When digital technologies are used for the transformation of existing traditional and non-digital business processes and services, or to create new ones, to meet the evolving market and customer expectations, it is called digital transformation.
There are many companies that offer digital transformation services to large organizations, which help to completely alter the way organizations manage and operate their businesses and deliver value to customers.
Digital transformation means a lot of different things for different people. For leaders, it becomes hard to tell where they must focus their investments, they are unaware of the kind of digital transformation they are looking for.
The authors have outlined the following four pillars of digital transformation:
- IT Uplift
- Digitizing Operations
- Digital Marketing
- New Ventures
Out of the above four pillars of digital transformations, which one is the right beginning stage for your organization relies upon your particular circumstance, needs, and also your digital maturity.
Despite discussing the topic of digital transformation for years, understanding what it means has been a daunting challenge for many companies.
Leaders who are given the charge of a digital transformation feel pulled in many directions, with contending demands from IT, Marketing, Sales, and Operations.
And wrong people who don’t have a clear understanding of digital transformation, are many times placed in control with some unacceptable resources, and some unacceptable KPIs, which leads to the failure of a digital transformation project.
Digital Transformation – A Multi-Faceted Journey with Different Goals
The key to ending the confusion is to see digital transformation as a single thing, but as a multi-faceted journey with different goals, depending on your industry and digital maturity.
Just as we had to look at computers after it was introduced – from a device performing a narrow set of tasks to one that performs many tasks, in various ways, the time has come now to change our perspective on digital transformation, from a solid idea to understanding that digital transformation implies various things for various parts of the organization.
Doing this will help you articulate what kind of digital transformation you’re really talking about, and plan accordingly.
Based on our in-depth research on companies undergoing digital transformation, we offer a simple framework to cut through the confusion and conflicting demands.
Our framework will outline the four pillars of digital transformation that we generally find today: IT Uplift, digitizing activities, digital marketing, and digital businesses.
Each of the four is important for most organizations’ digital transformation ventures. In any case, without grasping how four of them are different, it will be confusing to comprehend what to do straight away or where to invest, like the resources, tools, goals, C-Suite sponsors, and KPIs that are required for success and are totally different in each case. Being clear about their various demands will surely help you make smart tradeoffs and clear progress.
Below we have mentioned the four pillars and how to invest properly to set yourself for success.
Which pillar would be the right starting point for your company depends on your context, needs, and your digital maturity.
Generally, companies handle the first pillars we describe near the start of their digital transformation journey, once they matured, they will continually upgrade to add additional pillars.
Four Pillars of Digital Transformation
In general, for companies, digital transformation starts with upgrading their IT infrastructure, mobile infrastructure, data lakes, and the cloud. Importantly, this is an opportunity to use the budget that has been set to use to modernize IT and communications platforms within your organization.
When completed, the up-gradation of your IT will provide your organization access to modern devices that offer expanded employee productivity, lower IT maintenance costs, and increase employee satisfaction.
There are few organizations that have as of now gone deep into this journey, but there are some other companies that struggle with questions like “how to upgrade the digital infrastructure? ” Often this is the first step to the digital journey.
It requires IT specialists but promises up-to-date platforms with more effective tools to serve customers at a lower cost of maintenance. But for companies that are more mature and digital, financial investment is still required to use advanced tools like artificial intelligence.
Typically, all the CIO or CTO should come forward and lead this pillar of digital transformation and the KPIs to indicate success is access to new tools, reduced maintenance costs, improved employee satisfaction, and better business performance.
To support this, a recent research done by IDC shows that companies that had begun an ERP cloud migration as a part of a digital transformation before the Covid-19 pandemic performed far better than those companies that didn’t.
The second pillar of digital transformation often handled prior in the digital transformation venture, is utilizing digital for streamlining, improving, and legitimizing existing processes.
The main aim here is to use digital tools, which even include more advanced technologies such as Artificial Intelligence, 5G, and IoT, to streamline business growth.
In its basic form, this second pillar simply means swapping analog activities with digital ones. But at other times it involves rearchitecting the system to meet the needs of today’s customers.
For example, in the past when PayPal used to send money via email, it had significant time to ensure regulatory compliance. However, to allow immediate payments that are very much in demand in today’s market required rearchitecting PayPal’s association, merging once separate divisions for payments and consistence into one entity.
This is something beyond swapping analog processes for digital ones and is tied in with rearchitecting the organization and the digital activities to serve clients better.
Digitizing operation is the fundamental pillar of digital transformation. Without digital transformation, your company will be left behind by more efficient operators.
An organization may start its digital transformation journey by digitizing processes, but as it improves, rearchitects processes entirely.
As it is important to understand how a business works, digitizing operations often fare better when it is led by the CFO or COO. Although it requires time and technology, the advantages estimated by the central KPIs are savings in time, cash, and individuals to tackle business issues and serve clients.
When you are planning for digital solutions to win clients, build brand awareness, profile clients or simply want to sell online, then you are pursuing the digital marketing pillar.
This digital marketing pillar is totally different from the others in its focus on digital tools to interact and sell to customers. It requires various resources, such as doing investments in capturing clean data, digital tools including artificial intelligence to understand customers, and omnichannel presence.
There are numerous customers present globally, who are using digital channels, AI, and predictive analytics to access prospects and customers and set up digital marketplaces, viral campaigns, and geo-targeting campaigns.
In addition to this, companies are also utilizing AI to identify and act on critical customer behaviors, for example, identifying customers who are likely to leave your service, and later intervening with them, before they do so.
Typically, in an organization, the CMO leads this initiative and focuses on KPIs such as return on marketing investments, making reduction in customer acquisition costs, and generation of a big amount of valuable information that can be utilized to secure new clients and serve the existing customers in a better way.
Finally, digital transformation opens many new opportunities for established companies. Grabbing these opportunities, some of which may be disruptive, requires developing the innovation and digital opportunities to test and turn to new sources of growth.
Digital transformation may provide opportunities to create new business models, products, and services. Further, it may also allow for collaboration with a large ecosystem to create new sources of growth.
In general, companies CEO or head of sales leads such initiatives because there would be a requirement for investment, and agility, but most importantly, there would be a requirement of a team that is capable of running experiments to validate the new business opportunity.
The payoff would be a new source of revenue. Still, the KPIs are more nuanced, and typically unit economic measures that you are creating to solve a significant customer problem and grow profitably.
Most organizations have these opportunities yet holding onto them requires a more noteworthy digital development than required for an IT uplift or digitizing processes.
The Digital Journey
People who have been part of the digital transformation (offered by digital transformation consulting services) describe it as a journey. Digital transformation takes time, as it is a series of evolutionary, and occasionally disruptive steps.
Like, as in any journey, we decide where to go first, typically, organizations begin with IT uplift and digitizing operations, which is later followed by digital marketing and new business building.
But all four pillars are important for digital transformation, so they may happen in order. The key to success is simply having clarity that digital transformation is not one thing, but rather many different things.
With the right leader, resources, and measures of success, the excursion towards each different pillar can contribute extraordinarily to success.