What Is Digital Transformation, and is it Really Worth the Risk?
Digital transformation has become a common buzzword used to describe business adoption of today’s new information technologies like cloud computing and mobile applications. The term is so overused that it’s difficult to discern what it exactly means besides simply modernizing an organization’s technology.
Regardless, businesses with the savvy to implement digital transformation solutions have proven the impact it can have on their future success. This article discusses what digital transformation is, what it can do for business organizations, and whether the advantages outweigh the risks.
What is Digital Transformation?
A digital transformation is essentially a radical rethinking of an organization’s technology and how the organization integrates the technology with its business processes. Technologies like Wi-Fi, mobile apps, and cloud computing have made it possible to restructure many processes that were initially offline or were previously handled manually. Automation and artificial intelligence have also created digital transformation opportunities in industries that have yet to adopt these technologies.
When these technologies are applied to traditional business processes, the efficiencies gained can be dramatic. With digital transformation, organizations in industries that have avoided adopting these new technologies can disrupt an entire sector of the economy, resulting in a mass of companies scrambling to transform and keep up.
Digital Transformation Disrupts Entire Markets
We don’t have to search very far to find good examples of how a digital transformation can disrupt an entire sector of the market. A good example is Uber. While the company billed itself as a ride-sharing service, it was clear to the taxi and shuttle industry in major cities that Uber intended to replace its business model with one centered around a mobile app. By leveraging the capabilities of mobile technology and social media, Uber was able to disrupt the taxi service industry and force their competitors to follow suit.
Amazon leveraged the Internet and e-commerce web technologies to disrupt the retail sector, and it continues to accelerate that disruption today. Brick-and-mortar retail outlets of every type have struggled to adapt to the existence of Amazon as a competitor. The digital disruption by Amazon has been ongoing for nearly 25 years.
The company began as an online bookseller, expanded into other media types, and then transformed itself into an online marketplace for nearly any merchandise. Amazon has even disrupted the publishing industry by creating a platform for independent publishing of e-books. Amazon has continued to thrive and succeed by making its competitors play catch-up to its innovative use of new technology.
The trend of transforming traditional industries with new technologies that have been pioneered by companies like Amazon and Uber, continues to penetrate new sectors of the economy.
An excellent example of this can be found in the story of Albertsons, an American grocery store chain. The company has moved much of its internal business applications to the cloud to reduce overhead, employs robots to automate warehouse operations, and has aggressively made online shopping a centerpiece of its retail effort. As Ramiya Iyer, the General Vice President of Digital Stores and Pharmacy, says “We know our consumers are changing how they interact with us, so we want to move with them and be where they want us to be… It’s about advancing choices and making those choices even better.”.
Is Digital Transformation Worth the Risk?
Organizations that are well positioned in the market often feel little or no pressure to adopt new technologies or change their business models. After all, these changes might fail and result in a loss in profitability. Unfortunately, this way of thinking can cause companies to miss opportunities to stay ahead of the curve, allowing more motivated competitors to overtake them with their own digital transformations.
It’s important to think in the long-term and consider future threats that may emerge from competitors. While digital transformations carry some risk of failure, if an organization waits until its business model is obsolete, it may be too late. The most successful organizations make it a best practice to iterate their business models as new technologies emerge, because they understand that digital transformation needs to be an ongoing process in order to maintain their competitive edge.
How to Create a Digital Transformation Plan
A digital transformation plan begins with a central question: What outcomes will it have for the organization’s customers? The answers to this question will drive the ways technology is employed to improve an organization’s way of doing business. If an organization’s customer experience is improved, then it will have a foundation for future growth. If it creates a better customer experience than its competitors, then the organization will take the lead among its peers.
When an organization has a clear vision for an updated business model that it wants to achieve, it’ll be more likely that a digital transformation effort will succeed. Working backward from that vision, the steps to implement the technologies needed to make it possible will be more apparent.
Here are a few more guiding principles for undertaking a digital transformation:
- Define a set of clear objectives – Set well-defined goals from the start and create a consensus to reach those goals throughout the design process.
- Create an agile design process – Technology projects are creative by nature, so agile design methods that leverage small groups and low-level decision-making work best.
- Don’t be afraid of disruption – Market disruptors need to challenge traditional models to move forward.
- Set an optimistic scope – Digital transformations usually involve the entire organization, so it’s better to think big from the start to avoid incrementalism.
Get Started with Digital Transformation
A digital transformation requires both a firm understanding of modern technology as well as the ability to think outside the box. One way to explore how an organization can be transformed is to consult with outside professionals who can give an unbiased evaluation of its current processes.
Outsource IT has experienced information technology professionals ready to help businesses discover how they can transform the way they operate and stay ahead of the competition. Contact an Outsource IT account manager for more information today.