Digital transformation has become the buzzword darling of both the tech and marketing arenas. However, those who think the concept doesn’t apply to them should reconsider. “Everywhere there is evidence that digital technologies are transforming the way businesses operate and how they interact with their customers,” said Patrick Fenton, Head of Cloud Transformation at KPMG.
Industry research backs this up: A study by Forrester found that 47% of executives believe that by 2020, digital will impact nearly half of their sales. Global market intelligence firm IDC determined that by the end of 2019, spending on digital transformation will reach $1.7 trillion worldwide. And 27% of the senior executives surveyed by Capgemini Consulting and MIT Sloan’s Center for Digital Business said embracing digital transformation is a “matter of survival.”
Make no mistake, digital transformation is impacting every industry, not just the tech sector. Some industries, however (such as pharmaceutical) are not as digitally mature as others, often due to tight regulations and governance. It can be tempting for executives in these sectors to fall into the mentality that they have time to wait for their industries to catch up before they can embrace digital transformation. But, consider that it can take several years to execute on a complete digital transformation and realize digital maturity. And according to the Capgemini study, every industry, regardless of maturity, has companies that are already embarking on digital strategies. Those that do experience 26% higher profits than their competitors—potentially posing a real threat to their competitors.
With this in mind, you must first explore exactly what digital transformation is, how to determine if your organization is ready to make the leap, and best practices for devising a strategy built to last.
Defining Digital Transformation
Pop quiz: Which definition of digital transformation is more accurate?
A: Digital transformation means overhauling systems, weaning off legacy technologies, and applying the latest innovation to your operations.
B: Digital transformation is at its heart about applying technology as a solution for streamlining and optimizing the end-to-end customer experience, driving new revenue and value to your organization.
If you guessed A, you’re only seeing part of the equation. “Digital transformation is not a technology makeover. It’s a business revolution,” said Kaan Turnali of SAP. It’s a mindset change involving not only business processes, but also leadership’s vision for core values and company culture. Most importantly, it’s enabling your employees and other stakeholders to make a delightful customer experience the heart of every single transaction.
In fact, SAP’s Digital Transformation Executive Study found that companies successfully adapting to digital transformation understand the goal is customer empowerment. According to the study, 70% of these leaders have seen “significant or transformational value from digital transformation in customer satisfaction and engagement.”
Signs You’re Overdue for Digital Transformation
Still not sure your organization needs to make a digital investment? Here are a few telltale signs you might be behind the maturity curve:
- Your customers are frustrated: A customer-centric business strategy is no longer a nice-to-have. If your customer service department is continually dealing with routine complaints or your Net Promoter Score could use an improvement, your digital experience may be the reason. As McKinsey researchers put it: “In that dynamic of value creation and durable competitive advantage, delivering digital services and operations has emerged as a prime mover in reshaping customer experience in almost every sector.”
- You’re getting disrupted: If digitally savvy insurgents are encroaching upon your market share, and besting you when it comes to price, product or service delivery, and customer loyalty, you’re overdue to join the digital ranks. A 2016 study by IMD and Cisco showed that “digital disruption will displace nearly 40% of incumbents by industry over the next five years.”
- You’re blind to customer data: Without the right technology, you could be missing out on key insights into your customer journey. Digital tools and a process for leveraging them efficiently will not only streamline the data collection process, it will also better enable you to put that information into action.
- Your internal communications are breaking down: Departmental silos, clashing legacy systems, and company subcultures are a recipe for failure. A digital transformation strategy enables organizations to communicate faster and more clearly across channels, resulting in seamless workflows and increased efficiencies.
Implementing a Digital Transformation Journey
It will involve numerous stakeholders and extend into every corner of the business—from backend operations to customer-facing processes. But, there are three steps you can take to begin the journey:
1. Analyze your current processes and tech solutions: Are your legacy systems a hodgepodge of functional digital resources and outdated tools? Take stock and understand what you need to digitally transform before you start.
2. Get input from internal and external stakeholders: To ensure your new strategy is a success, you’ll need passionate buy-in from your employees, vendors, and investors; and feedback, testing, and training from your customer base. Lack of communication and stakeholder integration is one of the biggest reasons digital transformation efforts fail. Be sure you’re involving a diverse mindset, beyond just the leadership team.
3. Leverage tech to guide you through your evolution: After you’ve assessed your needs and weighed input from stakeholders, take advantage of tech solutions designed for your industry to build a roadmap for digital success. If you get stuck, reach out to an external partner specializing in digital transformation strategy, and work through the journey together.
Digital transformation is much more than the buzzword du jour. It’s the driving force transforming all industries. But digital transformation is not an endeavor that can be accomplished without serious forethought and investment. Understand what the evolution means specifically for your organization, take steps to gather feedback from both internal and external stakeholders, and thoughtfully design your strategic journey once you’ve evaluated your needs and risks. “The only wrong move when it comes to digital transformation,” said Didier Bonnet, Senior VP at Capgemini, “is not to make any move at all.”