Digital Transformation (DT) is a process in which an organization uses digital technologies to create new or adapt existing company processes to changing market conditions.
Through the integration and use of digital technologies, digital transformation enables businesses and organizations to start a new phase of operations.
As a result, their mode of operation changes dramatically. Also, the values offered to the customers and users, or, generally, stakeholders, change.
And it is not only a change in terms of technology but also an organizational and cultural change.
Along with the changing paradigm of action, corporate culture also changes, which with transformation constantly employs the principle of experimenting, adaptation to changing conditions and continuous improvement of models, standards, technologies and solutions.
Digital transformation of businesses, or digital business transformation, is a concept increasingly entering the mainstream, and gaining the interest and understanding of Polish business owners, too.
Although far from satisfactory, the digital transformation in Poland means a constantly expanding and deepening awareness, supported by numerous domestic examples of success stories.
The growing number of Polish owners, managers and strategists understand that, in practice, digital transformation means greater competitiveness, productivity, effectiveness, lower costs, higher profits, and better dynamics of operations.
Therefore, it is worth taking a closer look at it.
What is digital transformation? How to conduct it? What are the benefits, challenges and risks of it for an organization?
Why is it already a necessity, even for small and medium-sized enterprises?
All the answers you can find in our article.
Digital transformation - what is it?
The main challenges for organizations are the need to be agile, strong customer orientation, innovation, the ability to acquire new skills quickly, and the ability to use Big Data.
Both global and smaller ones operating in national or regional markets.
More and more often, you can hear that digital business transformation is not so much a chance or a choice but an inevitable necessity for every entity that wants to survive in the market and play an important role in it.
And these are the tasks formulated not only by business leaders.
The most significant features of digital transformation and digital technology are their comprehensiveness, multidimensionality, and capability to enter the market with brand new products (e.g., based on artificial intelligence).
An organization that decides to start the digital transformation process will be subject to changes that will include all levels of its structure, all (or almost all) of its processes, models, modes of operation, goals and values.
Digital transformation is not only about increased sales but also about remodeling and digitization of the entire organization processes (the use of state-of-the-art solutions), related, e.g., to:
- Customer service
- Management of financial operations
- Provisions of services
- Methods of production and distribution
- Promotion and advertising
- Reputation management
- Method for acquiring new customers, users and partners.
Inevitably, digital business transformation entails a huge change for the company customers who will be offered state-of-the-art technologies, functionalities, experience and benefits.
And here we come to the next keyword which clearly reflects the meaning, scope and goal of every organization entering the path to digital transformation and new achievable goals in the digital world.
It is, of course, customer centricity. As the authors of the 13 faktów o transformacji cyfrowej (13 Facts About Digital Transformation) report note, every organization should be customer-centric in all of its activities.
Customer centricity is the essence of digital transformation and its main driver. It is also its point of reference and the basic criterion for evaluation. As well as the horizon of its activities, driver of change, goal of the efforts, and change pace energy.
Generally, the need to provide customers with a much better experience is the key driver of digital transformation.
If not in reality (which inevitably is quite a challenge and is not always possible to achieve), then in the ideal being pursued.
The starting point for every organization that wants to be customer-centric should be the activities related to:
- Supporting the cooperation between departments to streamline the transfer of knowledge, ideas and concepts.
- Entering the mode of continuous work optimization, which should be carried out in an iterative mode
- Changing corporate culture, which should be expressed in the departure from hierarchical management to inspiring and encouraging the employees to make decisions and find solutions actively and independently
- Supporting Employee Experience which is a condition sufficient and necessary for Customer and User Experience
- Strong link between business and technology.
To complement the above points, it is worth noting that digital transformation does not have a singular character and cannot be reduced to single technological solutions, products or IT services (e.g., cloud computing).
Nearly always, it is plural, a combination, integration and use of functions, potential and capabilities of many technologies, services, and digital products, also affecting the User Experience.
However, the specific configuration of these components cannot be random.
It should result from a precise, reliable and comprehensive definition of the most important goals of an organization and customer requirements (business, financial, operational, strategic, technological and manufacturing).
The phase of analyses, discovery and definition of goals, searching for solutions, task prioritizing, specifying the desirable results, and indicating risks and limitations plays a key role. It is a phase of crucial importance.
The phase of analyses, discovery and definition of goals affects:
- Growth rate achieved through digital transformation
- Rate of return
- Customer and user satisfaction
- Transformation rate
- Speed of offering products and services in the new digital formula.
However, remember that digital transformation is a process, and as such, it will not always run smoothly.
Its biggest obstacles include primarily:
- Insufficient financial capabilities of an organization
- Petrified, old corporate culture resistant to change
- Deficiencies of competences
- Technological loads and technological debts
- Business silos
- Lack of investment in the development of new skills for the employees of various levels
- Lack of vision, of the definition of digital transformation and of the role of, e.g., machine learning or artificial intelligence is to perform in supporting the customer experience.
Key components needed for digital transformation
The success of the transformation process depends on many factors, also on the understanding of its actual essence and ultimate goal.
As Tomas Chamorro-Premuzic put it in his article “The Essential Components of Digital Transformation,” “the essence of digital transformation is to become a data-driven organization.”
What does it mean in practice?
It’s about a decision-making process and substantiation of decisions based on data.
The point is to avoid making decisions motivated by intuition, personal preferences and biases or short-term fads and impulses.
The key decisions, tasks and processes should result from analyzing the data acquired. This allows an organization to ensure greater impartiality, objectivity and rationality, as well as a deeper understanding of market processes, its position, capabilities, strengths and weaknesses.
However, the strengthening of the activities on data will not bring the desired effect if an organization will not additionally take care of the other necessary components, i.e.:
- Quality, quantity and depth of the acquired data
- Appropriate structuring, modeling and analysis of data
- Frameworks enabling practical, accurate, effective and useful conclusions
- Operationalization of data and conclusions into specific processes and actions, answering the questions: What to do? How? When? Using what?
- Definition of KPIs
According to the Deloitte approach, no digital transformation can be effective if its essence is not humans (customers, employees, users, stakeholders) whose needs, goals and expectations should be considered in the process.
Consequently, in digital transformation technologies, products and solutions are only half the success.
The other half can only be ensured by changing the existing business model.
Without a new concept of the approach to products and services, the technology will become nothing more than a form without substance necessary to provide an appropriate customer experience.
For this reason, digital transformation should primarily mean:
- Change of business models
- Change of (technological, decision and organizational) processes
- Change of values and work culture
- Change of workflows
- Automation of specific tasks and processes (e.g., through machine learning).
Generally, digital transformation has a vast range and covers an awe-inspiring number of processes, interactions, factors, needs, goals and methods.
It enables you to effectively and innovatively utilize new technologies (e.g., in E-Commerce).
The key importance of digital business transformation
What are the advantages of digital transformation? What is the role of digital tools, their use in the business model based on digital technology and digital solutions?
What is digital transformation all about? How to successfully start and carry out digital transformation?
Naturally, in every industry, or even in every organization, the advantages will manifest themselves to a different extent and in various configurations.
The scope of digital transformation includes:
- Possibility of faster, more dynamic growth of an organization
- Better financial, sales, production and organizational results
- Capability to respond faster and more effectively
- More (functionally) appropriate responses to the changing customer needs
- Increasing the involvement of customers
- Better timing: addressing the customer needs at the right time
- More accurate diagnosing of needs
- Capability to provide superior and less risky innovations
- Possibility of integration, aggregation and structuring of data from various sources
- Process automation
- Process monitoring
- Process planning
- Prediction of events, determining risk levels, hazard identification
- Effective management of principles and powers
- Possibility to use advanced AI technologies (e.g., machine learning, deep learning).
A business using digital technology - examples of transformation
Of course, the scope of digital transformation changes over time. It is conditioned by each organization’s individual needs and limited and, to some extent, determined by the framework (e.g., legal) of a specific industry.
It results from the current and future business processes streamlined by digital technology.
Nonetheless, it is possible to indicate the areas most often subject to digital transformation.
Digital transformation relates primarily to:
- Business functions (e.g., customer service, marketing)
- Business processes, i.e., ways of achieving business goals
- Business models, i.e., methods for an organization to function in the market
- Business ecosystems, i.e., methods for building relationships with stakeholders
- Corporate culture that should be customer-, employee- and business partner-oriented.
- Domain transformation (possibility of business expansion and entering a new market of services and products).
Digital business transformation means change. Usually, a deep and wide one.
The change of business model not only entails introducing new technology but, above all, means offering a brand new customer experience that can be achieved with its help.
It could also mean domain expansion. The best example is the story of Amazon which has continuously expanded the scope of its services and products through digital transformation.
Technologies supporting digital transformation
When discussing digital transformation, you must mention the technologies driving it, contributing new values, determining the business future, and transforming in the full sense of the word.
And they are the future of technology-, product-, service- and digital solution-based businesses.
Cloud computing is one of the most frequently mentioned services bringing new value to organizations.
Above all, cloud computing enables you to manage and analyze data better.
It provides digital products with appropriate scalability, stability, security and development capabilities.
Cloud solutions also provide affordable access to state-of-the-art technologies, services and products that are simply not available to most companies willing to create them independently. In terms of finances, organization and time.
AI, Artificial Intelligence, and its subdomains, Machine Learning and Deep Learning, are used today in a growing number of industries and for increasingly advanced tasks.
They are used primarily for:
- Diagnosing (e.g., in health care)
- Face recognition (e.g., at airports)
- Forecasting (e.g., changes in stock prices on the stock exchange)
- Discovering regularities, patterns and principles
- Classification (e.g., of plants in farming, enabling selective fertilization and spraying of cultivated fields).
- Identification (e.g., of faces)
- Detection of anomalies (e.g., weather)
- Answering frequent customer questions (e.g., chatbot assistants)
Data analysis and management are today the operations on very large databases which enable you to discover, predict and implement faster, more securely, more accurately and more precisely.
Moreover, data operations form an essential part of the decision-making process.
Customer centricity is also about meeting the customer expectations, needs and experience based on data analysis supporting customer segmentation.
The Internet of Things is another area to carry out digital transformation in organizations.
First of all, the Internet of Things (IoT) enables real-time data aggregation and analysis, and modeling processes and determining changes based on them.
The data operations constitute the basis for faster and more accurate decisions made in a very short time.
They provide invaluable support, e.g., in Supply Chain Optimization.
Digital transformation in business. Summary
- Definition of Digital Transformation: it is a process in which a company uses digital technologies to create new or adapt existing business processes to dynamically changing market conditions.
- Digital transformation should be understood as the change in the mode of operation and values offered by an organization to its customers, users and stakeholders. With digital transformation, the entire mode of operation of an organization changes.
- The digital transformation projects enable an organization to operate in the paradigm of constant experimentation and improvement of models, standards, technologies and solutions to better adapt to the changing market conditions.
- In practice, digital transformation (e.g., the possibility to use artificial intelligence) means more competitive advantage, productivity, effectiveness, lower costs, higher profit, new business models, capability to provide innovative services, new technologies, and better dynamics of organization operations.
- Digital transformation results in changes that will cover all levels of your company, processes, models, modes of operation, goals and values.
- Customer centricity is the essence of digital transformation and its main driver.
- The process of digital transformation has a plural character. It is the combination, integration and use of functions, potentials and capabilities of many technologies, services, digital products and, above all, process automation.
- In digital transformation technologies, products and solutions are only half the success. The other half can only be ensured by changing the existing business model. Digital transformation (in terms of technology) must be supported by the change in corporate culture.
- Cloud computing, AI (Artificial Intelligence) and the Internet of Things are among the most frequently mentioned services contributing new values to organizations.
- The importance of digital transformation cannot be overestimated. Digital transformation should be perceived as vital to the competitive edge and strategic thinking improvement.