The idea of digital transformation is sweeping the world, it is now one of the most popular topics of discussion at all levels of management, but in fact, it is far from a new concept, the discussion about it has been going on for several decades. Despite this, the scientific sphere and the business community have not yet formed a stable understanding of the essence and content of the term "digital transformation". There are even digital transformation services that help companies do digital transformation.
Digital transformation services also provide people who are an integral part of the company during the digital transformation. For example, content marketing service providers and marketing assistants.
A Plethora of Definitions of Digital Transformation
It is important to note that the content of the term "digital transformation" has evolved with the change and development of technology.
For a long time, digital transformation meant the transfer into digital format or digital storage of traditional forms of data. This, too, is one of the areas of digital transformation, but in today's world, it is much broader than digitization. When businesses realized all the possibilities of using digitized data, they began to develop processes for this purpose. Since then, digital technology has been booming, and the ability to implement it quickly directly determines the competitiveness of enterprises. Most executives agree that digital transformation is necessary to fight the competition, keep up with technology and the changing expectations of consumers. However, many are unsure of where to start and what digital transformation entails.
Today, there are many definitions of digital transformation. Some IT experts are categorically against "freezing" this concept and specifying it in a stable definition, justifying it by the fact that the evolution of digital technologies continues and the content of this term evolves with them. And this is undoubtedly true, but in our opinion, outlining the boundaries of the essence and content of the term "digital transformation" is not only an important task, but also extremely necessary at the current stage of development of the digital economy, allowing to form a common understanding, and, accordingly, to identify the main directions of digital transformation.
To begin with, there are many terms within the concept of digital transformation, for example:
Digitization (digitization) - represents the transformation of information "from physical media to digital media". Digitization does not change the quality and content of information, it simply converts it into electronic form for subsequent digital processing, which allows improving the existing business processes by adding digital information to them. If we classify this approach, we can relate it to the 3rd industrial revolution, which lasted from 1969 to 2010;
Digitalization is initially the creation of a new product in digital form. Therefore, the key difference between digitalization (digitalization) is the creation of a new innovative product, with new functionality and consumer properties. And if digitization (digitization) is primarily aimed at improving existing business models and changing business processes, then digitalization (digitalization) allows you to get a significant breakthrough in business and new competitive advantages. Digitalization (digitalization) is already an element of the 4th industrial revolution, which is often called Industry 4.0.
A November 2016 Pricewaterhouse Coopers (PwC) survey also found inconsistencies in how businesses and companies define digital. More than three in ten business and IT executives around the world attribute "digital" to all technology innovation activities, 29% believe digital is synonymous with IT, 14% define digital as user-centric technology activities, and another 14% say "digital" refers to all the investments a company spends to integrate technology into the business. The only obvious conclusion of this survey is that there is no consensus. Only 6% of respondents to the PwC survey said that digital "goes beyond technology alone and reflects a line of thinking that embraces continuous innovation, peer-to-peer decision-making, and the integration of technology into all aspects of the business.
Most companies are now focusing specifically on the digitalization of key processes and, for the most part, perceive digitalization as a new round of automation. In this regard, we should distinguish between digitalization and digital transformation versus automation.
What Is the Difference Between Digitalization and Automation?
Automation is first and foremost the replacement of manual labor with the use of electronic computing machines (ECM).
Digitalization is the use of digital computer technology to reshape a business so that it makes all decisions based on data.
It is not possible to digitalize any one area. Digitalization permeates the entire company, thereby achieving synergy between each area on a single digital platform.
The definition of digital transformation is most often "the transformation of a business through the redefinition of its business strategy, models, operations, goals, marketing approaches and products through the adoption of digital technology. It is used to accelerate sales and business growth.
Digital transformation is also referred to as the paperless office, the achievement of the digital maturity of a business. It's also the transformation of a company into a modern, efficient company that doesn't depend on the number of physical "machines."
Most experts agree on the following. Digital transformation is the process of introducing and using digital technologies to create new or change existing business processes, culture, and the customer experience in accordance with business and market requirements. It is not limited to a single business unit and allows company management to look at the correct actions and decisions made.
Digital transformation is often confused with digitalization. Although the latter - just a process of using digitized information to simplify established ways of working, that is - digitalization of business processes. Digital transformation changes the way we do business and sometimes creates a whole new business. A prime example is Netflix. The company started by delivering movie recordings by mail, which disrupted the video rental stores business. The development of the Internet and innovative services turned Netflix into a streaming video giant and displaced TV and movie studios from the arena. The company now creates its own video products and sells them directly to customers by subscription. It researches its audience on its own platform. It gets data on their preferences and tastes: it uses recommendation algorithms, which further ties it to itself. This is what digital transformation looks like in action: taking advantage of available technology to get data about how the business is doing.
The components of digital transformation strategy:
- a continuous process
- connection with innovation and technology
- focus on improving productivity and competitiveness
- business models based on customer demands and expectations
How to Create Effective Digital Transformation Strategy
First of all, you have to make that decision - the company is going to be a digital company.
Next, you need to create a team that is dedicated to digital transformation. The team will be the key to all the changes that will happen in the company. It will work out the strategy that is best for your business. Now there are many consulting services that can help a company with digitalization. Digital transformation experts know what strategy to choose and how to help businesses in this difficult business
As a result of the right transformation of a company, as a rule, profits multiply, personnel costs decrease, and the role of human capital increases.
In such companies, the value is gained by employees who are able to think independently and creatively, who are focused on the benefits of the business. This is how a company becomes stronger and more efficient.
Automation is "one of the directions of scientific and technological progress, which uses self-regulating technical means and mathematical methods in order to free people from participation in the processes of obtaining, transformation, transfer and use of energy, materials, products or information, or significantly reduce the degree of this participation or labor intensity of the performed operations.
Digitalization, in turn, is a process aimed at digitizing all the world's resources (creating digital copies) and the formation of networked platforms of interaction, with the aim of obtaining a predictable and guaranteed result from any controlling influence.
Digitalization is the use of online capabilities and innovative digital technologies by all participants in the economic system, from individuals to large companies and states.
But digital transformation companies aren't just about how to save money. It is more a story about how to make more money and sometimes just keep your business in a rapidly changing technological environment.
A Company Decides to Go Digital, How to Succeed?
In the new economic environment, all economic entities seeking to function sustainably have to go through a process of digital transformation.
Digital transformation is the introduction of modern technology into the business processes of an enterprise. This approach implies not only the installation of modern equipment or software, but also fundamental changes in approaches to management, corporate culture, and external communications. As a result, the productivity of each employee and the level of customer satisfaction increase, and the company acquires the reputation of a progressive and modern organization.
Digitalization of processes is not only relevant at the level of individual enterprises: entire industries are choosing this path of development as the only opportunity to meet the rapidly changing conditions of the world around them. As a result, the digital transformation of industry, retail, the public sector, and other sectors is already changing the lives of every person and every company.
The term "digitalization" is used to describe a transformation that goes beyond simply replacing an analog or physical resource with a digital or informational one. For example, books are not just transformed into e-books but provide a whole set of interactive and multimedia experiences. Accordingly, in an industrial enterprise, processes can become online dialogues between parties who previously did not even communicate directly.
Thus, in a business context, an organization that wants to become "digital" must focus on automating processes in order to make them more efficient. In contrast, a company that focuses on "digitalization" should aim to get value out of those processes more effectively, through higher customer engagement.
The definition of digital transformation as the process of integrating digital technologies into all aspects of an enterprise's business activities, requiring fundamental changes in technology, culture, operations, and principles for creating new products and services, seems significant within the scope of our research. To maximize the use of new technologies and their rapid implementation in all areas of business, businesses must abandon the old ways of doing things and completely transform their processes and operating models. Digital transformation projects require a shift in focus to the enterprise periphery and greater flexibility in the data centers that must support the periphery. This process also means phasing out obsolete technologies, which can be costly for enterprises to maintain, as well as changing the culture, which must now support the acceleration of processes enabled by digital transformation.
Results of Digital Transformation
Digital transformation maximizes the potential of digital technology through its use in all aspects of the business - processes, products, services, and decision-making approaches. It is important to emphasize that it will never be enough for digital transformation just to have technology per se. Clearly defined business objectives and data are necessary for the digital transformation process to be meaningful. Thus, digital transformation can only be viewed at the intersection of all three dimensions (articulated business purpose, data availability, and technology itself).
The main driver of change is the modern consumer - business is changing under the influence of new factors. That is why digital transformation is not a service of consulting companies, but an inevitable process that global business is experiencing as it adapts to the new conditions and preferences of the digital economy society.
Generally speaking, digital transformation is not so much about technology as it is about changing minds in the new conditions of the new digital economy.
The Positive Effects of Digital Transformation
The positive effects of digital transformation manifest themselves at all levels of the economic system - from the individual consumer to the country as a whole. Digital transformation brings with it, at a minimum, the potential of digital technologies, and, at a maximum, the effect of a complete rethinking of the very format of the economic system - numerous opportunities for growth, improved business efficiency, cost reduction, improved customer experience and the development of innovative business models.
The role of digital transformation in industrial enterprises as economic systems cannot be underestimated. Digital transformation opens up fundamentally new opportunities for value creation for all industries and sectors of the economy.
Let us outline the main benefits that digital transformation brings to socio-economic systems:
- Process optimization. New technologies allow businesses to automate simpler processes and eliminate intermediate steps in more complex processes. This increases the flexibility of enterprises, which can now use their resources much more efficiently.
- Finding new revenue streams. With the advent of new technology, new ways of generating revenue that may not have been available before are opening up.
- Creating a personalized and attractive service infrastructure. Today's customers expect businesses to listen to them and meet their specific needs. Today's technology is advanced enough to meet all of these challenges.
Enterprises are quickly replacing traditional interaction processes with digital ones using the latest technology. Very often the transformation happens not because businesses decide to, but because they need to in order to survive. Demand for effective digital technology for business has grown in the marketplace today, and businesses that fail to adapt to the new digital consumer model will likely cease to exist. Businesses that welcome and are ready for change, and are able to adapt to more flexible operating models, have more potential for success than ever before. This is because digital transformation encompasses all aspects of business and offers effective ways to improve them along with the development of digital technology. Big data and advanced analytics enable more accurate and faster decisions, from preventive production repairs to preventing fraudulent operations.
However, the most difficult change for traditional industries will, in our view, be not so much the creation and integration of technology, but the fundamental restructuring of corporate culture and organization. An iterative, adaptive approach, a higher tolerance for risk, characteristic of the entrepreneurial mentality, is largely alien to the established approaches to big business management. It is difficult to accept that the structure of any industry and company today should be perceived as a key variable rather than a constant.
In the term "digital transformation," it is "transformation"-sequential, deliberate restructuring-that is expected to cause the greatest difficulty for traditional businesses. Anyone who fails it will fall hopelessly behind. Today, digital transformation is penetrating all sectors of the economy at different rates. It should be noted that the effect of digital transformation varies from industry to industry. Obviously, high-tech industries lend themselves most easily to digital transformation. However, there is no doubt that digital transformation will affect all sectors of the economy.
6 Reasons Why Digital Transformation Services Can Help Your Business
The reasons why digital transformation services can help your business are revealed in their benefits. The benefits of digital business transformation are worth the effort because their list includes:
- Elimination of time-consuming manual processes through business process automation
- Increased employee skills Increased customer satisfaction through improved customer service
- Accurate market segmentation Improved and efficient decision-making through real-time data collection
- New products/services World-class competition
- Increased company efficiency, flexibility, and scalability
- Revenue growth and cost minimization
Every company that steps on the digital transformation path will gain these or other benefits
Thus, digital transformation for modern economies is:
- A growth engine that ensures the construction of digital business models by stimulating growth within and beyond the core business of the enterprise; identifying and creating new digital business models; ensuring long-term competitiveness;
- ? tool to improve efficiency based on the transformation of the operating business model to digital technologies by optimizing business processes at all levels and reducing costs; rational use of existing competencies and infrastructure; transfer of the entire value chain to digital technologies and modernization of IT architecture;
- The Basis for Breakthrough Innovation, which is the basis for the creation of a corporate incubator and venture capital by identifying promising opportunities for future growth; creating conditions in advance for access to the latest and complementary technologies; positioning themselves as a partner in the long term.
Examples of Digital Transformation
The Swedish furniture company IKEA is an example of foresight and digital business transformation. It skillfully optimizes costs and "nurtures" new experiences in its customers. Back in 2017, the company bought TaskRabbit - a website that helps find and hire people to deliver and assemble furniture from IKEA stores. So customers who were interested in such services were more likely to order them from the company itself. To make it easier for customers to choose furniture, they can "arrange" it around the apartment using the augmented reality in the IKEA Place app. In addition, the company has a Space10 - research and exhibition center with ambitious plans to produce cars in collaboration with someone. Example of digitalization of IKEA business Trying on furniture in an apartment using the IKEA Place app. Image source. The digitalization of business has not spared the beauty industry either. L'Oréal is a great example. Its experts created the Makeup Genius (News - Alert) application, which helps 20 million customers choose the right products. The app reads and assesses the parameters of the user's face using a smartphone camera, then shows how to apply makeup correctly. The user can, with a single tap, order all the products they'll need to create the look they like. The winds of change have even caught up with children's toys. Barbie brand sales rose 29% in the last quarter of 2020. That's the best performance in at least two decades. Of course, COVID and lockdown helped this not least, but the company has also embarked on a digital transformation. Barbie started a YouTube (News - Alert) channel, put animated movies on Netflix. And the voice assistant Alexa now helps children with dolls learn different professions. Such stories inspire company owners to believe that it is possible to repeat the actions of successful colleagues and get the same result.
However, to leverage digital data effectively, businesses must continually adapt, test, and leverage emerging technologies to better adapt and be prepared for the challenges of the future. While adopting new technologies is a riskier approach than using familiar systems and devices, the potential opportunities and payoffs will be enormous. Most experts and companies agree that traditional businesses should begin their digital transformation by assessing the market and customer demands, both latent and hidden. A cocktail of analytical data, an out-of-the-box approach, up-to-date technologies, and quick reaction to changes will make it possible to become a strong competitor in the market to keep moving on the treadmill of digital transformation.
