Digital Transformation — What It Is & Why You Need It
Winston Churchill once said, “To improve is to change; to be perfect is to change often.”
Churchill was most likely talking about individuals, but his statement applies just as well to businesses. Throughout history, businesses have been forced to change due to economic conditions, world events, cultural shifts, and technological advances. Adaptation has always been the name of the game, and companies must do it quickly or risk being replaced by more agile competitors.
Today, we’re in the middle of what some experts are calling the fourth Industrial Revolution — a time of rapid technological change and innovation sparked by the invention of the internet. This time around, digital transformation is the required adaptation.
We’re data experts — not digital transformation experts — but, since data is at the heart of every successful digital transformation, we have a lot of experience and insight to share on this topic, too. In this article, we’ll share what we’ve learned about digital transformation including why you should do it, why most digital transformations fail, and how you can use data to drive successful digital transformation.
What is digital transformation?
You’ve undoubtedly heard and seen the term “digital transformation” dozens of times, but what would your answer be if someone asked you, “What is digital transformation?”
You might mention technology or data or the cloud or digital assets — and you’d be at least partially right — digital transformation involves all those things, plus a few more.
Here’s our answer: digital transformation is a new way of doing business that combines data and technology to support strategic business initiatives and create value now and for the future.
True digital transformation is more than an IT strategy or a technology update — it’s nothing less than a complete shift away from your old mindset and processes to a new organisational culture founded on data-driven decisions and a firm understanding of the link between data and technology and business outcomes.
Done well, digital transformation extends beyond the IT department and the technology stack and encompasses people and processes as well. You should work to understand what both employees and customers need from data and technology and to ensure those needs are met. Your processes and expectations should reflect a commitment to data-driven insights and using technology to achieve business goals.
As for the results, digital transformation is meant to create value through new opportunities and improvements to core business areas. It enables you to make smarter and faster decisions, better understand and serve your customers, and react to market trends and consumer demands with more agility.
Enterprise digital transformation drivers
Digital transformation is difficult no matter how big your company is, but it’s particularly hard for enterprises to transform their complex culture and processes and adapt to the digital world. Despite the challenges, enterprise digital transformation is worth doing.
Let’s take a look at some key digital transformation drivers to help you understand why this kind of change is so vital to your company’s success.
Your customers expect personalised service and a high level of engagement.
When digital disruptors like Amazon and Netflix emerged, the changes they brought didn’t stop with their own industries. Based on their experiences with digital native brands, customers now expect you to provide personalised service that anticipates their needs, a high level of engagement, and smooth automated processes.
The only way to meet these expectations is to embrace digital transformation and use data and technology to transform your customer experience.
Digital transformation leads to lower costs and more efficient operations
Digital transformation helps you save time and money in all areas of your business. Adopting modern tools and cloud-based technology results in lower IT costs, while operating based on data-driven insight helps identify opportunities to reduce costs, improve quality, and streamline your processes.
Today’s business environment has no place for tortoises
Contrary to traditional wisdom, slow and steady does not win the race — at least not in today’s fast-paced digital business environment. Instead, speed is key, and it’s one of the most important digital transformation drivers.
Digital transformation enables you to use data and technology to make smarter decisions faster. You’ll avoid getting left behind by quickly identifying new opportunities and acting to test new ideas before your competitors. You’ll also be in a much better position to provide real-time customer service and support and respond rapidly to changes in the market or customer expectations.
Accessibility = growth
Increased accessibility to data is one of the major goals of digital transformation. Accessibility fuels growth in two ways.
First, when your employees have better access to data and the tools they need to analyse it, they gain deeper insights and make better decisions about both minor and major matters. Better decisions lead directly to increased growth and returns.
Second, making customer-facing data and information more accessible and easier to use leads to increased customer satisfaction and more repeat business.
How you’ve always done things isn’t good enough anymore
The final digital transformation driver may be hard to accept. Your company may have had great success in the past, but the conditions that led to that success have fundamentally changed.
The mindset and tools and processes that worked for you in the past were built for a different world and they don’t work as well in the current digital environment. Digital transformation is a way for you to continue your success by transitioning to what works today — a data-led business model supported by modern technology.
Understanding why digital transformations fail
Digital transformation is an audacious undertaking. The benefits are real, but so are the challenges. Unfortunately, research suggests that roughly 70% of digital transformation efforts fail to overcome the challenges and bring about the desired benefits.
So why do so many digital transformations fail? The specific reasons for failure vary by company, but most digital transformations fail for one or more of the following reasons:
Too much focus on technology
Technology is an important part of digital transformation, but it shouldn’t be your primary focus. Many digital transformations fail because the team focuses too much on bringing in new technology and not enough on the data, people, processes, and attitudes needed to accomplish real change.
Not enough focus on data
Data and technology are the two pillars of digital transformation. Technology often gets too much attention, while data gets overlooked even though it is arguably the more important of the two.
Without data you can trust, technology gets you nowhere. It’s impossible to use data to make better decisions if your data is inaccessible or in poor condition, meaning your digital transformation will not succeed unless you value and treat your data as a critical asset and enabler.
Lack of business context, connection, and collaboration
The perception of digital transformation as an IT project has doomed many efforts. Digital transformation is not an IT thing — it’s a business thing intended to result in a new way of doing things so you can achieve better business outcomes.
Weak management support
When you’re trying to accomplish something as big as digital transformation, tepid leadership support and managing from the middle won’t work. Without enthusiastic support and buy-in from the top down, you can’t achieve the widespread cultural change needed to make digital transformation succeed.
4 keys to building a successful digital transformation framework
In the previous section, we mentioned four reasons why digital transformations fail. Now we’d like to share our observations about what it takes to develop and execute a successful digital transformation framework.
1. Focus on the “why” first
Successful digital transformation starts with asking yourself a series of important questions to gain clarity about why you’re pursuing digital transformation and what you want to accomplish.
You need to articulate your drivers for change, what you want your business to look like after transformation, and how the changes you propose will affect your employees, customers, and other stakeholders.
2. Connect your digital transformation to business objectives and outcomes
The goal of digital transformation is to create value for your business. It’s vital that you understand this and connect your digital transformation actions and objectives directly to your organisation’s business strategies and outcomes.
Make sure to include and cooperate with business leaders and employees. They should be an integral part of the digital transformation team and process right from the beginning.
It’s worth a special effort to make sure you’re all speaking the same language and aligned on where you want to take your business and what it will take to get there.
3. Be realistic about both gaps and opportunities
A good digital transformation framework should include a realistic assessment of your current capabilities, the gaps between where you are and where you want to be, and opportunities for change and improvement.
Make sure your assessment is thorough and includes company culture, operating model, processes, people, and barriers to change. You should also prioritise your opportunities based on the value they create or enable.
Resist the temptation to minimise obstacles and embellish opportunities. Focus your energy on setting realistic goals for your transformation.
4. Develop a detailed roadmap to accomplish your goals.
Once you’ve established your “why”, partnered with the business, and assessed your gaps and opportunities, you need a detailed roadmap outlining concrete actions to help you achieve the goals you’ve set.
Your digital transformation roadmap should include a combination of ‘inch stones and ‘milestones to keep delivery on track and demonstrate value. Make sure to define how you’ll measure progress, define success, and communicate expectations to different parts of your organisation.
Nothing is too big or too small to include in your roadmap. Think through and document everything from data governance and technology to how you’ll change company culture and interact with customers.
Enabling digital transformation with data asset management
Earlier in this article, we listed lack of attention to data as one of the reasons many digital transformations fail. Data is widely recognised as an integral part of digital transformation, so why is it so often overlooked?
The answer is simple — data is overlooked because most companies don’t treat it as a valuable asset. Instead, data is considered as a business input or even an IT cost. As we’ve seen over and over in our interactions with clients, this causes organisations to miss out on tremendous value and hinders their efforts to become data-driven and adapt to the digital business environment.
We help businesses overcome this problem using an approach called data asset management. When you adopt data asset management, you stop treating data as a cost and start treating and managing it as a valuable corporate asset. This involves gaining a clear understanding of the value of your data to your business, setting goals for it, investing resources in improving its condition, and measuring ROI.
Much as digital transformation transforms how you do business so you can create more value, data asset management transforms how you approach data so you can use it to drive change and growth. When you treat data as an asset, your chances of achieving successful digital transformation skyrocket.
Ready to learn more about how data can drive digital transformation?
We’ve built our business around helping companies use data asset management to unlock the hidden value of data and use it to drive transformational change. Contact us to learn more about how we can help your business manage your data and build a reliable data foundation for your digital transformation.
The benefits of treating data as an asset
The benefits of doing a data maturity assessment
Data maturity models – measuring the health of your data
Different data valuation methodologies
Data landscape – navigating the data jungle
Data quality vs data condition: the power of context