Digital Transformation: History, Benefits and the Road ahead
These are exciting times for us and a future that we have seen in fictional Hollywood movies is not far from reality. We are fortunate to be experiencing this important transformational journey where digital technologies impact human lives, businesses and enterprises around the world. With innovations happening at an astonishing pace, the digital era comprising smart machines in the form of robots, drones, connected cars, connected health and manufacturing has dawned upon us. The disruptions of the past decade have been nothing short of amazement, but they are just a prelude to many more innovations that we are yet to experience and see.
Charles Darwin in his “Theory of Evolution by Natural selection” stated:
It’s not the strongest or the most intelligent of the entities/species that will survive, but those who adapt, change and transform in relation to the dynamics of their surroundings/ecosystem.
If we trace back the roots of business evolution, we observe 4 distinct growth phases viz., Agrarian, Industrial, Digitization/Automation and Digital (that is defining the next decade). Over the years, organizations in the digital era grappled to maintain competitive advantage, build scale and continuously innovate to transform themselves and stay relevant because of increased customer expectations, challenging market conditions like global recession and subsequent debt crisis.
Enterprises that leverage cutting edge digital platforms and solutions to glean actionable deep insights (both predictive and prescriptive) by number crunching contextual, social, and organizational data to enable them gain strategic advantage through workforce, customer and partner enablement, operational excellence, innovative digital solutions, supply chain innovation, governance and risk management are digitally mature and are called a “Digital Enterprise“.
The journey in which a traditional enterprise reimagines itself by inculcating the Digital DNA with clear focus on value and customer experience is called Digital Transformation.
As the days pass, more and more enterprises are adapting the Digital Transformation strategies to transform their business. The potential value that an enterprise derives from a digital transformation initiative is huge. It essentially enables the enterprises to further develop the competencies which revolve around customer centricity, innovation, agility, streamlining processes, capability to leverage opportunities to disrupt the status quo and gain an insight into the emerging field of digital technologies. To the uninitiated, Digital Transformation is the use of technology that significantly improves the performance and reach of the organization by leveraging the digital technologies such as analytics, mobility, social media and IoT (Internet of Things) along with the continuous improvements and innovations on traditional technologies like ERP which reshape the customer relationships, value propositions and internal processes.
In this blog, we will briefly touch upon the concept of Digital transformation, history of Digital Transformation and the potential benefits that can be availed by adapting a lean digital transformation strategy.
With the world buzzing with the keyword digital transformation, the question arises when it started and how the future is going to pan out?
The digital transformation, we are all excited about has come long way and been in existence for a long time.
- The first instance of the digital transformation (Pre-digital era) occurred when the websites of companies connected with the customers, thus, dynamics of the market began to change where the marketers began to realize that customers have the bargaining power. The consumerism trends and developments forced marketers to engage the customers across various channels. To ensure these engagements with customers, organizations built digital teams, which marked the beginning of Digital 1.0.
- With the emergence of technologies like IoT, 3D printing the Digital Transformation has now moved into the next phase known as Digital 2.0. Kaizen (Continuous Improvement) ensures that engaging stakeholders of different level in the innovation ecosystem which is more important than ever, empowering the organization to stand out of the crowd.
Figure 1: Evolution of Digital
Figure 2: Digital Era, Traits and Characteristics
In a recent study conducted by MIT among 50 companies shows that the CXOs in these companies are focusing on the three segments viz., customer experience, operational processes and business models re-imagining. However, in a traditional sense when there is a wave of change coming, it is obvious that they are going to meet with obstacles. The journey of digital transformation has never been easy for an organization and is always marked by obstacles.
One of the research states that 70% of the digital transformation initiatives launched by organizations often failed.
So, naturally the question arises why those initiatives fail?
Upon closer inspection and deeper investigation, it was revealed that there are two crucial factors that are the root cause for failure:
1. Limited Perspective or myopic vision:
Companies that invest more in technology often forget to align the technology with the customers and business objectives, thus providing a partial solution for an existing problem. For a successful digital transformation, holistic perspective from all direct, indirect stakeholders is essential.
2. Immature Processes:
Traditional IT application processes which is often used for driving digital strategy that overlaps numerous functional areas. This often fails to recognize the unique risk related to the innovation process and successfully integrating it into the existing process. Most of the companies that initiate the process have failed to recognize the threat.
Apart from the aforesaid pointers, some other obstacles that come along in the transformation journey include Low Digital Literacy among Employees and Leadership, the Process is a costly affair, Company Culture and Legal, Risk Management and Compliance concerns. These problems can be easily overshadowed by the benefits that drive the transformation.
With Digital Transformation, industries have undergone a dramatic change. To standout in a crowded marketplace the organizations should think innovatively, often adapting the best practices in the industry, re-engineer legacy processes to suit the strategy, vision and goals of the organization.
There is no one size fits all approach to innovation. A generic framework would comprise the following:
1. Innovation Workshops with the customers that advocate Ideation, process, best practices, brainstorming, design thinking round tables.
2. Assessment, Due-diligence and Preparedness hat would involve strategy assessment, applications portfolio analysis, IT process and systems assessment.
3. Roadmap and Prototyping comprising product roadmap, IT strategy roadmap, rapid prototyping and user testing and validations.
Benefits of Digital Transformation
Key statistics reveal that “39 per cent of organisations say that digital transformation has helped them make progress in enabling and realizing real-time transactions. 32 per cent say it has helped improve operational efficiency and 28 per cent say it has helped them acquire new customers”.
Some of the benefits, that organizations could reap-in include:
Transforming Customer Experience
With meteoric rise in technologies, emergence of digital natives – the consumer holds the loyalty power centre. If consumers don’t like the experience provided by specific brand, they will change the IT in a matter of few seconds. Customer experience is more an art than a science and building a customer obsessed organization and delivering superlative experience is the success mantra. If the organizations can provide a compelling customer experience, they will successfully retain the existing customers as well as acquiring new customers.
Following are the metrics that are crucial for the growth of the organizations.
A. Customer Understanding
The boom in digital transformation enables the organization by utilizing the power of digital, engaging the customers through various digital channels like websites, social media platforms. Doing so, enables organizations to gain a deep insight into customers’ day to day activities. A careful demographic analysis, customer tastes and preferences along with their buying journeys provides deep insights into customer behaviour. With the introduction of analytics, the companies are slowly but steadily building solutions to understand the customers better.
B. Top Line Growth
Understanding the consumer demographics helps the organization to boost their sales. Personalization empowered by analytics, provides customers with compelling experience. Digital technologies allowed the firms to aggregate customer data from various channels, analyze using various tools, customize the products according to the needs of the customers. An end to end solution that orchestrates and manages customer experience, converts your non-committed customers to be your brand advocates through better customer targeting and profiling, delivers high performance and improves top line.
C. Setting up Customer Touch Points
Customer touch points are any form of interactions made by the customers with the organizations from the time they became aware about their brands. With the introduction of digital tools, the touch points are built through various social media channels. This resulted in increased interaction between the customers and the organizations, thereby reducing the cycle time significantly. Introduction of digital channels has provided avenues for many organizations that are struggling to find a right balance in delivering a compelling user experience.
Following are the parameters that define the operational process transformation
Operational Process Transformation
Streamlining the entire operational processes is one of the key aspects of the digital transformation, making it a techno-structural intervention. Traditional mundane processes often cost more money, are slow, lead to burn out and productivity losses. The operational process transformation includes revamping of structural design, re-engineering, TQM and worker empowerment. Digital transformation technologies enable organizations to perform analytics to gain actionable insights, automate processes that are repetitive, thus simplifying the process by eliminating human intervention.
Automation of certain repetitive tasks enables the company to deploy their resources and focus on the strategic aspects of the business. In this way, the company will reduce the cost, while increasing their bottom-line. Digitization of the processes in an era of digital transformation has been very promising with the introduction of technologies such as Artificial Intelligence and Robotic Process Automation.
B. Worker Enablement
Digital transformation in an organization creates a virtual workforce, enabling them to separate work processes and work place. The communication tools play a vital role in this scenario, breaking down the departmental silos, empowering the employees to stay connected with the workplace from anywhere at any given time. Integrating the major components of communication tools and presenting them as UCaaS (Unified Communication as a Service) has drastically reduced the burden on employers, easing their relationships with the partners and the stakeholders. Innovative tools such as Chatbots have given a respite to the customer facing employees. That in turn, ensures the organization in focusing and redeploying their resources to redefine and optimize the way the business is carried out.
C. Performance Management
Digital Transformation has profound impact on performance management. The transactional process dashboards allow the top management to gain deeper insights into companies’ day to day activities. These insights are gained by analyzing real time data that are collected through various touch points. Shift in strategic decision making, enforces the executives to make more informed decisions that is heavily influenced by the insights gained from the transactional processes.
Business Model Transformation
Along with the process transformation, the organizations are not only defying the limitations of the business model, they are game for transforming the entire business models and value chain to suit digital customers.
Below are key building blocks for business model transformation that serve as catalysts for business growth.
With the exponential growth of eCommerce market, it is now imperative that, the traditional business models should be tuned to suit digital business to give their customers compelling user experience. The traditional companies are constantly building newer digital service offerings to retain their customers and acquire new customers thus, combining the best of both worlds.
B. New Digital Business and Digital Globalization
Meteoric rise of ecommerce has propelled the traditional companies to build complimentary digital offerings. It also provides an opportunity to leverage their omnichannel presence to provide the customers with the ultimate service and experience. With globalization, the organizations are expanding their operations across multiple domains, geographies and have resulted in a global citizen network with the mantra of “Think Global, Act Local”.
Digital transformation is here to stay for a long haul. With the continuous advancements in the technologies, it is going to further optimize the customer experience and operational processes, thus helping in business transformation. It will continue to challenge the traditional ways of working, creating new models of workforce collaboration that increases the worker efficiency. In the coming days, we will see solutions that are more customer centric. With social media playing a pivotal role as the preferred communication channel, personalized services are prevalent. The road that lies ahead is full of opportunities and the companies that leverage those opportunities to innovate deploy and scale will have the maximum chances of survival.