There is no denying that digital transformation has been one of the hottest buzzwords in the last few years. As every company scrambles to get digitally transformed, there is no shortage of options when it comes to companies that claim to enable “digital transformation” — starting from strategy consultants to technology providers. While digital transformation remains a common topic across industries and segments, little do people understand about the needs, challenges, and expected outcomes. Let us try to get a basic perspective of Digital Transformation (DX) and its implications for organizations.
To begin with, let us dissect and define the following key terms.
What is Digital?
The textbook definition of digital is that it uses binary digits or a series of 1s and 0s. Going back to our school days, we understand that any continuous-time signal is sampled at a regular frequency and stored in discrete-time and digitized using A/D Converters. Computers are basically digital devices and any information stored or processed electronically is done so digitally these days. (Christensson, 2018) However, with the amount of research going on in the field of quantum computers, the tables may be turned shortly — with quantum superposition where the same qubit can be 0 and 1 at the same time, the jury is yet to be out on whether these are truly digital devices (Analog vs Digital Quantum Computers, n.d.).
What is Transformation?
Transformation is the marked change in form, nature, or appearance. Unlike change, which may be small and incremental and caused by external factors, transformation is almost always large and significant. It is more internal and it changes the fundamental beliefs. In contrast to a change that may bring about temporary modifications, the outcomes of transformation are mostly permanent in nature.
What is Digital Transformation?
So, simply put, digital transformation is about the use of computers or digital technologies in executing businesses.
Most companies believe digital is about technology (Edelman, 2015), while there are others that believe it is about going online, being available on social media or automating their workflow, and going paperless. Though many of these are essential parts of being digital, they are only the indicators and not the end goal of being digital.
Unlike the earlier terms that we discussed, digital transformation defies one simple definition as it means different things to different organizations. In general, digital transformation is the fundamental reimagining of how people, processes, and technology are used to deliver value to customers. (George Westerman, 2014)
The Digital Practitioner Body of Knowledge™ Standard [DPBoK™ 2020] defines Digital Transformation as:
“A strategy and an operating model change, in which technological advancements are leveraged to improve human experiences and operating efficiencies, and to evolve the products and services to which customers will remain loyal”
It is a lot easier to understand the expected outcome of digital transformation rather than try to explain the term in itself. For most organizations, the goals for digital transformation can be broadly classified into one or more of the following:
1. Improve customer experience
2. Enhance business processes
3. Develop new business models
Why digital Transformation?
Today DX has moved from a nice-to-have initiative to a must-have for most companies. The primary reason is the change in consumer behavior due to the heavy penetration of mobiles and extensive reach of the internet. Most customers search for information and try to buy products online hence, it becomes important for companies to reach out to customers through multiple channels. Customers also expect hyper-personalization of their products and do not settle for anything that is stock or standard make.
The second reason is due to process efficiency enabled by technology in some industries. For example, machines fitted with the Internet of Things (IoT) can predict failures and avoid delays. The older / unsophisticated processes may prove to be insufficient and just too expensive to continue with.
The third and most important reason would be the fact that organizations that do not adapt to the newer technologies will eventually face an existential crisis. This is because technology has enabled newer and more nimble firms to disrupt the markets leaving the market leader behind with no ammunition to fight back. Some examples are companies like Netflix that have changed the consumption pattern causing the time-tested Billion-dollar business, Blockbuster, to go bankrupt
With the advent of digital business models, the resources and capabilities considered core in an industry are rendered irrelevant. There is a paradigm shift in how value is created and delivered to the customer. Platform business models have redefined the core value proposition of organizations. For example, companies like Uber, Airbnb, and Amazon have been extremely successful in thoroughly exploiting the positive network externalities and rendered many of the core assets of the current players insignificant.
These changes in the landscape have made it absolutely imperative for organizations to transform themselves.
Having covered the fundamentals of digital transformation and answering the ‘why’, we will come back with the ‘how’. Watch out for this space for more and please feel free to share your thoughts in the comments section….
Analog vs Digital Quantum Computers. (n.d.). Retrieved from https://arstechnica.com/science/2016/06/going-digital-may-make-analog-quantum-computer-scaleable/
Christensson, P. (2018, September 12). Analog Definition. Retrieved from https://techterms.com
Edelman, K. D. (2015, July). Retrieved from McKinsey Digital
George Westerman, D. B. (2014). Leading Digital: Turning Technology Into Business Transformation. Harvard Business Press.