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What you need to know about digital transformation

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David Weldon Freelance Writer and Research Analyst
 

Digital transformation is nothing short of a complete makeover. It involves the injection of digital technology into virtually every aspect of an organization, its business processes, and its culture. And the process is accelerating.

Digital transformation changes how an organization operates and how it engages with customers and partners. It is an extremely challenging process for IT organizations to keep pace with a digital transformation, but it's vital for any business to remain competitive.

There is no master blueprint for digital transformation. You can create your own roadmap, but the journey looks different for every organization, depending on its industry, business needs, and customer wants.

Common elements in digital transformation successes are a willingness to challenge the status quo, take risks, and occasionally fail. Among the top roadblocks to success are insufficient staff and budget and the unwillingness of staff to embrace change. But if you execute your digital transformation well, you can transform IT while running the business.

Here's what you need to know about digital transformation.

The key elements 

The major pieces of digital transformation include pretty much everything, from specific business processes and new business models to a renewed emphasis on encouraging innovation. But most importantly, it infuses technology into everything in order to enhance the experience of customers, partners, and other stakeholders.

Admittedly, the term digital transformation can conjure up very different images for different people. Some might think of embracing artificial intelligence tools in IT operations management. Others might assume that it means going paperless. Still others might understand it to mean the use of advanced data analytics tools.

But technology tools, data analytics, and software are the enablers of digital transformation, not the process itself.

The benefits of digital transformation

The top reason that many organizations pursue digital transformation is survival. The world is becoming increasingly digital, and transformation is often key to remaining competitive and staying relevant.

Besides that, other benefits include increased speed and agility, improved efficiency and an enhanced customer experience. And for many organizations, digital transformation is a large-scale move away from legacy systems that no longer serve the business's needs or prevent it from scaling up or growing.

Advantages for IT, and for the organization

Despite its challenges, digital transformation can be a boon to the IT department. It can provide IT professionals with the ability to make good on a major expectation of the organization: that IT contribute to the profits or cost savings of the organization. Simply being a support function is not good enough.

Digital transformation can help IT be a primary driver of business innovation and success, focusing on new capabilities.

From the perspective of the organization as a whole, a digital transformation effort can encourage collaboration and communication. After all, successful digital transformation involves everyone. This greater focus on communication, collaboration, and team-building can itself transform the organization.

How the concept has evolved

As more organizations have embraced digital transformation, it has become apparent that different approaches may be needed for different teams or groups. A one-size-fits-all approach may be counterproductive. Different groups of employees within the larger organization may have unique cultures and processes. Digital transformation initiatives may therefore have to be customized within each group.

Some industries have been slow to adopt new technologies, and that has encumbered their ability to innovate and better serve customers. Government and healthcare are two prime examples of sectors that are largely hampered by legacy systems and applications. Indeed, according to the federal IT Dashboard, over 70% of IT spending in government in 2017 went to the support of legacy systems

On the flip side, leading organizations use digital transformation to disrupt entire industries or established ways of doing things, to better innovate and capture market share. Prime examples include Uber and Amazon, which have revolutionized the transportation and retail models, respectively.

Where is adoption happening most quickly?

As of 2019, most organizations were either involved with digital transformation, were pondering it, or at least had some idea of potential benefits and challenges. According to research firm IDC, 40% of IT spending went for digital transformation efforts as of 2019, and global spending on these initiatives was expected to reach $1.18 trillion in 2019, an increase of 17.9% over 2018.

This year was expected to see wider adoption of digital transformation, and then the pandemic hit.

Among the digital transformation trends predicted for 2020:

  • Wide-scale adoption of digital transformation models
  • Increased investments in artificial intelligence technologies, such as machine learning
  • Increased adoption of cloud-based applications
  • Adoption of advanced analytics tools to improve decision making
  • Adoption of new metrics for measuring the success of digital transformation
  • Greater focus on the long-term benefits of digital transformation

Best practices for success

Because digital transformation involves and affects the entire organization, it is critical to show gains being made from the effort throughout the process. Failure to do so could jeopardize continued investments.

Consider the following accepted best practices:

  • Establish initial overall metrics for determining success before starting any transformation efforts.
  • Establish smaller-set metrics for specific projects and initiatives.
  • Include minimal business outcomes as part of the criteria, such as revenue generation and time-to-market.

Equally important, a digital transformation effort should be led by the CEO, not by IT, since it involves all aspects of the organization.

But the most important step toward a successful digital transformation effort is to ask this question up front: What business outcomes are you looking to achieve, and how will they improve the customer experience?

Digital transformation is all about improving business processes and customer experience. So start with the desired business outcomes, create the new business models needed to get there, and then reshape your processes and culture to support those models.

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