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What is Digital Transformation? Introduction to an Effective Business Strategy

What is digital transformation?
Digital transformation is how companies use technologies to create or change organizational culture, processes, and offerings to meet the requirements of customers and markets. It is the process of transforming a business to become more relevant in the digital age.

So, what is digital transformation? It has been the buzzword for quite some time. Top businesses turn to tech to enhance productivity, collaboration, engagement, and growth. Moreover, small entrepreneurs use tech to gain competitive advantages against giants. Additionally, even professionals as ordinary citizens digitalize many aspects of their lives from personal finance to setting fitness goals.

In this article, we’ll seek to explain what digital transformation in business is all about. We will discuss its definition and even provide some digital transformation examples. Also, we’ll share strategies and tools that you can use to transform your workplace however big or small, into a data-driven and digitally-able organization relevant to the modern market.

what is digital transformation?

In the last decade, technologies like cloud, analytics, and those that support digital experiences disrupted markets and business models. To adapt to these changes, experts emphasized that both business and technology teams should work together to deliver outcomes faster.

Moreover, they stressed that collaboration or alignment is expected to never compromise enterprise scalability, reliability, and security among others. Digital transformation doesn’t just mean catching up with technologies. Its real goal is to optimize business processes.

CIOs on automation and transformation

Executives consider analytics and virtualization to be the top innovation drivers in digital transformation. However, legacy IT and the lack of digital skills hinder this growth. Thus, this shows us that culture and mindsets are major factors for digital transformation just resources and expertise. Digital transformation is not as easy as some may think.

What is digital transformation?

Digital Transformation (DX) is the adoption of new and efficient digital technologies to solve organizational problems. Often, these technologies change and evolve. The same can be said of customer preferences and the market. Thus, DX is also ever-changing—a long continuous process.

Also, digital transformation has to be managed at a reasonable pace. You don’t want to lag or be too fast. In the case of the latter, you may be just throwing good things away in the hope of possessing new tools that may only end up like bells and whistles.

This is why it serves us well to have a good working definition of DX. Look no further, Salesforce has one:

“Digital transformation is the process of using digital technologies to create new — or modify existing — business processes, culture, and customer experiences to meet changing business and market requirements. This reimagining of business in the digital age is digital transformation.”

The last statement in the definition packs so many things. Also,  it’s easy to remember. However, we should put more emphasis on why businesses should undergo such: to meet changing business and market requirements.

Current DX Needs and Opportunities

Today, the demand for personalization and faster customer service cannot be satisfied with conventional tools. Top customer service professionals need to be supported by digital platforms and channels to meet customer requirements. Why? Customers prefer fast and secure services that digital tools help provide.

Also, modern markets and shareholders demand data-driven decision-making using analytics.

Moreover, the US economy has been losing about $3.1 trillion per year for some time now thanks to the suboptimal handling of data. This is where businesses need digital transformation as well.

Mostly, DX needs and opportunities can be classified into two categories: internal and external. DX can help smoothen internal processes like communications and decision-making. On the other hand, DX focused on external processes that can enhance customer touchpoints. Having both helps the company increase efficiency and stay relevant in its market. Well, if it is done right.

What is a digital transformation strategy?

A digital transformation strategy is a medium- to a long-term plan of rolling out digitally augmented business processes that improve customer experience, productivity, and profitability. It requires strategic thinking and planning. Also, in large enterprises, this is not a job for a C-level-suite executive alone. The effort includes teams of interdisciplinary experts ranging from marketing to IT.

However, before we go to the hallmarks of a good digital transformation strategy, let’s discuss two important things to consider when planning.

First, we need to grasp that digital transformation is grounded upon being customer-centric. Any digital transformation strategy needs to take into account end-to-end customer experience to be successful. Why? Well, it’s the customers who are the lifeblood of the company. They allow the company to do what it does: provide value to them.

Thus, when you construct a strategy on how to go about digital transformation, you need to put customers first. This includes getting inputs from employees who face customers the most. Many times, they are not heard. This is rather unfortunate, given the proliferation of customer experience management software to help you out.

Secondly, a good digital transformation strategy starts by taking into account your business goals. Many companies think and feel that an overall business strategy is separate from a digital strategy. This leads their digitalization efforts to be deployed in a fragmented manner. Moreover, this is a pretty inefficient outlook as you’d end up managing two strategy deployments that don’t have much to do with each other.

The Hallmarks of a Good Digital Transformation Strategy

A good digital transformation strategy is much like any strategic plan. Strategic planners need to assess the industry, the market (including competitors), and the company itself honestly. This includes the organizational structure, legacy IT equipment, and also the culture of the company.

Moreover, this should include a review of the overall strategy of the company from corporate to marketing strategy. This is because digitalization can benefit different types of business processes. It can contribute to making mergers and acquisitions more convenient. It can do this by deploying CRM tools to keep communications flowing and in one place. Also, it can even help manage shareholder equity in such situations with equity management platforms.

So, here are some points to ponder when creating your digital transformation strategy:

  • Does your strategy fill current productivity, efficiency, and collaboration gaps?
  • Will your strategy deployment fit your organizational structure and culture?
  • Does it address the adoption strategy for employees complete with lead people?
  • Are the goals SMART—Specific, Measurable, Attainable, Relevant, and Timely?
  • Is your strategy futureproof? Will it be agile enough to manage uncertainties in the next 5 to 10 years?
  • Is it complete with financial projects for investments and ROI?

Many times, strategy work is very hard. That’s why companies poised for DX hire specialists to work with their in-house talents. You should consider doing this too.

How do you plan a digital transformation?

Digital transformation plans will look different from firm to firm.

For example, if you are just starting, don’t worry about DX too much yet. All you have to do is digitalize your operations and make it futureproof as much as you can. For legacy companies, a strategic digital transformation plan will look more of a novella. On the other hand, for small and medium businesses, it may be written in less than ten pages.

However, planning is not too different for all of these types and scales of businesses. It needs to take into account the good hallmarks of a digital transformation strategy mentioned above. However, you can do well here with a human-centric approach for UX design.

Human-Centric UX Design for DX

UX stands for user experience. It is defined as the total experience that a user/customer gets when interacting with a company in all of its touchpoints. This includes the user interface of apps, the sitting arrangement in the waiting area, the AC being too cold, etc. Also, experts insist that when we design such experiences using both analog and digital interactions, we shouldn’t forget our internal users as well.

Since DX is customer-centric and employees do their jobs to provide value to customers, therefore companies should also provide tools to employees to make their jobs easier. Thus, top UX designers design for both customers and internal users. DX, for them, is UX-centric in this way.

This is also very important when you are implementing a digital transformation strategy. Moreover, UX designers usually employ rapid testing and learning iterations to find the most optimal solution for every user journey. This, for them, is the best way to make experiences human-centric.

Observe, Test, Iterate, and Learn

There is a UX platitude stating “fail fast, fail often.” Well, many can take this differently and it doesn’t work for them. However, when applied correctly, this pertains to finding solutions.

The premise is “always stay human-centric” or “design for your user”. Also, this assumes that you often get it wrong at first. That’s why you fail fast. Thus, you redesign your system, protocol, or product incorporating the insights you gained from failing. Of course, you won’t get things right the second time around. So, you must fail often until you create a solution that suits your users’ needs at a profit.

This is called rapid testing. Many professionals in the software industry subscribe to this workflow. However, even caused-oriented professionals working for NGOs use this framework to guide them in providing sustainable products and services to their target users. You can check out this worksheet here if interested in this approach.

This, we recommend that you consider using for your digital transformation.

A Note on Human-Centric UX Design for Digital Transformation

This article isn’t really an in-depth look at anything. As the title suggests, it’s an introduction. However, we’d like it to be an introduction with some depth. Thus, allow us to expound a little on how you can use Human-Centric Design (HCD) for digital transformation.

The framework is actually quite related to the agile approach to project management. Why? Agile works best when there is uncertainty in projects. The goalposts move around too much and too frequently for a waterfall or top-down planning to catch up. So, we recommend that you treat your digital transformation in a more agile way. If we put our faith in too much centralized-planning, we might not get to course correct in time.

Thus, rapid testing and learning is a viable option to get things done in digital transformation. What a business can do is deploy this type of a user-centric rapid-testing program to not only external users but also to internal users as well in target departments. It is a learn as you test and go approach that provides you with real-time data.

Moreover, if you want to measure and track these efforts, you can always use a customer experience management platform.

Most Popular Customer Experience Management Software

  1. Zendesk. With one of the most flexible plan structures, Zendesk covers all your customer experience, support, chat, call center solution and knowledge base needs. Know more about this cutting edge solution in our Zendesk review.
  2. Yotpo. This app sees customer experience management via product reviews, using the best among them as sales-boosting incentives. Our Yotpo review analyzes its key features.
  3. Qualtrix CX. This customer experience management platform gathers customer feedback then uses its own predictive intelligence engine called iQ to automatically extract deep insights and predict the key drivers of your company’s customer experience. Learn more in our Qualtrix CX review.
  4. Smartlook. The app features event tracking and sessions recording to show you the activity of your site behaviors, giving you the insights to help you understand the online behavior of your customers on your website and mobile app. Read this Smartlook review to understand how it works.
  5. Contactually. This is a web-based customer relationship management tool that allows companies to oversee and manage communication activities using an easy-to-use and well-built interface. Get up to speed with this Contactually review.

The State of Digital Transformation in Different Industries

Many are quite interested in digital transformation in banking and finance organizations. Some have their sights on digital transformation in oil and gas companies. These are very interesting cases as simple mistakes in planning and deployment can have severe repercussions. So, in this section, we’ll discuss the state of digital transformation in different industries. Hopefully, we can learn some best practices and opportunities from similarities with our own.

Healthcare and DX

Healthcare and technology always go hand in hand. However, in the last decade, digital technologies pose greater opportunities for healthcare to progress. Telehealth became in demand because of the drive to centralize healthcare administration and to enhance the quality & safety of its applications. The market size in the US was valued at $572 million in 2014.

Also, it is expected to reach up to $13 billion in 2020. Furthermore, other factors influence the increase in demand like the shortage of physicians especially in the fields of psychiatry, neurology, and critical care. However, there are other challenges.

Culture is being considered as the biggest hurdle to the industry’s DX. Other barriers include organizational structure, mindsets, and governance. In essence, the greatest blockade for digital transformation in healthcare may just be the human factor.

Thus, soft skills and a soft systems approach may be needed to solve this problem. A soft systems approach recognizes that the real world is messy and complex because we, human beings, are part of it. Therefore, we need to address the human elements of systems as they tend to make complex endeavors more complicated.

The Future of Healthcare DX

DX, when done right, will increase access to physicians and healthcare systems. This ensures that patients receive the right care for their concerns at the best times. Recent surveys had shown that around 76% of US hospitals can connect patients and physicians using video and other technologies. To increase this, experts believe that governments have big roles to fill.

In other countries, this has been the case. Australia had set up its National Digital Health Strategy with a My Health Record feature as an opt-out medical record for citizens. England did the same with their NHS Digital and NHSX. These support national health services and social care. However, hospitals worldwide have not been able to close gaps in quality and access despite their growing budgets.

Today. healthcare customers expect that their healthcare experience is going to catch up in quality with other consumer experiences. It doesn’t matter whether it’s market-driven or government-owned. Thus, experts believe that there is much opportunity for DX experts and healthcare providers for more development. Areas for development include:

  • Focusing on tangible value to consumers
  • Promotion of open innovation
  • Reinforcing incentives by developing better reimbursement systems

Moreover, if you are in the healthcare industry and you are ready for DX, consider these different kinds of software to meet consumers’ analog and digital expectations.

Insurance, Banking, and Finance and DX

Insurance, banking, and finance have always been people-centered industries. However, they also have B2B connections and relationships. All of them do business with each other all the time. Thus, it is really easy to see how digital transformation can benefit firms in such industries. Why? People want faster and safer transactions all the time from company to company.

One insurance services provider, Talanx AG, understood this well. Thus, they began their DX and transitioned their overall strategy into becoming a digital business. They repositioned themselves to become an insurance inf0-tech company. They did it with a two-step approach.

  1. Reengineering legacy back-end systems to reduce technological complexity
  2. Deploying cloud-based front-end systems to enhance B2B and B2C channels

Even in the early stages of implementation, they already opened the possibilities for advanced analytics and data management. Moreover, they launched a best-practice lab. This enables them to provide transparency for new technology solutions for insurance. Moreover, this helps their far-flung offices align with DX projects.

The Future of Insurance, Banking, and Finance DX

These industries are arguably at the forefront of digital transformation. However, not all companies are there yet especially SMBs. In the next few years, experts expect ERP automation capabilities and cognitive innovations such as AI and machine learning to continue to progress. Also, they’ll receive more adoption from these industries.

These will free up people and finance will likely be leaner because of this. Moreover, as analytics will be a part of many DX projects, traditional finance cycles will become more irrelevant. Leading organizations, according to experts, will have a new outlook. There will be monthly or quarterly forecasting. Everything will be in real-time.

Additionally, it seems that self-service will become the norm. Experts believe that this is highly likely especially with B2B customers. Many users already want to do things on their own with the help of digital tools. This ranges from basic queries to report production. Thus, this should be included in your DX efforts if you are part of these industries.

As culture and organization is a big part of the DX efforts, leading companies will likely hire new talent that can work at this pace. This means that a premium place will be given to data scientists, business analysts, and even storytellers. Thus, talent models and pools will have to change to accommodate DX appropriately. Again, this is to meet customer and market requirements.

Oil, Gas, and DX

DX is indeed very interesting in the case of oil and gas. Accenture has revealed that 18% of companies are business leaders that have achieved strong financial performance despite not prioritizing DX. These companies maintained their financial strength with their legacies. Fifty-nine percent of companies just got by without going digital altogether. Moreover, 16% of companies were considered to be digital leaders as they made significant progress in their digital capabilities.

Among companies, only 7% achieved high performance in both digital and financial metrics. How come?

Of course, many executives consider digital to be a key enabler in the oil and gas industries. Also, they believe that it could help reduce costs, improve workforce productivity, and make better and faster decisions. However, the sector is undergoing grave tests in recent history.

Weaker oil prices and lower demand plagued the market. Moreover, cost-cutting and delayed capital investment have undermined profitability and shareholder value. Some think that this is slightly improving. But, the focus and scale of investment and growth in the industry remain uneven. To wit, only 19% of companies are focusing on digital as a priority. Additionally, new digital technologies are still disrupting the industry rather than supporting it.

The Future of Oil and Gas DX

The balance of power is shifting to the customers. Industries deal with a new customer-centric world. This includes the oil and gas industries as well. Customers want personalization and prefer an omnichannel relationship with companies. This means that they want their interactions to be seamless when they jump from channel to channel.

Moreover, this shift isn’t just a B2C trend. It is also what many B2B customers prefer nowadays as well. In essence, it is important for oil and gas companies to employ CRM platforms to keep contacts centralized, handy, and accessible under one roof. Moreover, these systems can help you integrate different channels.

Moreover, blockchain will likely be an area of growth. If you are not familiar yet with the term, it is a digital ledger system enabling decentralized transactions across an entire firm. The increased use of devices even BYOD policies in the oil and gas industries will be supported by blockchain. This technology will help connect all parties and departments without the need for employees to actively get involved. This enables easy collaboration.

Lastly, oil and gas companies produce so much data. Only digital tools will help them manage these better and leverage them for decision-making. Thus, we can expect machine learning and predictive analytics to be used by more and more companies soon.

Digital Transformation Technologies Round-Up

In this section, we’ll list and briefly describe technologies that can help in DX. Moreover, we’ll show how they can provide benefits to companies. Again, these technologies assist and enable organizations to meet customer and market demands. Thus, they are customer-centric productivity enhancers.

  • Cognitive Technologies
  • Blockchain
  • IoT
  • Productivity (with collaboration and communications)
  • Cyber Security

Cognitive Technologies

Cognitive technologies extend the power of information technology to do tasks usually performed by humans. Technologies under this umbrella fall under three categories: product, process, and insight.

The product type is embedded technology in products or services to provide benefits to end-consumer. Secondly, the process types embed tech in an organization’s workflows to make internal processes more efficient. Thirdly, insight types use cognitive technologies to uncover insights and inform decision-making processes.

An example of product types of applications with cognitive tech is the recommendation engine. You find them in sites like Netflix and Amazon.

Secondly, an example of process type is automation. This results in work getting done faster, more accurate, and even cheaper. Customers only benefit from this indirectly. Organizations that implement these technologies allow for better efficiency. Lastly, an example of insight cognitive tech is NLP or natural language processing. NLP enables companies to analyze large amounts of unstructured texts for high-quality predictions. Other examples include machine learning for building predictive algorithms.

Blockchain

Blockchain was once known as “block chain.” It was associated with cryptocurrency. This technology allows parties that have low trust with each other yet have common interests to create a permanent, unchangeable, and transparent record together. Blockchain is basically a digital ledger that is distributed among parties. Verified transactions are recorded into blocks in its history. This provides all users with proof of value or assets that are owned.

This made sense in cryptocurrency. However, this also helps with other business processes that involve transactions. Even simple communique or lead generation information can profit from the ease that this system provides. Mostly, this is seen to be used in processing payments and settlements. Moreover, others are using blockchain to track supply chains and even for identity management.

Experts warn, though, that there is much unjustifiable hype around this technology. Sure, there are many potential applications in other industries like healthcare, media distribution, and even in government. However, many technologies are still immature. Thus, if you are new to this technology, be sure to just keep up with the trend. Don’t jump in on it without researching more of use cases.

IoT

This is not really a single technology like some make it out to be.  It involves a variety of technologies with many different components. What IoT or the Internet of Things is a vast network of interconnected devices that can detect other devices and send data. This allows more information to flow in the network.

But it is not just about getting data. It is about what we make of data—how we turn it into knowledge. The devices are connected already. They talk to each other in their own ways. However, we are not that fluent yet in making sense of everything. And we are not yet great at turning them into valuable services or products.

Well, not everyone. The best thing you can do if you are new to this is to read up on how IoT will take shape in the future.

Productivity

Productivity apps are aplenty. However, these are the main trunk of technologies for digital transformation.

Firstly, you can digitize records and have them all in one place. Secondly, you can track and monitor tasks. Thirdly, you can generate automatic reports. Fourthly, you can collaborate and communicate with all your stakeholders. The list goes on and on about what you can do with these types of apps and services.

Again, when most people talk about digital transformation, they talk about adopting these types of technologies. Tools range from CRM platforms to video conferencing tools. So, if you are on your way to DX, be sure to check out the wide array of productivity tools available.

Cyber Security

Seventy-six respondents of a study found security to be brought in too late to DX efforts. Many feel that DX is all about speed, agility, and connectivity that they think security is a hindrance to all of these. Moreover, only about 21% of Chief Information Security Officers (CISO) report to the CEO or the board. Thus, many security concerns are not even known by other executives.

Thus, experts advise us to make security the starting point. Good cyber risk management allows your business to become more resilient. Also, when you have good cybersecurity technology, you can protect your DX from vulnerabilities. Thus, it is an integral technology for every digital transformation initiative. Be sure to check out what cybersecurity tools can do to keep your DX safe.

Are you ready for Digital Transformation?

Digital transformation is not just a buzzword. It is an adaptive business strategy that can almost pivot a company from the brink of insignificance to being highly relevant again. It is the leveraging of digital tools to help organizations to be able to keep up with the ever-changing customer and market demands. Also, like any other strategic move, it should be done with care. Moreover, as mentioned before, it should be user-centric.

Being user-centric does not only mean being customer-centric. It also involves being sensitive to the workflows and experiences of your internal users–your employees. Remember, they help you create value for your customers. Thus, whatever they do, they directly or indirectly affect how you provide products and services to customers. Therefore, you need to give them support. You need to help them help you.

To learn more about being user-centric, read more about user experience here.

Lastly, there is a myriad of technologies that you can use for DX. Not all of them can be useful to you. For example, if you are an SMB, you may need to prioritize productivity technologies and cognitive technologies over blockchain or IoT. If you are in the healthcare industry, DX would look different to you than those in the oil and gas industries. DX varies from industry to industry. Moreover, it varies from firm to firm.

Also, do remember that culture and organization are big factors when it comes to the success or failure of your digital transformation. Remember, your system is not just made up of buildings, equipment, computers, software, and other inanimate objects. Your systems have people too. Thus, the change must pass through them as well.

Jenny Chang

By Jenny Chang

Jenny Chang is a senior writer specializing in SaaS and B2B software solutions. Her decision to focus on these two industries was spurred by their explosive growth in the last decade, much of it she attributes to the emergence of disruptive technologies and the quick adoption by businesses that were quick to recognize their values to their organizations. She has covered all the major developments in SaaS and B2B software solutions, from the introduction of massive ERPs to small business platforms to help startups on their way to success.

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