Many people think that digital transformation is the translation of a business from offline to online and that it is enough to make a mobile app, launch a simple website, or install a chatbot. But this is not transformation, but the automation of individual processes.
Digital transformation is profound changes in a company associated with the transformation and transfer to the digital environment of products, services, business structure and development strategy, communication with clients, and corporate culture. In fact, it is a revolution in a single business.
To transform projects, companies implement various digital technologies – blockchain, Data Science, artificial intelligence, IoT, etc. The tools are chosen depending on the business area and the scale of the project. But the digital transformation does not end with technology.
Let’s try to understand what digital transformation involves, who needs it and what you need to know to implement it.
What is digital transformation?
Transformation was first talked about when businesses faced the problem of data processing. There was too much information and people didn’t have time to analyze it. Then in 1964 IBM introduced digitalization – copying and transferring data from paper to digital. Spreadsheets, word processors, and electronic photos began to appear.
Then it got down to business as usual: companies tried to automate business processes – to store, find, process, and exchange data at high speed. To do this, businesses simply implemented digital technologies – switching to electronic document management, installing a ready-made CRM system, etc.
Such automation increases the speed of work and reduces costs. Digital transformation affects the entire company. It is not enough to install ready-made software, you need to develop software and reconsider the principles of doing business.
So digital transformation does not end with the introduction of digital technologies. It will help a business to become more efficient with information, more flexible with staff and clients, but it will not lead to business transformation. It takes more than that: it takes redesigning the way a company operates to meet customer needs and adapt to changes in the marketplace.
That’s why digital transformation changes the business culture within a company and the business itself. Changes can range from strategic planning and corporate culture to how you work with your customers and competitors.
Digital transformation works if companies make comprehensive changes, not just implementing digital technology. To be successful, it needs to work on five different fronts.
Why do we need digital transformation?
Companies transform businesses for a variety of reasons. Some want to meet customer needs, others want to enter foreign markets and follow trends, and still others simply want to reduce costs.
We have identified 5 main reasons why digital transformation is necessary:
- To accelerate business processes. With the help of modern technology, a company can make decisions faster and respond to changing conditions. This helps it fight competitors and capture markets – the business can be the first to close customer needs;
- To optimize resources. Let’s say you have to improve a transportation route. In a normal situation, you will make a plan, walk the route, study the availability of stops and how convenient it is for passengers to use the branch. It will take about six months to develop the project. During that time, a new business center in the next block will open and all passenger traffic will go there;
- In the end, the project becomes obsolete before it’s even launched, and resources are wasted. But if you use digital technology, route planning can take into account the soon-to-launch business center and other passenger needs. The project will launch faster with less labor, but with greater efficiency;
- To increase transparency. Digital technologies help collect and analyze large amounts of information, as well as control the preservation of data;
- To optimize staff and production. Transformation increases productivity in general and the efficiency of each employee individually. Transformation also reduces the cost of production and delivery of goods, and this, in turn, leads to lower production costs and increased revenues;
- To improve communication with the customer. Businesses can get to know the customer better and offer them something that can solve their problem.
Just a few years ago, companies created websites and social media accounts to attract customers. But things are different now. Every modern company needs to implement systems to make life easier for customers.
For example, retailers are launching mobile food delivery apps so that customers don’t waste time going to the supermarket.
Who needs digital transformation?
Businesses in any field can be transformed. For example, in medicine, cloud technologies are being introduced to store user data – tests, scans, case histories. They are also introducing telemedicine and devices for remote tracking of indicators. The same mobile applications help search for doctors according to symptoms, make appointments or monitor blood sugar levels.
In education, IT technologies – interactive whiteboards, virtual diaries, class chats for communication between students and teachers. Instead of classic tests, students create audio and video presentations and joint media projects.
Entrepreneurs are transforming businesses in all areas – agriculture, manufacturing, trade, marketing, etc. Depending on the task, they either change an existing company or create a product from scratch, based on the principles of digital transformation.
The rules of digital transformation
We have systematized the rules proposed by Boston Consulting Group experts. BCG is a global consulting firm that is one of the three largest and most prestigious consulting firms in the world. According to experts, six factors help ensure the successful implementation of digital transformation:
- Decide how you see the company in the future. To change, you need to understand what the company should become in the future. You will have to completely change the business – strategy, management system, approach to work, attitude to clients, etc. Start by making a plan: think about how you can achieve your transformation goals and what you need to do for that;
- Team loyalty. The first thing you need to do is get buy-in from the company leadership and middle management. You need to involve them as much as possible in the transformation process and infect them with enthusiasm. Explain that there will be no going back to the old system. The sooner management accepts the new model, the easier the transformation will be;
- Become more flexible. Too much bureaucracy and lack of communication between departments hinder transformation. For example, tech support sometimes communicates the most with customers. The opinion of these professionals plays a big role in the creation of a new product. Think about how much authority to assign employees and how to distribute responsibilities in order to increase the efficiency of each of them;
- Implement an agile project management system. Get to know your customer, gather feedback, and add value to the product in the eyes of the user;
- Analyze results. Measure results at different stages of the transformation;
- Develop a modular, agile platform that will maximize your objectives.
The specifics of digital transformation in Canada
In Canada, transformation is unevenly developed. Most businesses that have implemented digital transformation are concentrated in seven sectors: industry, fuel and energy, agriculture, construction, transportation and logistics, banking and healthcare. For the most part, these are large corporations that operate in domestic and foreign markets.
Digital transformation technologies
In Russia, most companies use the following technologies to transform their business: artificial intelligence, mobile technology, augmented reality, Internet of Things, robotics and cloud computing.
Artificial intelligence and machine learning
Artificial Intelligence and Machine Learning are empowering businesses – they make it easier and faster to acquire data and help find new ways to solve problems.
Mobile technology
According to a 2015 PwC report, 71% of entrepreneurs thought mobile technology was the foundation of digital transformation. Now nearly every executive thinks so. That’s because smartphones are increasing the speed and frequency of contact between the customer and the company, providing online access to any data.
Mobile technology also allows marketers to gather valuable customer information needed to expand the customer base or open new markets.
AR
Augmented reality (AR) is a way of virtually expanding the physical world by adding digital elements, sounds and other sensory stimuli. Augmented reality cannot be used without mobile technology.
For example, Leroy Merlin used AR technology to help customers choose furniture. They had to install an app and choose a product, then point the camera at the interior. If the customer liked what they saw, they could buy the furniture without leaving the app.
Internet of Things IoT
The Internet of Things (IoT) is a network of connected systems that can collect and exchange information without manual input. The technology works like this: special sensors are connected to a centralized platform that retrieves and stores data. When a user makes a request, the sensors receive the signal, analyze the data, and display the desired information.
The IoT can also determine which data is useful and which can be safely deleted. This feature helps find patterns, suggest solutions and predict possible outcomes, including problems.
IoT is usually used in conjunction with other technologies. So, a company can accelerate transformation, improve the efficiency of changes being implemented, reduce costs and protect the business from mistakes. IoT can help highlight innovative and more effective solutions.
Robotics
Robotics is the kind of technology that helps automate routine tasks. It helps improve user interaction, efficiency and productivity of routine operations by several times.
Cloud computing
Cloud computing is the provision of requested computing: applications, storage or processing power. Typically, you need the Internet to access the data you need. This digital transformation technology can increase a company’s scalability by increasing flexibility and agility.
For example, a company can initially rent the capacity it needs without spending the resources to build its own.
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The complexities of digital transformation
Research by McKinsey and Harvard Business Review, showed that two-thirds of the companies that launched digital transformation failed. Their problem is a lack of a comprehensive approach. Companies are adopting modern technology, developing business innovations, but completely forgetting about cultural transformation.
Managers think that employees and partners will support any endeavor. Their problem is a lack of planning, poor communication, and weak team involvement. Employees, not understanding the need for change, sabotage the process.
If you do not want to repeat the mistakes of those who failed, implement digital transformation as a whole. Use modern technology, implement business innovations and motivate the team.