What Does Digital Transformation Really Mean For Businesses?

From 2020-2024; direct investment projections into Digital Transformation or ‘DT’ will reach nearly $8 Trillion US Dollars! - (Statista)

"Digitization, Digitalization, Digital Transformation" 

What exactly do these words mean and are they even the same thing? The difference between them might seem subtle but "Yes" they are very different indeed. 

In this article, I will reveal exactly what these buzzwords mean and How Digital Transformation is deeply tied to business at the most fundamental level - pushing businesses and people forward in ways we could have never expected.

“Economic growth and technology are inextricably linked” - Oxford Economics

Despite the media hype out there, Digital Technologies is 'Actually' changing entire economies and disrupting markets on a global scale! 

Digital Transformation Spend Growing at 10% YoY (Statista) - This is the most incredible era of opportunity with new innovations enriching value offerings and geometrically impacting how problems are solved in markets. 

Technological disruption is nothing new... 

In fact, starting back in the first Industrial Revolution; the utilization of coal caused many disruptions. 

The 'Steam Engine' became the engine for growth... 

Fast forward to the 21st century and we see the same fundamentals playing out in the markets. But only today,

the 'Search Engine' amongst many other innovations - became a true engine for change 

We are already in the Information Revolution. Now; changes take place on a global interconnected scale. 

Digital-powered transformations are certainly different than what many previous generations were accustomed to. The ubiquity of information and the processing thereof is a core driver of competition in our era.

What is Digitization? 

Digitisation is the process of converting information from physical and traditional formats into digital formats. This enables computers to access and process information, which in turn automates processes and lays the groundwork for digital data-enabled capabilities to be built and developed. 

What is Digitalization? 

Digitalisation refers to the use of digitisation in adding value and enhancing business processes. Once digitized; businesses can leverage digital information to improve and enhance processes, increase revenues, reduce overheads and build cultures of the future. 

What is Digital Transformation? 

Digital Transformation is when digital technologies are used to transform business models, cultures, management, processes and entire industries and domains. When information is successfully digitized, further processed and utilized it then starts influencing ‘business as usual’ by enabling new value in a digital manner. The full utilization of digital technologies and the change it brings is referred to as digital transformation. 

Now that we understand the underlying meaning behind a Digital Transformation we can look at what types of Digital Transformation exist right now

How Does Digital Transformation Really Change Businesses?

These transformative forces disrupt the grooves of ‘status quo’ and boils down to either one of two core truths:

The pursuit of new markets and maintenance of current markets

These core types of digital transformations are:

1. Digital Culture Transformation

It all starts and ends with people. 

Companies are ecosystems and act as a single organism - the attitudes and behaviours of the ecosystem reflect the company culture. Thus culture when defined as a model acts as a single organism but also as an ecosystem of individuals with their own nuances and beliefs.

The art and enactment of collaboration and aligning individual employees with the mission, vision and goals of an organization is one of the core strengths of a great culture strategy. To build a thriving organization you need to cultivate reciprocal synergies between people. This means redefining and aligning mindsets and talent and incorporating practices that question the ‘status quo’ and go against the grains of popular belief.

With so much focus invested in digital transformation, culture is often overlooked. Nevertheless, this is the most integral building block with which no digital transformation can be sustained. 

Failure to align efforts for change with employees, people and their behaviors would create unnecessary risk in sustaining change. A bias towards Agile, decentralized decision-making with less bureaucratic structures thrives in the future. Cross-functional teams unleash the power behind enriched ideas. Rapid change means rapid learning - why not align people with such principles

This means failing fast and learning from taking risks. 

2. Management Transformation

Change management is changing. 

Digital technology incorporated into change management geometrically affects how change is enacted and managed.

Often confused with Digital Transformation, change management in and of itself refers to administering and directing change in the management process. Whereas Digital Change Management is enacted by the integration of digital technologies into a business. The amalgamation of digital into businesses vastly affects the foundation and extends beyond merely the administering of change.

The changes digital technologies bring are generally enormous and due to the recency, there are few case studies and track records to refer to. 

The process of strategic planning, organizing, leading and maintaining control is greatly impacted by digital technologies and should be incorporated into the thought process.

3. Business Model Transformation

The new economy is robust and filled with so-called ‘digital-enabled challengers’ and the new models behind their value propositions. 

The exchange of value between businesses and their customers represents the reason for their existence. That exchange of value permeates between different models with the invention of new technologies. 

The core strategy of delivering value to your market in a profitable way is called your business model

The basic building blocks in a business model i.e. the business model canvas: customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships, and cost structure as an example of a model

Transformations of the underlying building blocks effect changes in how throughput is powered. Just look at how Blockbusters was disrupted by Netflix; or how Uber gained a large portion of the taxi market

Businesses need to assess whether the new environment poses threats to business as usual and implement a portfolio geared towards such futures.

4. Business Process Transformation

Processes are vital to fast and effective cycle times and delivering value competitively

When referring to business process transformation we think of changing elements of processes to reduce inefficiencies in throughput. How digital comes into play here is the integration of digital technologies like APIs, machine learning and data analytics to greatly reduce process-heavy inputs.

This might look something like British Airways and how they integrated digital into their customer experience and system efficiency. This relieved the strain on employees during key customer touchpoints and gave them a great advantage. 

Business process management and digital transformation unlock powerful opportunities to remove bottlenecks and increase efficiency as well as customer experience. 

In the new customer experience and data-rich era; investing in improving processes is one of the greatest keys to unlocking scalability.

5. Industry & Market Transformation

The coined phrase: “Digitalise or Die” might sound like a cliche, however, the media and industry sheds little light on the change of entire industries and domains due to digital disruption.

This is most likely due to the abrupt nature of such digital transformations, or at least that is what it might look like on the surface. Entire markets undergo paradigm shifts and leave entire industries grasping at margins - the phrase ‘better late than never’ does not quite apply here…

It is never too late to conceptualize a digital transformation strategy for your organization but the entities abreast of such opportunities actively allocate towards such projects on their portfolio. Digitalization has not affected all sectors similarly.

Native sectors were built on a digital backbone whilst the revolutionized sectors were transformed and bypassed their traditional incumbents. When industries undergo transformative periods, strategists are faced with navigating the new structures arising from digital-enabled value propositions.

During these periods of rapid change, the digital-enabled challengers arise and position as market leaders i.e. Apple, Alphabet, Amazon, Microsoft, Tesla, Facebook, etc.

Interestingly, these digital capabilities are becoming as ubiquitous as data itself, small and emerging economies now powered by greater data-processing power allow commercialized solutions to power SMEs and smaller organizations too.

“90% of the world's data was generated during the last 2 years” Forbes

This data and the processing thereof will be the new playing field 

Failure to see that these technologies unlock new industries in their entirety might shift organizations downward into incumbency whilst new digital startups grab the low-hanging fruit instead...

The Agrarian Revolution gave us the transformation of agriculture where land ownership was a competitive advantage. Followed by the Industrial Revolution, employees and workers were a means of competition in order to increase volume output.

Digital technologies in the Information Revolution unlock surges within economies today.

"Today it is more how intelligently problems are solved with the use of ubiquitous data processing as a new means of competition."

PwC, Oxford Economics,”https://www.pwc.com/cl/es/publicaciones/assets/the-new-digital-economy.pdf” (Accessed 2021-05-16)

Statista, “https://www.statista.com/topics/6778/digital-transformation/#dossierSummary”,“https://www.statista.com/statistics/870924/worldwide-digital-transformation-market-size/”(Accessed 2021-05-16)

Forbes,“https://www.forbes.com/sites/bernardmarr/2018/05/21/how-much-data-do-we-create-every-day-the-mind-blowing-stats-everyone-should-read/?sh=76ec6d8860ba”(Accessed 2021-05-20)