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Digital Transformation

What Is Digital Transformation & Why It’s Important for Businesses

Every sector and industry that we know today is being changed by digital transformation, such as manufacturing, education, financial services and more. The whopping amount of spending on Digital Transformation provided by Statista shows how serious many companies are taking this digital trend to improve their procedures and facilities, thus increasing customer loyalty. In this article, we will take a look at the definition of digital transformation and why it’s important for businesses everywhere around the globe. 

1. What is digital transformation?

Digital transformation is the process of using digital technology to develop new or change current business processes, culture, and customer experience. Digital transformation is the reformation of industries in the digital age to meet changing business and consumer needs.

When digital transformation first started exactly is a debatable topic. But there’s one thing for sure, is that it has been there since the initial advent of the Internet in our daily lives. Take Dell, for instance, the company was quick to take advantage of the World Wide Web around 1996–1997, disrupting traditional PC manufacturing companies like IBM by selling direct to consumers rather than through dealer networks or hobby shops, and gaining valuable insights into consumer behavior as they navigated the website. – Wikipedia

2. How COVID-19 affected digital transformation

The COVID-19 outbreak has slowed market demand in many industries and countries, leaving them in limbo. They were forced to transform and rethink their models digitally. Companies are debating how to react to this sudden change. They want to know if technology will help them develop new business models and generate more revenue.

Many companies had been exploring digital transformation before the coming of COVID-19. But it wasn’t until after the pandemic that there was a shared desire to go beyond just talking about it. As consumer tastes changed, competition increased. As a result, the need to reform quickly became the standard. In certain ways, digital transformation is now a matter of economic survival.

3. Types of digital transformation

3.1. Process Transformation

Business processes have become a significant subject of corporate activity. Data, analytics, APIs, machine learning, and other innovations provide businesses with valuable new ways to reinvent processes around the organization to reduce costs, shorten cycle times, or improve efficiency.

We also see process transformations in customer experience, where companies like Domino’s Pizza have entirely re-imagined the food ordering process; Dominos’ AnyWare lets customers order from any device. This innovation increased customer convenience so much that it helped push the company to overtake Pizza Hut in sales.

3.2. Business Model Transformation

Several businesses are pursuing digital innovations in order to transform conventional business models. While process transformations concentrate on the business’s finite areas, business model transformations aim at the basic building blocks of how the goods are delivered to the market. Netflix’s reinvention of video streaming, Apple’s reinvention of music delivery (iTunes), and Uber’s reinvention of the taxi industry are all well-known examples of this form of innovation.

3.3. Domain Transformation 

Domain transformation takes new technological innovations to a whole new level, it’s redefining products and services, blurring market lines and introducing completely new markets beyond what is currently existing. It is also this type of transformation that provides the most potential for new value creation.

3.4. Cultural/Organizational Transformation

Long-term digital transformation necessitates redefining corporate mindsets, structures, talent, and skills for the digital age. Digitalization calls for agile workflows, a preference against testing and learning, decentralized decision-making, and a greater focus on market ecosystems, these are the facts that best-in-class businesses have admitted.

4. How to implement digital transformation

4.1. Establish the New Business Process

Redefining the current business process is the first step in digital transformation. This may be a large-scale operation or something as small as improving the customer feedback process.

It can be difficult to alter a method that has served a company well for years. The fundamental issue with digital transformation is that it necessitates measured risk-taking. You’ll need to look at the marketplace and internal company data to figure out which processes can be improved.

4.2. Identify the key technologies

While many new technologies are experiencing rapid growth and acceptance, this does not mean that you will need to incorporate them all into your business. The technology you use is determined by the method you’re trying to improve.

In fact, technology is merely a tool to help you realize your vision. People are often confused by new technology and attempt to incorporate them all into their current business processes. The emphasis should be on identifying and implementing technologies that are suitable for your business goals.

4.3. Decipher the Paradigm of Innovation

When it comes to digital transformation, finding the best fit on the first try is extremely unlikely. And if you find a successful match, you’ll need a way to quickly introduce new ideas in the future. This necessitates a shift away from traditional managerial hierarchies and more engagement with employees at the lower end of the chain. It also implies redefining the culture to foster a dynamic environment in which opinions and changes are welcomed rather than suppressed.

4.4. Create a talent pool

To put creative technology into motion, you’ll need professional and dynamic people who can turn innovations into a workable plan. Innovative technology would be difficult to apply without qualified IT experts.

You can also outsource the enablement work to IT companies who specialize in the technology you’re trying to implement. This approach has the advantage of lowering recruiting and training costs while also allowing you to pivot from one strategy to another. 

Even if the project is outsourced, an in-house team will be expected to communicate and introduce improvements within the company. The need to recruit new employees in this case is largely reliant on the skills of your current workforce.

4.5. Define a Roadmap

Now that you know what you need to do, it’s time to create a plan for getting it done. The whole implementation process should be carried out in stages. Before going all out with your proposal, it’s best to test your theory on a small scale. A risk reduction milestone should be included in each step of the implementation, as well as gaining top management approval and finalizing the vendors.

4.6. Determine KPIs

To evaluate the effectiveness of the plan, you’ll need to establish some key success metrics (KPIs). These metrics will be used to demonstrate the plan’s effectiveness and to guide future decision-making. You’ll need to come up with smart goals that include a precise figure and a timeline, These goals will guide and refine the entire execution while still ensuring that the team maintains its focus.

Afterwards, it’d be the time to repeat the digital transformation process after you’ve completed all of the steps. It’s crucial that you keep your plan up to date based on business dynamics and results. You’ll have to pivot your approach frequently before being able to find the right tools and processes.

5. Digital transformation examples

5.1. Digital transformation in healthcare

Digital transformation plays an important role in the healthcare market. In the US only, digital health market is expected to reach 504.4 Billion USD in 2025 from 86.4 Billion in 2018. Digital transformation in healthcare aims to help healthcare providers streamline their operations, understand what the patient requires, build loyalty and trust and offer a better user experience. 

The way patients engage with healthcare professionals is changing thanks to a slew of creative solutions. The solution known as “telemedicine” enables people’s access to health professionals on demand, from searching for a doctor to scheduling a virtual appointment to connecting with doctors via video or voice call. This especially benefits remote or rural areas where access to healthcare is limited.

5.2. Digital transformation in manufacturing

Digital transformation in the manufacturing sector is about more than just automating the production line or further analyzing existing data. It necessitates a change in mindset and new problem-solving strategies. For example, With IoT supported by cloud systems such as Microsoft Azure, Swedish-Swiss multinational food packaging and processing company Tetra Pak was able to use real-time data to accurately predict when their dairy processing equipment needs maintenance.

5.3. Digital transformation in financial services

Across all sectors, digital transformation is a business requirement, and financial services is no exception. According to BDO, almost all (97 percent) financial services organizations are pursuing digital transformation in some way, whether they’re either designing a plan or have already adopted one. More than a fifth (21%) claim their top priority is to implement a digital transformation plan. Some of the most notable benefits of digital transformation to financial services are the improvement of Customer Experience and Operational Efficiency.

5.4. Digital transformation in education

From 2020 to 2021, the world has seen impactful changes digital transformation made to education amidst the Covid-19 pandemic. Teachers learned how to incorporate computers into their lessons, online classes became the norm, personalized learning approaches grew more prevalent, these are just some of the many benefits digital transformation can bring into the fray. Nowadays. the adoption of technology no doubt is accelerating to meet the educational needs of students worldwide.

5.5. Digital transformation in retail

For retailers, digital transformation entails looking beyond incremental changes. It’s all about facilitating a linked relationship through technology. It’s not only about data intelligence, agility, customer centricity, new value propositions, and innovation; it’s also about cost reduction, increased efficiencies, and process streamlining.

Retailers must rethink every aspect of their company while considering the digital transformation, from sourcing to inventory management, employee management and training, customer experience management. 

Customer retention and loyalty can be improved by digital transformation by providing consumers with the services and goods they need.

5.6. Digital transformation in banking

Digital banking transformation involves the integration of data, advanced analytics and digital technology into all areas of a financial institution, changing the way work is done, priorities set and services delivered. 

Standardization and automation are the key advantages of digital transformation in banking, which contribute to increased efficiency, lower prices, and better interactions with both customers and employees. To make this work, a holistic plan that incorporates digital technologies, software, customer service channels, and the entire infrastructure is needed. Creating a digital bank necessitates the streamlining of procedures, the adoption of a new organizational culture, and the implementation of scalable IT solutions that enable speed-to-market and personalization.

6. Why digital transformation is important for businesses

Customers’ expectations and requirements are at the heart of every digital transformation processes across all economic fields. Those who wish to embark on this global movement should be well-versed in the approaches and concepts. Such proper understanding will have a positive effect on a company’s success.

With digital transformation, core business functions, such as finance and HR, will benefit by moving away from manual processes and automating key areas like payroll, allowing leaders to concentrate on larger business opportunities. The result coming out of it also means that companies will be able to manage their resources more efectively and guarantee strengthened business partnerships.

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