You've probably encountered the term 'digital transformation (DX)' in one way or another. It's been a buzzword for a number of years now, and while it seems that everyone understands what it is, our experience shows that it might just not be that simple.Looking at the Statista's forecasts, by 2024 the global spendings on digital transformation will reach a mind-boggling 2.4tn USD. Nominal GDP driven by digitally transformed companies is predicted to constitute to a half of global GDP. And quite frankly, COVID-19 only sped up the rate at which enterprises invest into DX-related improvements as the entire world went online.
If it happens that your business somehow set a low priority onto digital transformation before, this might be just the time to change that. And if you're not yet familiar with what exactly hides behind this popular keyword, let's have a quick introduction.
What is a digital transformation?
Used by everyone in their own way, digital transformation can mean virtually anything related to implementing technology in your business and the implications that follow, thus making it rather difficult to write down a definition that suits each and every case.To not bore you with all the ifs, it's best to stick to something generic and speak about actual examples instead (which we'll do later in this article). Here's how digital transformation is defined by the Enterprisers Project:
'Digital transformation is the integration of digital technology into all areas of a business, fundamentally changing how you operate and deliver value to customers. It’s also a cultural change that requires organizations to continually challenge the status quo, experiment, and get comfortable with failure.'
Now onto the main question.
Do you actually need to digitally transform your business?
The answer is simple yet bears a lot of complexity in itself. Obviously, if you don't want to fail due to your inability to compete with companies that decided to adapt to the technology-powered future, you should start digitalizing your company as soon as possible.The issue is, digitization doesn't mean simply making a website, slapping the URL on your business card, letting your niece run your social media, and voilà — you're done.Yes, those are some of the elements that contribute to it, but especially within larger enterprises it requires taking into consideration every aspect of your business operations. All the processes have to be digitalized and even better automated: invoice handling, documents processing, support ticket management, time tracking, data analysis, etc.While that sounds like a tremendous amount of changes and humans are naturally not the biggest fans of changes (aren't we?), the potential easily outshines all of the irrational fears.Just to name some benefits:
- Robotic process automation (RPA) tools like UiPath can perform tasks that otherwise would take humans hours — in a matter of seconds or minutes in the worst-case scenarios.
- The latter means your employees can focus on more complex and valuable tasks instead of doing repeatable ones that lead to a drop in overall happiness and satisfaction. According to Gallup, disengaged employees have 37% higher absenteeism, 18% lower productivity and 15% lower profitability. If those values don't seem to mean much, converting them into real-world numbers would equate to the cost of 34% of a disengaged employee's yearly salary, or 3 400 USD for every 10 000 USD they make. Multiply that by a number of employees and… Hope that does the job.
- Robots are also prone to human error, which can lead to a significant decrease in operational risks generated by such mistakes.
- Business intelligence tools can do wonders with data analysis, providing you with unprecedented insights into how your business actually performs, thus enhancing your decision-making processes.
- AI and machine learning can help you solve complex business problems using computing powers highly exceeding a human brain's capabilities.
- Business process management (BPM) solutions like Camunda Platform allow you to digitalize and automate a wide range of your business processes, however complex they are, while integrating together a number of your internal tools that were otherwise completely disconnected.
All the above are only a selected few examples of how digital transformation can not only cut time wasted on manually performed tasks, but also drastically reduce total business operations costs. The ROI of completing digital transformation grows exponentially with the scale at which it is introduced into your current business.
Examples of digital transformation
Best Buy's digital transformation
Best Buy — an American multinational consumer electronics retailer, that for years was a brick-and-mortar business, at some point started loosing its market share until the change in the CEO position put them on a trajectory of digital transformation.They started with both very important internal changes in processes and implementation of new technological solutions to educating their customers on the ongoing shift to the digital way of doing shopping. As a result, they managed to improve delivery times, orders processing, digitally-powered recommendations, customers experience and more.It took 7 years for the company to implement the changes they initially intended for, which lead to their stock price growing from 23.7 USD per share in 2012 to 115.4 USD as of the time of writing of this article.
The Home Depot's digital transformation
The Home Depot — the largest home improvement retailer in the United States, in 2017 decided to put an emphasis on a much more active digital transformation strategy with the plan to enhance their online shopping experience with a seamless process across all channels.A whooping 11bn USD was spent over the 3-year period on hiring 1,000 IT professionals, building back-end and distribution channels as well as business intelligence and data analytics. Since that decision, by 2020 their revenue grew by 15,6bn USD and the price per share from 124.09 USD to 335,05 USD in 2021 as of the time of the writing.
Microsoft's digital transformation
Here's an interesting example, as Microsoft has never been an 'analog' company. How did it end up in an article about digital transformation, you may ask? Well, their story goes back to 2014, when due to the actions from their competitors in the likes of Apple or Amazon, their share prices started to lag.It was then when Microsoft realized the potential of going into the new and yet unproven industry of cloud solutions. As we know today, they became one of the leading providers of such services and without that transition that falls into the definition of digital transformation they would likely not see their share prices go from 38 USD in 2014 to 294.6 USD as of today and an increase in total revenue of more than 56bn USD by 2020.
How to start digital transformation?
Now, I know all of the above probably sounds extremely exciting for some and nightmarishly risky and uncertain for others. That's why it is important to not dive head-first of a cliff without an actionable plan in mind.It's best to start with developing a digital transformation strategy by doing self-analysis of where your business is right now and where you'd like it to get to.Kick off with asking why you think it is the right time to start investing into digital transformation, then identify what exactly is going to be the target of your change (like it was in the case of The Home Depot focusing on their online shopping experience, for instance) and lastly who will be responsible for the entire process of transformation.
The latter will help you set a framework for further actions. Based on this, you'll be able to pinpoint where the change will stem from and what parts of your business will have to get involved, what is the timeframe in which it should occur, exactly what action will be taken and how much your company is ready to invest, not only money-wise but also considering the difficulties drastic changes can bring, including people who can leave the company due to not being able to handle the process of transformation.
As you can imagine, this was just a fraction of what digital transformation is and how it can be implemented. Many books and researches are focusing on this field, but I hope I've managed to provide you with enough information for you to understand the basics and start working on transforming your own business and bullet-proofing it for the future.In case you'll have any question that you'd like me to clarify, or you’d like me to have a look at the strategy that you created for your company, feel free to drop me an email at firstname.lastname@example.org, and I'll do my best to help.That's it for today, till the next one!