If businesses three years ago were not certain about the impending supremacy of digital technologies, the COVID pandemic provided brutal clarity. Over the past two years, as businesses have been forced to close and consumers compelled to remain locked up in their homes, the most successful organizations have been those that were capable of taking advantage of digital tech to connect employees, customers, suppliers and more. As various patterns continue to linger at the tail end of the pandemic — patterns like consumer behavior, supply chain threats and employment preferences — more companies are eager to adopt the tools and strategies used by those successful businesses and find similar success for themselves.
Thus, digital transformation has become a massive trend across industries. But — what does digital transformation really mean, and how do business leaders manage it? Read on to find out.
Before we can delve into the details of digital transformation, it might be useful to lay the groundwork by understanding the category of organizational change that digital transformation belongs to: transformation. Unlike other types of change a company can undergo, transformation always involves a fundamental change to the entire business — its systems, processes, people and/or technology — to achieve some type of improvement, like greater efficiency, greater effectiveness or higher stakeholder satisfaction. In addition to digital transformation, an organization might experience:
- Process transformation, or the optimization and automation of low-level, repetitive processes to focus effort on higher-value projects.
- Management transformation, or the alteration of the existing hierarchical structure to improve communication and facilitate faster, better decision-making.
- Cultural transformation, or the translation of shifting company values into action and practice by the workforce, resulting in a new character and personality to the organization.
Transformations are almost always long, requiring multiple years to complete the broad changes required for success, and transformations demand extra energy from every single employee, who must learn the new systems and processes to uphold the bold, seismic shifts. Transformation is not easy, even when it is necessary, as is increasingly the case with digital transformation.
Understanding Disruptive Innovation
Another critical component of digital transformation — indeed, typically the driving force of digital transformation — is disruptive innovation. Businesses innovate constantly, developing new tools and techniques for achieving their goals and appeasing their customers. Yet, sometimes innovation creates something that is remarkably better than the process or product that came before, and this can result in disruption.
Disruption occurs when an innovation creates a new market value and value network. Over time, the new market will grow and overtake the existing market, displacing the established companies and products that previously dominated. Unlike transformation, businesses cannot plan to participate in disruptive innovation. There are some business strategies that provide more fertile ground for fruitful innovation, but to innovate a product or process that is disruptive requires the convergence of creativity, diligence and luck. Instead, business leaders most often need to be poised to react appropriately to disruptions in their market — which increasingly means engaging in digital transformation.
Understanding Digital Transformation
The simplest definition for this exceedingly complex and expensive process is: Digital transformation is the widespread adoption of digital technology throughout an organization. In many ways, this explanation of digital transformation is most reflective of the experiences of the largest number of organizations, as it avoids the issues of why a business engages in a digital transformation and of how an organization achieves digital transformation — both issues being extremely subjective.
In the post-pandemic world, there are many reasons organizations might be more interested than ever in digital transformation, such as:
- Reducing costs
- Increasing revenues
- Increasing employee productivity
- Improving agility
- Improving customer experience
- Increasing compliance
Likewise, there are almost uncountable ways that a company could go about completing a digital transformation. Despite the availability of step-by-step guides on business blogs across the web, the truth is that every digital transformation is unique, highly dependent on the existing processes and people of an organization. Executives interested in effecting a digital transformation should learn as much as they can from structured digital transformation courses led by industry experts at some of the world’s best business schools. Then, business professionals might be able to develop their own understanding of what digital transformation really means.