up, saves resources, and adds operational efficiency. Software can easily be adapted to changing situations or expanded to account for new customer needs. Systems can be scaled up more easily to account for new products or to enter new markets.

The type of technology adaptation a business takes on depends on the offering and the sector. As eCommerce surges in popularity, for instance, more customers are shopping directly from their phones. As a result, retailers are making mobile a priority in digital transformation. Some retailers are adopting Internet of Things technology to gain finer control over the supply chain, stock availabilities and the delivery process. Manufacturers are moving towards robotics process automation to build products more efficiently, and reskilling personnel for data analytics roles to further business enhancements.

Regardless of the sector, the customer is at the heart of any digital transformation. Given the massive growth in digital touchpoints during the pandemic, customer expectations have soared. Digital transformation empowers businesses to provide better service, through more touchpoints and digital interactions. Armed with more data on customer preferences, companies can offer customized services with tailored delivery and payment options. Advanced analytics and artificial intelligence (AI) generate powerful business insights that business can use to drive customer engagement and increase revenue.

Three Stages of Digital Transformation

From both the customer and the business perspective, digital transformation is no longer an option, but an imperative. At the same time, there’s not one way to reap the advantages. It takes the right strategy to succeed. The problem is, some organizations don’t spend sufficient time developing a strategy, or pursue one with unrealistic expectations. It’s important to remember that digital maturity is a process. Businesses need clear objectives, goals and measurable targets. A workable approach tackles digital transformation in stages.

  • Modernization: Businesses digitize add digital channels, or digitize some systems or processes. These are quick wins for companies that help get their feet wet in the digital ecosystem.
  • Enterprise-wide transformation: Businesses make cross-functional, enterprise-wide changes. The company makes a deep and thorough commitment to becoming a digital organization.
  • New business creation: Businesses leverage data and forecasting to create new value and improve performance or sales. The business’s new digital framework is what enables innovations to its existing model.

Technologies for Digitalizing

Technology both drives digital transformation and supports it. While most business might smart out small during the modernization phase with a mobile or eCommerce platform, several technologies are critical to full digital transformation and enable new business creation.

  • Mobile platforms: Few customer-facing businesses exist today without some kind of mobile app. People want to be able to access products and services wherever they are, whenever there are. That’s true for employees as well. Many companies start their digital transformations by building an employee portal or digitizing internal services that support remote work.
  • Cloud computing: Businesses used to keep their data in servers on-site, but the power, capacity, and speed of cloud storage is now clear. Cloud computing gives companies quicker access to software, is easier to scale systems, and offers secure data storage with far greater efficiency.
  • Machine learning and AI: Advanced computing provides powerful insights about business processes and customer behaviour. That data can be fed back to improve the decision-making process, enhance marketing strategies, drive product development, and more
  • Blockchain: Companies are preparing for Web3, the next iteration of the Internet built on decentralized blockchain technology. They’re exploring business and marketing opportunities for NFTs, cryptocurrencies, and emerging virtual spaces, such as the metaverse.

Digital transformation isn’t without challenges and every business will have its own learning curve to navigate. Doing everything at once is not the answer.

Rather, the road to digital maturity might start with a single digital touchpoint or business process upgrade. Above all, it’s important to identify goals, define targets, and review achievements. As with any business strategy, a successful digital transformation relies on planning, resources, and proactive leadership. As digital technology evolves, you’ll need to adapt your strategy, but the customer will remain at the centre.