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Organizations across all industries are currently reimagining their business model, operations, and culture to compete in a modern digital landscape—where customer expectations rapidly change, and new technologies constantly emerge. Spending on digital transformation technologies is expected to reach $2.8 trillion by the year 2025.
Digital transformation is an umbrella term for updating business systems by implementing advanced digital technologies, namely artificial intelligence (AI) and machine learning (ML), cloud computing, mobile devices, and the internet of things (IoT). For example:
- A decades-old financial firm migrates critical data from an outdated, on-premise legacy software system to a faster, more flexible cloud-based solution.
- An eCommerce retailer streamlines its fulfillment process by implementing an order management system (OMS) that provides real-time product tracking and automated email notifications to customers.
- A wholesale business enhances its client experience by building an online sales portal where users can find products, create bulk orders, check the status of those orders, view previous purchases, make payments, and so on.
There’s no one-size-fits-all approach, so planning and executing a digital transformation strategy for your company will depend on a variety of factors, such as your short- and long-term business goals, technical requirements, industry regulations, market trends, customer expectations, and so on.
All businesses—from clothing retailers to healthcare providers, to law firms—will inevitably undergo some kind of digital transformation, if they haven’t already. In this blog post, we explore the four main categories of digital transformation, providing expert insights and real-world examples for each. But first, let’s make sure we fully understand the importance of investing in digital transformation, along with the key technological innovations that are changing how businesses function in today’s world.
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Why Digital Transformation Matters
According to a recent survey, business executives who invest in digital transformation report improved operational efficiency, faster time to market, and higher customer satisfaction as the top benefits.
In response to the COVID-19 lockdowns, many organizations accelerated their digital transformation initiatives so that they could continue serving customers, and their employees and partners could continue collaborating on a remote basis. The pandemic—on top of the cultural influence of eCommerce giants like Amazon—quickly and irrevocably changed the way people interact with businesses. In a world where you can purchase an item online and receive it on your doorstep in less than 24 hours, companies must provide fast, intuitive customer experiences—supported by efficient, scalable business processes—to survive. And that’s what digital transformation is all about.
In addition to lowering costs, increasing productivity, and improving client relationships, digital technologies are also helping companies contribute to a more sustainable future. Research shows that 69% of digitally-mature organizations—specifically in industrial niches like construction, manufacturing, and waste management—leverage innovations like 5G and IoT to reduce their carbon emissions.
Key Digital Transformation Trends in 2022
Digital technology is evolving rapidly and creating all kinds of exciting new possibilities for businesses. Understanding these developments will help your company uncover improvement opportunities and guide its modernization efforts. Here are some of the most common digital transformation trends as of 2022.
- Collecting data remotely via IoT devices: Shipping and logistics companies use remote sensors to track the location of inventory so they can project more accurate delivery times. Farmers use drones and satellite cameras to oversee the health of their soil, crops, and livestock. And doctors use patient monitoring devices to track their patient’s blood pressure, brainwaves, muscle bio-signals, and so on.
- Replacing manual workflows with hyper-automation: Robotic process automation (RPA) tools, low-code, and no-code platforms, and AI and ML tools help businesses eliminate time-consuming, error-prone workflows—namely data entry. For example, accounting teams leverage RPA tools to process invoices. This involves scanning the document for errors, matching it with purchase orders, and sending it to the appropriate party for approval—and it can be done faster and more accurately than any human employee.
- Democratizing data: By implementing a centralized platform for collecting, managing, and analyzing data from disparate systems, organizations can make key information more accessible among different teams—and ultimately leverage this data to improve critical business processes and the customer experience. Companies that prioritize data analytics experience lower operational costs and an average annual revenue increase of 5%.
- Migrating to cloud infrastructures: According to a recent survey, 93% of companies switched to remote work during the pandemic, prompting them to move away from legacy, on-premise software. By storing data and hosting business applications on the cloud, employees can complete tasks and collaborate remotely. Cloud providers like AWS, Microsoft Azure, and Google Cloud also help organizations reduce their IT costs, as they no longer have to pay to maintain and upgrade their software.
- Implementing zero-trust security: Zero-trust security means requiring all users—whether internal or external—to be routinely authenticated and validated when accessing a business application. This became a necessary measure for companies during the pandemic when employees and third-party partners would access critical data from various, unprotected networks. As a result, over 445 million cyberattacks were committed against businesses in 2020.
Types of Digital Transformation
Some organizations—particularly mature companies in industries like finance, healthcare, and legal—require a complete digital transformation to maintain their competitive edge in the current landscape, while others may only need to modernize certain areas of their business. Let’s take a look at the four main categories of digital transformation.
- Process transformation: The goal of process transformation is to streamline internal workflows, and thereby reduce costs and boost revenue. By implementing automation tools like the ones discussed above, you can increase efficiency in sales, marketing, accounting, order fulfillment, customer service, and other departments. And with fewer manual workflows, you can cut down on payroll costs, simplify the onboarding process, and put more time and resources toward high-priority initiatives.
- Business model transformation: This involves changing the actual products or services that your company provides via digital technology. For example, during the pandemic, many retailers migrated to a curbside-pickup business model, so they could continue selling their products without posing a health risk. Another example is Netflix, which originally mailed physical copies of DVDs to its customers, and now offers content primarily through its digital platform.
- Domain transformation: With domain transformation, a business will expand its product and service offerings, extend to new markets, and ultimately establish new streams of revenue. For example, Apple—a brand most famously known for its consumer electronics—recently launched Apple TV+, a streaming platform that competes with brands like Netflix, Hulu, and HBO.
- Cultural transformation: Also known as organizational transformation, this involves reimagining your business’ training and onboarding processes with a digital-first approach. Employees old and new must be proficient in all applicable business applications, whether it be an ERP system, eCommerce platform, or internal communication tools like Slack or Microsoft Teams.
Getting Started with Digital Transformation
By investing in innovative digital technologies, you can streamline internal operations, enhance the customer experience, and gain a competitive advantage for your organization. But planning and executing a digital transformation strategy—whether it’s for a specific area or a top-to-bottom approach—requires significant time, effort, and technical expertise.
The first step is nailing down your business’ strengths and weaknesses. Which internal processes are the most time-consuming and prone to error? What are the most common complaints from your customers and employees? How are you managing data from various systems? And what technologies are your competitors using?
As a business owner, you likely don’t have the time or experience necessary to pull off a successful digital transformation with the current resources at hand. To ensure the strongest ROI possible, you’ll need a team of digital experts who can build, implement, and maintain cutting-edge solutions that align with your company’s goals and requirements.
When you acknowledge current operational problems, embrace new ways to exceed customer expectations, and partner with talented people, you can make game-changing digital transformations that drive efficiency and boost revenue for your business. Ready to get started?