How Does Digital Transformation Work in Business?

Digital Transformation

We have all heard the buzz about digital transformation, and how its positive impact on the business and projected returns energize businesses big, mid-sized, or small. Whether out of the fear of missing out (FOMO) or intending to improve their competitive edge, companies invest in the transition from manual business processes into digital ones that rely heavily on data, computers, networks, and the cloud.

One crucial aspect that often gets overlooked is the role of robust digital infrastructure in the success of digital transformation. A well-established digital infrastructure ensures seamless integration of technology, enhancing the capability to collect, process, and analyze data effectively, thus amplifying the benefits of digital transformation.

McKinsey Global Institute projects $11 trillion spending on digital transformation by 2025. That’s undeniably an enormous amount of money. However, some businesses hesitate to push the gas pedal harder due to the low success rate, averaging a “45 percent chance of delivering less profit than expected.”

So what is digital transformation, and what does it mean for business? What processes and applications are replaced? How do companies benefit from it?
Constantly-Evolving Markets

The fluidity of the global economy and the business world demands adaptability, resilience, and agility from companies wishing to stay ahead of the competition.

Meeting the challenges of the constantly evolving market requires the use of digital technologies such as data analytics, artificial intelligence (AI), machine learning (ML), 5G connectivity, productivity tools, and so on. The purpose is to replace old systems, augment existing business processes, or build new ones. This is digital transformation. It reimagines the business and creates a culture that prioritizes data to improve business processes, increase operational efficiencies, and provide better customer experiences. In short — ideally — you’re no longer running on instinct but on well-targeted initiatives.

As Salesforce points out, central to digital transformation is the customer. Every business process is geared toward improving customer experiences, such as payment transactions via a mobile app instead of writing a check, calling in a credit card or going to an ATM for cash.

Getting Past Analog Processes

The use of digital technologies has been crucial in changing the way business is done, ushering in a new industrial revolution with data taking a prominent role. The Internet of Things (IoT), Artificial Intelligence (AI), ML, and the like have made generating, processing, and sharing information quicker and more efficient.

Most analog processes will become history as machines take over repetitive tasks, delegating human counterparts to more complex tasks that require decision-making capabilities. With digitalization, there will not be a need for handwritten ledgers, printed materials, photocopies, and other documents, moving forward to embracing a paperless environment. The business becomes more agile as it becomes digitized, able to change direction and communicate faster — with data driving those decisions.

Digital technologies are valuable for generating ideas, innovation, decision-making, simplifying business processes, and increasing efficiency. Netflix, for example, has evolved into a model of digital transformation. From its humble beginnings of selling DVDs, Netflix leveraged modern technologies and ventured into video streaming. It keeps a massive library of video content and the digital infrastructure to deliver it. And it uses AI to gain insights into users’ viewing patterns, habits, and preferences to provide them with a better customer experience. Today, video streaming service has become synonymous with Netflix.

Balancing Digital and Transformation

While companies consider digital transformation a new and innovative means to bring value to customers, so far, the return is lower than expected. Perhaps it is because of the lack of balance between digital and transformation capabilities, between technology and management.

Scaling out a project is supposed to create a positive impact on the business. And this has to do with the transformation capability of an organization. It means understanding what digital transformation is for — and putting the right people with talent as the focal point to carry out the endeavor.

The technologies will always be there — and they keep on getting more sophisticated — but without radical change management, a digital transformation project would fail. It requires patience, persistence, perspective and time, as people remain at the core of digital transformation, whether they are running the technology or are the customers that provide revenue.

Digital technology is the enabler, but leadership, talent, and business model drive the transformation. The goal is to achieve change in different business dimensions: framework, processes, company culture, and customer experience as the chief end.

How Does Digital Transformation Work?

For a quick rundown, let’s take marketing and sales as a case in point on how digital transformation works.

It’s always been marketing’s chief objective to reach out to a large number of customers at a lower cost. With analog processes, the expenses are higher — from marketing materials to logistics, billboard rent, and so on — to build brand recognition and loyalty.

Using digital marketing materials, such as email and digital ads, is way less expensive than analog and printed materials. By going digital, you can automate marketing processes, track customer interactions in real-time with analytics tools, and create ways to engage customers and prospects better.

With digital channels, such as email, social media, websites, e-commerce platforms, and mobile apps, the messaging is personalized, thanks to advanced analytics tools that help collect information, analyze customer behavior, and shape customer experiences.

Getting data analytics software and a reliable CRM platform could boost sales and increase revenue. Sales and marketing are all about data. Targeted marketing is the name of the game where you analyze customer information — profile, profession, education, business, cultural background, religious beliefs, political views, online shopping habits, etc. — and craft messages that identify the need and provide solutions.

As marketing and sales integrate with customer service, digital transformation presents even more opportunities for upselling as customers can communicate across different channels like websites, chat, or social. Solving customer issues on products and services will be round the clock, perhaps with the help of chatbots, enabling you to engage customers and meet their needs in real-time. It offers more chances of converting them into business deals and brand loyalty.

To keep up with changing global economic realities, digital transformation will be essential in industries, from manufacturing and banking to communications and service delivery. And it requires the right balance between technology and management.

Further reading: Investing in Customer Experience for a Post-Pandemic Future