The rise of digital transformation

In recent decades, the use of digital technologies in our day-to-day life has grown at a rapid speed. In our personal lives we’re constantly connected through our smartphones, and in our professional lives technology has undoubtedly revolutionised the way we work.

Due to this, businesses are now recognising the importance of taking their products, services and processes online, and digital transformation projects are common in many workplaces.

What is digital transformation?

While digitization is the initial move from analogue to digital, a move which the majority of businesses has now undertaken, and digitalization is the use of digital data to simplify ways of working, digital transformation is a complete digital overhaul of the way a business operates.

Digital transformation is the process of integrating digital technology into all areas of a business, from the way the business operates internally to how sales, service and value is delivered to customers. When a company undergoes a digital transformation, it is a complete shift for employees and customers, and so is a cultural change as much as a change to digital processes and systems.

The term ‘digital transformation’ has become a buzzword, often mentioned as an essential move for all businesses. Though it is an important shift for a company’s survival, what it means and what it involves often gets lost or confused and many digital transformation projects don’t end in success.

What makes a successful digital transformation?

Research suggests that the success rate of digital transformation projects is consistently low, with less than 30% succeeding.

In 2018, a McKinsey Global Survey aimed to seek out the solutions to what creates success in digital transformations. Respondents represented the full range of regions, industries, company sizes, specialties and tenures, and were asked questions about digital transformation projects they’d been a part of, either at their current or at a previous place of work.

In those who reported success in the digital transformations they’d been a part of, 21 best practices were identified. These characteristics fell into five categories: leadership, capability building, empowering workers, upgrading tools, and communication.

Digital-savvy leadership

Almost 70% of respondents to the McKinsey survey say the leadership team changed during a digital transformation project. Leaders familiar with digital technologies were recruited, and many organisations had a chief information officer (CIO) or chief digital officer (CDO) in place.

Having a team of leaders who are solely dedicated to the change, and having those in key roles who are committed to change, heightens the level of success a project will have.

Upskilling the workforce

Developing talent and skills within employees is one of the most important factors for a successful digital transformation.

This includes redefining individual roles and responsibilities so they align to the goals of the transformation, and engaging the roles of integrators and technology innovators to bridge the gap between traditional and digital parts of the business to foster stronger capabilities among colleagues and translate new digital methods and processes into existing ways of working.

Empowering people to work in new ways

As any business transformation will be a change to the status quo, adopting digital technologies is also a cultural and behavioural change and people must be empowered to work in new ways for the project to succeed.

Reinforcing new behaviour through formal mechanisms, establishing practices for working in new ways such as continuous learning, and allowing employees to share their ideas on where business processes could move to a digital model all make a difference.

Upgrading day-to-day tools

Making the use of new digital tools the norm, deploying digital tools that make information more accessible across the business, increasing data-based decision making and the use of interactive tools are all key to a successful digital transformation project. 

Survey results showed that organisations who introduced more digital technologies had greater success. Though multiple tools may seem counterintuitive, those with a broader suite were more likely to use sophisticated technology such as artificial intelligence, the Internet of Things (IoT), and advanced neural machine-learning techniques.

Clear communication

Communicating frequently with employees is critical during a digital transformation project, particularly communicating the change story on where the organisation is headed, why it’s changing, and why it’s important.

Ensuring buy-in from all levels of the business is entirely dependent on open channels of communication, and having the whole workforce on board can greatly determine whether or not a project is successful.

How digital transformation can generate competitive advantage

Customer expectations are now driven by digital technology and digital innovations. As consumers who are always connected, if they see one business adopting a new digital technology which improves their service and customer experience, they’ll want it from their usual suppliers as well or they’ll go elsewhere.

While many companies now have social media channels to communicate with their customers, this has now become a norm and many customers are expecting more. In Saleforce’s report ‘State of the Connected Customer’, over half of the surveyed customers said that technology has significantly changed their expectations of how companies should interact with them. 

The report also showed that 57% of consumers say it’s critical or very important for companies they buy from to be innovative, and 70% said new technologies have made it easier for them to buy from another business instead.

The use of analytics in consumer behaviour is a business strategy that has been in action for many years, though the introduction of big data in many organisations has enabled the possibility of targeting customers more precisely to gain competitive advantage.

How has digital transformation changed the landscape for the workforce?

The introduction of digital technologies has radically changed the landscape for the workforce in recent years. Automation can increase productivity, allowing workers to stay focused on tasks and making their day-to-day run smoother, cloud computing gives employees greater oversight of what is happening internally and externally, and digital workflows enables all members of a team to collaborate efficiently and to see team updates in real-time.

No matter where a company was on their digital transformation journey, the coronavirus pandemic of 2020 undoubtedly made all businesses shift to digital ways of working quickly. As offices closed down, digital channels opened as remote working became the norm.

At the 2020 MIT Sloan CIO Symposium event, the ways the pandemic forced digital change across all industries was explored. It was identified that rapid change became normal, both within workforces and also in consumer demand which made many adopt new technologies for their supply chain like blockchain and IoT, and it is predicted that some of this fast-moving consumer behaviour will be permanent. 

With these new consumer behaviours in place, digital transformation has become key for all businesses to keep up with supply and demand.

How to approach digital transformation

We are living in a digital age, and the expectation for customers to purchase new products from innovative companies is rising. In order to maintain survival and growth, business leaders have to develop new business models that encompass digital technologies into their ways of working. 

Digital transformations must be approached with an open mind, and led by a management team who are open to risk taking. In order to be successful, all must understand that it is a complete cultural change to a business and communication with employees at all levels is essential. 

If you’re in a business that is undergoing a digital transformation, whether a startup or a large company, you can learn more about digital transformation and the digital organisation on our 100% online MBA. Study part-time with Keele University, and learn how to gain the competitive advantage all businesses need in a digital society.