Business optimization

What is digital transformation?

by Andrej Lovsin
January 17, 2022 - 7 min

It’s no secret that businesses must change and adapt to survive in today’s digital age. But what does that actually mean? And how can you achieve digital transformation in your own company? In this blog post, we’ll answer those questions and more, so you can start making the necessary changes to stay ahead of the competition. 

As a business owner you have probably heard the term “digital transformation” but might not be sure what it means. Many people use the term to describe a company’s efforts to go digital, or to make their operations more efficient through the use of technology. Others define it as a shift in how customers interact with businesses, often through the use of online channels. Still others see it as a change in how companies create and deliver value to their customers. So what is digital transformation really? There is no single answer to that question, but it is safe to say that it is a complex and multi-faceted phenomenon that is constantly evolving. To understand it better, let’s take a closer look at some of its key components.

What digital transformation actually means?

The first step to understanding digital transformation is to have a clear idea of what it means. Unfortunately, because there are so many different definitions out there, this part can be a little tricky. In one sense, digital transformation is as simple as using technology as leverage in your business. In another sense, it’s an all-encompassing term that includes changes not just in how you use technology but also in how your customers interact with your brand and how value is created and delivered across all levels of the organization. Still others view it as a change in mind-set – a shift from a traditional organizational focus to one that embraces digital solutions and innovation. 

Digital transformation components

The most common way to break down digital transformation is by looking at its three primary components: customer experience, business model innovation, and operational excellence. It is important to note that these are somewhat interconnected. For example, improving your customers’ experience with your business also affects how they think about your brand – which means you need to consider aspects of both your business model innovation and operational excellence as well. Let’s take a closer look at each component in turn. 

Customer Experience

If there is one area where companies must excel in order to achieve digital transformation, it’s their approach to customer experience. As customers increasingly expect businesses to provide them with meaningful, personalized interactions any time they are engaged, the pressure on companies to deliver is growing. The good news is that thanks to social media and other digital channels, it has never been easier for companies to proactively engage with their customers and change how they think about the brand. The bad news is that many businesses still approach customer experience in traditional ways, using channel-focused strategies rather than cross-channel strategies that incorporate all digital touchpoints. 

Business model innovation

Since the rate of technological change continues to accelerate across nearly every industry, business model innovation (BMI) has become an increasingly important tool for companies looking to stay ahead of the curve. BMI can include anything from changing your company’s operational processes or adjusting its current branding to changing how your products are created or delivered. It can also encompass making large-scale changes to the business, such as what happened when Amazon moved from being an online bookseller in 1995 to becoming a retail juggernaut that now sells almost everything you can imagine. 

Operational excellence

Having good operational practices is nothing new for organizations looking to boost their performance and improve their bottom line. However, with digital transformation, it is not enough for companies simply to have good processes in place. They must be able to adopt and quickly adapt those processes in order to stay ahead of rapidly shifting consumer preferences and expectations – something that will become increasingly difficult as the pace of technological change continues to climb (the same technology that has caused businesses and consumers to become so intertwined in the first place).

Operational excellence is especially important when it comes to digital transformation because companies need systems and processes that support all of their existing needs while helping them meet their customers’ exponentially increasing demands for better, faster, and more personalized interactions. This includes everything from analytics and data management to security and customer service – none of which can be ignored if you want to stay relevant in today’s marketplace.

Digital transformation challenges

Although there is still a lot we don’t know about digital transformation, we do know that it doesn’t come without its challenges. For one thing, there are conflicting opinions on how best to move forward. Some believe that businesses should focus on improving their current operating models instead of completely overhauling them, while others think the only way to achieve digital transformation is through major changes.

Additionally, it can be difficult for businesses to engage these days, with consumers now demanding more private and personalized experiences over anything else. Plus, many companies are simply not prepared to adapt their systems quickly enough or invest in customer experience solutions that will allow them to create relevant interactions with their customers at scale across every point of contact.

What are the actual benefits of digital transformation? 

There are several practical reasons to take on digital transformation. One is to grow your customer base by offering online services or different payment plans. Another benefit of digital transformation is being able to access all of your customer data, which can help you find ways to boost sales and improve products. For example, if you know most of your customers are women between the age of 30 and 50, you may decide to tailor your ads more towards them or offer a different line of products for this demographic.

Many companies also use digital transformation as a way to cut costs. As more business becomes automated through digital processes, you can rely on fewer employees. Digital transformation enables companies to adopt new technologies quickly and easily so they stay relevant in the market. 

How to approach digital transformation?

If you want your organization to achieve digital transformation – i.e., if you want it to become the industry leader – then take time now to determine which aspects of your organizations need immediate attention and focus on those first. This means mapping out how your current business model works and what might need to be tweaked or overhauled in order to create a digital-first model. Then, develop the necessary capabilities and systems to support your new business model so you can not only meet customer expectations but exceed them as well.

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