What is digital transformation?
That’s a tricky question. Here’s a very general answer:
Digital transformation is a process of implementing digital solutions into your business to create a better experience for your customers and employees.
Sounds relatively simple, but that’s where the trick lies.
Is it enough to transfer your documentation from paper to digital formats? Maybe use instant messengers for communication instead of having people wander around relaying messages and assigning tasks in person? Communicate with customers via email?
The answer to all of the above is no, it’s not enough. That’s not what digital transformation is.
Difference between Digitization, Digitalization, and Digital Transformation
“Digital transformation” is a hot mess of a term in business. Everyone understands it differently and many confuse digital transformation with either digitization or digitalization (or both). Here’s a very short explanation of the three:
- Digitization is transferring data from physical form to digital. This essentially means switching from paper documents to digital ones.
- Digitalization is the use of digitized data, so it’s a process that naturally follows digitization. It also includes the use of digital means of communication and scattered work-related tools. Digitization and digitalization combined make businesses less cluttered, but that’s about it.
- Digital transformation is the process of implementing digital solutions into all areas of a business, from customer communication to manufacturing to management. Such a fundamental change leads to a major shift in operations.
With the development of technology, digital solutions have become not just a set of tools to use in business but a way of thinking. Today, digital must be woven into the core of the business — that is, if the business aims to thrive. That’s why it’s called digital transformation — it transforms the business from the inside instead of polishing its veneer.
To summarize definitions by digital transformation consultants:
Digital transformation is a set of practices, services, and tools that change at the core the way a business interacts with its customers, employees, and partners to better reflect the current demand for quality communication and service.
Depending on the kind of business, digital transformation strategies may vary greatly.
The world itself — and our lives in it — are going digital, so the first and biggest reason to start the digital transformation of your business is to ensure its basic survival. In our fast-paced environment, ignoring technology can lead to a business failure. Below are just some of the benefits of digital transformation.
Anthony Hymes, the head of digital media at Shiseido, divides digital transformation into three categories:
- External
- Internal
- Data-driven
We’ve divided the benefits according to these types of digital transformation.
External digital transformation benefit #1 — Reaching more customers
It’s no secret that expanding your business’s presence online is a necessity these days. Young people spend the majority of their free time online, but even if your business caters to older generations, you’re likely to reach more people via a website or a mobile app than you would with a banner somewhere on the streets or on TV. Besides, online advertising is more reliable and can be cheaper compared to other options.
External digital transformation benefit #2 — Increasing customer satisfaction
The customer experience is front and center when it comes to transforming businesses, digitally or otherwise, and it’s one of the biggest reasons why digital transformation is so important. Customer demand is always pushing businesses to evolve. Today, the evolution demanded digital transformation.
People interact with and rely on technology more and more each year, from smartphones and social networks to smart homes, wearables, and the Internet of Things (IoT). The more comfortable technology makes our lives, the more we expect from the services we use.
We want our goods delivered faster, their quality to be better, and communication to be simpler. Digital transformation is essential for businesses that strive to deliver on those demands.
Often, digital transformation takes the form of developing new websites and mobile applications. The development of telemedicine platforms is a great example. In 2019, before the COVID-19 pandemic, the telemedicine industry was already worth $45 billion and was rapidly growing. The reason was that it’s way more convenient for patients to talk to their doctors via a video call than to go to the hospital.
In 2020, this convenience became a necessity. And while we hope it goes back to just being a convenience, there’s no denying that the digital transformation of healthcare is well underway.
Internal digital transformation benefit #1 — Enhancing employee experience and internal communication
Emails aren’t cutting it anymore — they’re too cluttered, unreliable for delivering urgent messages, and can take ages to write and send. On the other hand, internal communication software not only creates order where chaos ruled but can positively impact corporate culture, make employees more engaged in the company’s affairs, and help to better organize interdepartmental collaboration. All this improves the employee experience, reduces stress, and potentially can make your business’s operations smoother and of better quality.
Internal digital transformation benefit #2 — Improving manufacturing processes
Business processes and the employee experience aren’t the only parts of a business you can improve with technology. Digital transformation in manufacturing has been gaining popularity for a while. Digital solutions can make operations smoother, faster, and safer, and in the long run, they can also be a budget saver.
To learn more, read about Custom Software Development for Manufacturing Companies.
Benefits of data-driven transformation
Expanding online means you can access user engagement metrics and use that data to make better decisions. How users engage with your digital product — whether it’s a website or an app — is easier to track than users’ offline behavior. It’s also easier to get feedback from customers online than it is offline. This means you can get to know your customers better, find out their pains, adjust your strategy, and successfully serve them the products they need. And voilà — your reputation improves, more customers try your product, and your ROI skyrockets. All pros.