Why Are Businesses Experiencing a Digital Transformation?

There were times when computers, high-speed internet, applications, and cloud storage were unimaginable.

Now, those things have become a staple in most companies. Thanks to the invention of the computer, businesses transformed their analog procedures and processes into digital ones.

Then, they started to go through digitalization and so-called digital transformation to better connect and communicate with their clients and coworkers.

But why is that happening? What exactly is digital transformation and how does it affect organizations?

What is Digital Transformation?

To put it in simple words, the integration of high-end technologies in every functional part of a business is called digital transformation. 

It’s a change that affects business activities, processes, models, and competencies to provide value for the customers, improve efficiency, and get the ability to quickly respond to the changing market requirements or risks.

But digital transformation is not only about new technologies. It has an impact on the whole business, its structure, workflows, and management. It also touches on customer service as well as transforms the way of thinking.

Examples of Digital Transformation

To make it easier to understand, let us give you some examples of real-life digital transformations. These are:

• automated customer service,
• a remote-first workspace,
• AI-driven insights that help to improve sales,
• design thinking as a way to analyze and optimize the customer journey,
• automation of employee performance management.

In 2017, Nike – an American sportswear company – started using analytics and customer data more efficiently and updated their eCommerce strategy with better UX and membership options. Nike wanted to double the innovation, speed to market, and connection points to its customers by delivering a unique shopping experience, which made them thrive even during the 2020 and 2021 lockdowns.

UPS started its digital transformation in operations and logistics. Their goal was to speed up the delivery process and introduce real-time package tracking. In 2012 they came up with a fleet management tool that increased drivers’ productivity, decreased overall costs, and reduced the carbon footprint.

Ikea decided to focus on developing its eCommerce services while simultaneously transforming its stores into fulfillment centers. Ikea now uses complex algorithms to manage the supply chain, keeps consistent branding, and delivers an enhanced customer experience.

Difference Between Digitization, Digitalization, and Digital Transformation

When researching the topic of digital transformation you may encounter similar-sounding words like digitization, and digitalization. 

Although they sound almost the same, they can mean different things, so let us set the record straight once and for all.

Digitization is about moving from analog to digital. Some time ago, all handwritten documents and important business data were converted from a physical copy into a digital version. The process of digitization made companies more efficient, but because business systems and processes were designed for the analog era, the activities of finding, sharing, and using information remained the same.

This is where digitalization came in. It’s a process of using digitized information to make work easier and more efficient. Digitalization is about making data more accessible, which can be seen in, for example, digital customer records. Those records made customer service processes more efficient, even though the basic methodology didn’t change. 

Finally, digital transformation alters the way we do business. It allows companies to reevaluate their processes and change them for the better to enable quicker decisions, and introduce better customer experience.

Reasons Why Businesses Experience Digital Transformation

A lot of companies want to have an impact and change the world. They want a positive output and a return on their investments. 

That is why their core focus is to address their customers’ needs and help them achieve goals. If the company is proactive about responding to the need of its clients, its reputation is going to grow, and, as a result, so is the revenue. 

However, that’s not the only reason why companies dive into digital transformation. Let’s look at the other reasons.

• A Need To Be Flexible

Flexibility is critical in the ever-changing market. Businesses have to remain competitive and strong by embracing changes without losing focus on the core objectives. A digitally prepared company has a great advantage over its unprepared competitors in remaining flexible and swiftly adjusting to emerging environmental elements.

• Improved Customer Journeys

Firms experience a big switch from a product-driven approach to a customer-oriented one. Digitalization can help products become more recognizable and prominent for clients.

• Innovative Business Models

The idea of having a concise and sustainable cloud-based business model became more relevant. Companies around the world started to come up with their own business models to gain a competitive advantage in the market. Thanks to digital transformation those innovative models can be implemented helping businesses reach a wider audience.

• Innovative Technologies

The world has seen an increase in tech innovations in recent years. This had an impact on how companies perform their operations as well as how customers interact with products and services. With the customer focus set on faster and more convenient end-result delivery, most businesses started to embrace new technologies to stay in the game.

What Are The Benefits of Digital Transformation?

Digital transformation allows businesses to better serve their customers, employees, stakeholders, and other business executives. The connection between a business and digital technologies helps them to:

1. Decrease time to market – by introducing new products and services, and implementing analytics and agile processes.
2. Better respond to customer requests – thanks to chatbots and automated customer service processes.
3. Improve employee productivity – performance reviews, extensive feedback, training, onboarding, and employee satisfaction tracking can be done automatically.
4. Provide engaging customer experiences – better understand client’s needs and deliver value by optimizing user’s journey and customer service.
5. Gain more insight into individual customers, and product personalization – with the use of complex metrics and tracking user behavior.
6. Save money – by moving to more modern solutions and rethinking the processes, companies can save money usually spent on maintaining old systems and products.

Digital Transformation Technologies

Technologies drive digital transformation. Even though there’s no universal app or technology that enables digital transformation, some of them are a vital part of it.

• Machine learning and AI – artificial intelligence technologies can be implemented into basically any workflow helping to make real-time decisions based on provided examples from the past. Those can be used in sales, marketing, product development as well as other strategic areas.
• Cloud computing – gives quicker access to software, updates, and new functionalities along with data storage and the ability to use it anywhere at all times.
• Mobile platforms – enabling the work to happen whenever and wherever.
• Automation including RPA (robotic process automation) – sending bots to handle mundane and repetitive tasks.
• Blockchain – providing transnational transparency to those who require it while being inaccessible to others.
• AR and VR – creating immersive and personalized user experiences.
• IoT – using devices and objects equipped with sensors that collect and transmit data over the internet.

Trends in Digital Transformation

During the pandemic, digital transformation became an urgent matter, introducing previously unimaginable speed of change. 

Companies that had years-long plans for their digitalization, had to make adjustments quickly. That’s why digital transformation is often characterized by the word resilience.

In 2022 and the years approaching, there will be several trends that businesses wanting to stay on top should be aware of. Those are:

• sustainability and resilience,
• increased attention toward managing data throughout its lifecycle,
• increased use of machine learning technologies,
• emphasis on cloud solutions,
• AI ethics and governance,
• remote work,
• security as the main goal of any business (not just an addition),
• automation of business processes with AI.

Summary

Digital transformation comes in many shapes and forms, and businesses decide to go through with it for different reasons. 

Most of them, however, have one thing in mind – to deliver better experiences to their clients, to gain competitive advantage, and to grow their revenue.

Even though for the transformation to be successful there’s a great need for a shift in thinking, it’s become necessary to stay relevant in the digital era.