“The big question that organizations must ask themselves in the digital age is how to respond effectively to the increasing digitization of society, not only in terms of how to avoid becoming obsolete in the face of competition but also how to adapt and lead the way. Digital disruption”.
Digital transformation is a continuous process over time, in which many factors beyond the technological ones are involved. It is of little use to digitize a company if employees are not empowered to adopt digitization in their work. Therefore, an organization’s cultural change is considered the most complex challenge of digital transformation for all companies.
Sustainable digital transformation focuses on carrying out a progressive digital immersion, divided into a series of phases or steps so that the next step in projects are not addressed until the different initiatives of the common step have been completed. To carry out the most complex digital initiatives, it is necessary to go through the following degrees or steps of maturity or digital immersion, the so-called Immersion ladder.
Phases of Digital Transformation
Digital Foundations: In the first phase, what we call Digital Foundations is established. In this step, initiatives are carried out to establish a base on which the digitization of a company will be built on. The architecture and strategies that coordinate the different digital actions to be carried out include a social media plan, CRM execution, and different digitization processes.
Digital Expansion: The second step is the stage that we call Digital Expansion. In this phase, symptoms begin to appear outside the organization, known as digital contact points. Employees are also being empowered in digital skills, and the results of actions carried out in digital media are being analyzed.
Digital Optimization: We identify the third stage as Digital Optimization. At this point, the actions of the previous step are delved into. The companies that are in this echelon have a true digital culture. They can analyze digital information in an advanced and predictive way, and with self-learning processes. They also interact with their customers through the channels they always prefer, collect their feedback in an advanced way, and can enhance the innovations derived from co-creation.
Digital Maximization: The last step, which few companies reach today, is Digital Maximization. At this stage, automated processes are seen in which authentic artificial intelligence is applied. Large amounts of data, both internal and external, are analyzed, allowing for robust personalization of the customer experience. This allows creating new business models based on the digital world, such as virtual reality or augmented reality.
Pillars of Digital Transformation
A company that wants to start a digital transformation process must consider key elements that help drive the process forward:
Leadership: The success of digital transformation in a company does not depend only on the degree of digitization but also on its managers and leaders’ ability to drive change. This implies adopting agile management styles that facilitate the evaluation and implementation of new models, sources of income, and opportunities.
Customer Experience: Digital Transformation is closely linked to Customer Experience. It must aim to use technology to create new ways of communicating, predict customer needs and behaviors, and improve omnichannel strategies.
Business Model: A business model is a way a company creates, delivers, and captures value. Within the Digital Transformation, companies must be willing to evaluate and modify:
- Value proposition: that is, the products and services it offers.
- Value delivery: these are the distribution channels, customer segmentation, and the relationship with them.
- Value creation: the resources and alliances to create the products.
- Value capture: An adequate Digital Transformation also implies a revolution in costs and sources of income. Therefore, the need to have the support of the directives in this function.
Organizational Culture and Agility
Technology within the Digital Transformation is the great pillar within the path of change. However, technology could not act in the desired way if it is not accompanied by processes of practice and relationships between human agents. In this way, technology is linked and shaped by the culture and the organizational context; thus, Digital Transformation will be a more complex process that involves all the actors in the organization.
Digital transformation requires investment in human capital and culture. Also, for a company to respond adequately to rapid changes in society, it must become an agile company.
To learn more about how agile is changing the way we work, listen to this podcast on agile culture and how companies are beginning to adopt it to improve their processes and make them more efficient in the fourth industrial revolution.
Benefits of Digital Transformation
An adequate Digital Transformation will have 7 positive impacts on:
1. Competitive advantage: Digital transformation allows a company to create new products and services according to customer needs, and this undoubtedly allows diversifying services, making better decisions, and driving growth versus versus its competitors.
2. It promotes the culture of innovation: Agile innovation management in companies is one of the most important tools to adopt new methodologies that deploy the creation of new products, solutions, and business opportunities.
3. Improves productivity: When automation processes are adopted in companies, employees’ better performance is guaranteed, who see digital tools as the ally to achieve the objectives.
4. Greater brand presence: When we talk about a company having an omnichannel strategy in its digital and physical channels, it is because the said company has understood the importance of providing the best service to its customers, and the digital transformation allows these channels to communicate and flow with each other, avoiding setbacks in customer service processes.
5. Give importance to data: A company’s databases must be converted into stocks to have a greater impact on the market. Digital transformation allows better decisions based on the big data generated through all areas of the company.
6. Reduce costs: When methodologies such as Agile or DevOps are adopted to develop technological products in an agile way, errors in their production are reduced, which gradually lowers the company’s costs. In addition to the automation of processes and cloud computing for information storage, avoiding the purchase of physical servers and their maintenance.
7. Customer satisfaction: It is perhaps the greatest benefit that digitalization brings to companies. Knowing customers allows providing a better experience, more agile and secure services, and direct communication to help the company attract, convert, and retain loyalty more appropriately.
Technology applied to Digital Transformation
Big Data: Big Data is the tools and techniques that allow the real-time processing of large amounts of data collected from different organization’s internal and external sources.
The processing of this data and its subsequent analysis will make decisions based on predictions, anticipate people’s needs, and distribute budgets more intelligently.
Cloud Computing: Cloud computing has great advantages for digital transformation.
Cloud services allow computer tools such as databases, servers, analysis, networks, and software, within a flexible and low-cost infrastructure.
The cloud also facilitates access to different technologies, deploys services almost immediately, and has architectures based on microservices, delivering greater agility and scalability.
Mobile: With the arrival of smartphones, mobile technologies’ development has been escalating rapidly, promoting apps that open a new form of relationship between organizations and their customers, suppliers, and workers.
Artificial Intelligence: AI is a set of techniques that allows machines to perform actions rationally. In this way, companies can understand customer needs, suggest the perfect product to the right person and streamline the sales process.
For companies’ benefit, artificial intelligence is used to automate processes and capture and analyze information, bringing benefits such as cost reduction and optimization of services and products. This type of service is widely used in the financial sector, which has pointed to banking’s digital transformation for a few years.
The digital transformation process in the company is not something that is not trivial and must be implemented with strategic planning. It involves profound changes in the company at all levels and must necessarily encompass all departments from senior management to operators. The digital transformation methodology will help the company develop a digital strategy that will improve the company’s processes, which will translate into an increase in productivity and an increase in the efficiency of the processes.