Today, businesses have to and are looking at technology with a new approach. Conventionally, enterprises had to handle the emergence of any technology in isolation. However, now they are being affected by a number of technologies, all at once. The integration of digital technology into all business domains is radically changing how they operate and offer value to their patrons. From expansion to meeting market demands, businesses are now embracing technology. According to IDC, digital transformation will account for 53% of all ICT investments by 2023. This is, hence, the era of digital transformation. But what makes this journey transformational is the significant impact these technologies have on businesses.
There is no one comprehensive way to define this transformation. However, the use of technology to optimize efficiency, boost customer value, manage risk, and navigate through new prospects for income creation can be said to be the digital transformation for businesses. This also opens a set of new opportunities into sectors that had never been feasible before.
Significant areas of Digital Transformation
The digital transformation as a concept is not complex. This entails embracing digital technology, including sales, marketing, and support activities, both for internal and external operations. Basically, there are four different business aspects of digital transformation in various sectors:
Transformation of Business Processes
Data, analytics, Interfaces, Artificial Intelligence, and other technologies provide businesses with essential contemporary techniques to reinvent processes across the board, cut costs, shorten production cycles, and improve efficiency. Many companies from different sectors, such as hospitality, law and accounting firms, have used robotic process automation to streamline their back-office operations. The retail giants who embraced digital transformation in their business processes include Nike, Target, Honeywell, and Home Depot. In fact, online retailers like Amazon and Alibaba have enormously affected the traditional brick-and-mortar giants.
Transformation of the Business Model
Some firms use digital technology to convert their traditional business methods. While the transformation of processes focuses on specific business sectors, the transformation of the business model targets critical elements of the value offered in different sectors in the market. Like, how Netflix has become the streaming service today, a significant shift from the DVDs. By altering the key value-building elements, companies that achieve transformation of the business model provide considerable new growth prospects.
Transformation of the Domain
Most firms are changing old business paradigms through digital transformation, and its most significant example for all businesses is Amazon. It has transformed with the expansion of domain in a new market segment with Amazon Web Series (AWS). It shows how new technologies change products and services, break the boundaries of the sector and create whole new groups of non-traditional rivals. Hence, digitalization has introduced one of the most critical business growth possibilities. All digital transforming organizations should be aware of new domain opportunities with the introduction of new technologies.
Transformation of the culture
The consumer credit agency Experian is one of the instances of this cultural/organizational change. Best-in-class companies perceive digital as demanding agile workflows, testing and learning, decentralized decision-making, and increased dependence on corporate networks. By introducing collaboration and agile development into their operations, they were able to alter their company. Various individuals employ different systems. A significant example of the power of digital transformation is the introduction of Artificial Intelligence, Machine learning and deep learning in your business. For customer queries, AI-driven chatbots on your web page can decrease the waiting time for clients. It might be challenging to get everyone on a similar page and adopt massive changes, but it is worth it if your product gives your consumers a better overall result. A complete, long-term digital transformation involves the redefinition of the digital environment of perceived workplace, procedures and people.
Benefits of Digital Transformation
As different industries have different business and growth trajectories, all together with a different set of challenges hence, the digital transformation and its benefits are also not the same across the sectors. Usually, digital leaders make better gross margins and net income than organizations on the backfoot. However, some expected benefits witnessed across the sectors are listed here.
Increases Productivity: Transferring repetitive and boring activities to powerful computers boosts productivity while lowering the risk of human mistakes. Moreover, delegating the heavy lifting to technology allows you and your team to concentrate on crucial business responsibilities and revenue-generating activities. When revenues grow, companies have access to more significant resources that further boost their efficiency and productivity.
Improves Efficiency: Integration of technologies help in avoiding redundancy, thereby enhancing efficiency. For instance, one of the main benefits of using an ERP system for your organization can accelerate processes and simplify operations. Hackett Group states that through digital transformation, organizations can improve their efficiency by 20% and reduce costs by 40%.
Improves Experience of Customer: Today’s customer has access to numerous media channels and hence, communicates seamlessly with other firms and consumers. The number of touchpoints has significantly increased, of which most are digital. According to Forrester’s Customer Experience Index, around 39% of companies that are outperforming have embraced digitalization and adopted an integrated omnichannel strategy. However, organizations should acknowledge that when it comes to customer experience, digital transformation is not just a matter of the front-end but holistically the whole organization.
Improves Competitiveness: You may increase your competitive edge in your sector by upgrading your company’s infrastructure. The ideal approach to achieve this is to prepare for your new system to strengthen your organization’s features and functions. Digital transformation fosters competitiveness by giving team members the proper tools suited to their context.
Increased agility and creativity: Organizations become more agile after undergoing digital transformation. With software development, companies may boost their agility to improve speed to the market through digital transformation and embrace continuous improvement techniques (CI). However, recent software development techniques such as DevOps and Agile promote greater team communication and enable teams to swiftly design and roll out new features and functionalities to meet market demands as they change. This fosters innovation and adaptability to be faster and provides a means to improve.
Industries Navigating Digital Transformation
The definition of digital transformation is widely disputed among all industries. This technological advancement has a different meaning for different sectors — depending upon the industry where it is being used. Regardless of the challenges and opportunities, it holds for the future, many industries are accepting the change while modifying their way of conducting business. Let’s look at the some basic industry cases where digital transformation has taken the way.
It has been a long time now since digital transformation has taken over the essential industry — manufacturing. Almost all the industries worldwide are smart factories relying widely on new technology, “Artificial Intelligence.” With the help of AI, the manufacturers have automated the tasks where there is no need for human intervention. Inside such factories, robots work on the assembly line. Not just this, IoT has also been introduced in factories. IoT devices collect the data in the factories, and machine learning technologies analyze the data. Not the mention, the technological evolution significantly increased the production output while speeding up the processes.
Health and Pharma
The health and pharma industry were a little too slow in adapting to the change. Usually, companies were uncertain about how they will align the digital strategy with their business model. But with time, the companies realized the importance of accepting the change. And now healthcare and pharma are surprisingly among the leading industries in digital transformation. Hospitals have incorporated the use of AI to diagnose conditions while assisting doctors with surgeries. The Pharma industry is using technology to discover and produce new drugs within no time. Simply put, digital transformation has improved the overall healthcare sector with better access and security.
Since the introduction of digital transformation, hotels have particularly undergone immense change. With the help of mobile phones, tourists can quickly check into hotel rooms. Not just this, hotel management use AI to fulfill all the request for services. On top of this, IoT is used to collect customer data making the customer experience better. Above all, if you do not like to travel, you can now opt for virtual reality vacations from the comfort of your home.
Digital transformation has changed the finance industry in numerous ways — cloud computing, robotics, and analytics are the tools that have revamped the core of finance and banking. Simply put, financial management has become easier with no room for errors for both customers and banks. Not only this, smart ATMs, banking apps, chatbots, and virtual helpers have made the entire process easier. Sooner, human staff will be reduced in the banking sector that will ultimately make the customer experience better. Not just this, it is expected that robots will surely lead the way in efficient customer engagement.
The finance industry is also heavily driven by business model transformation changes in the market introduced by new entrants providing services in form of para-banks, cryptocurrency stock exchanges, crowd financing organizations, etc.
To stay competitive, the energy sectors are using automated machinery, which has made their process faster and easier. Above and beyond, the companies are using sensors to gain valuable insights into equipment failure. Just like other industries, human intervention has been reduced to the minimum, and the chances of errors are less likely. Moreover, new mobile capabilities help agents get done with the project quickly, resulting in better customer service with minimized cost.
The significance of digital transformation is acknowledged across the sectors. Moreover, the necessity of rapid adjustment to significant changes, including supply chain interruptions, time-to-market pressure and fast-changing client expectations, was witnessed during the COVID-19 pandemic. Owing to the number of benefits of digital transformation, businesses must consider this as a critical factor in assessing the company’s performance and planning for the years to come.
So what is a caveat with digital transformation? The biggest challenge is the transformation project itself. It is a significant change that must be applied through the whole organization while making the least disruption to the ongoing operations. Moreover, although digital in the source, the change usually impacts well-established processes and organization structure. Thus, if not communicated well, the people and existing company culture may be the biggest obstacle.
Nonetheless, every organization will have to make a more concise approach towards digital transformation and new ways of operations, sooner rather than later, or face the consequences of diminishing effectiveness against the market.