What is digital transformation?
We live in a context of continuous change and evolution, where digital technologies are taking hold in every field they come across, and where the economy is constantly changing as a function of this technology. This reality makes it necessary for any organisation, company or institution to implement digital capabilities in its struggle to be competitive and stay afloat. For this reason, digitisation becomes essential, in a process known as digital transformation.
Digital transformation is understood as the set of changes that involve the implementation of digital capabilities in all areas of a company, encompassing processes, products, strategies and competencies, with the aim of improving its efficiency, facilitating risk management and, in general, achieving a rapid and necessary adaptation to the context of digital technology in which we find ourselves.
A simpler definition of digital transformation could be that it is the set of actions that organisations carry out in order to adapt to a new world, in which technology is present in their day-to-day work. It is a process where the company introduces its business to the technological world, through tools aimed at meeting its needs.
With these definitions in mind, it stands to reason that this transformation requires an evaluation and reinvention of virtually every aspect within an organisation, from supply chain and work strategy to the skills and abilities of its employees and interactions with customers.
Source: https://pixabay.com/es/illustrations/digitalizaci%c3%b3n-transformaci%c3%b3n-hombre-4751659/
What drives digital transformation in a company?
In the previous section we have seen a series of emerging technologies that will increasingly condition the functioning of businesses and markets.
Access to all of them requires a minimum level of digitalisation, but even for companies that are not so directly involved in this technological revolution, digital transformation is a necessity.
In general, there are several causes that induce the need for a digital transformation strategy, and in many cases they go hand in hand:
- Changes in customer behaviour and expectations
- New economic realities and paradigms
- Social changes, both in the type of needs and in the world of ideas and even at the statistical level, where population ageing is becoming more and more noticeable.
- Ecosystem and industry disruption
- Emerging or existing digital technologies
Digital transformation strategy
A digital transformation strategy focuses on building capabilities within a company that maximise the opportunities of new technologies and accelerate their impact - and, of course, their benefits.
This process requires the involvement of different aspects of the company in a clear and concise roadmap to be followed, which must take into account at all times that the end goals are not static but changing, as digital transformation is a continuously evolving journey, just as innovation is.
Source: https://www.youtube.com/watch?v=MSU2q-1YsM4
A very important aspect to bear in mind is the versatility of this process. While there are common goals and common basic challenges, there are also big differences in the way forward depending on the company, the region in which it is located, the partners, and so on. Thus, the guidelines are never fixed.
Source: https://pixabay.com/es/photos/ajedrez-ipad-3d-digital-estrategia-1214226/
However, we can describe the parts that generally need to be reinvented in a digital transformation strategy at the business level:
- Company functions or activities: marketing, operations, human resources, administration, customer service, etc.
- Business processes: All those set of operations that have a specific business objective. Digital transformation requires the optimisation of these processes, and in most cases involves their automation.
- Business models: It is essential to regenerate the way the company operates, meaning the value proposition, the way it seeks to make money and the approach it takes to marketing its product or service. New sources of revenue and new approaches in terms of investment must be proposed.
- Business ecosystems: A digital transformation in a company is never a stand-alone, independent process. There are contextual factors that affect any business, as well as a number of partners or stakeholders. In this sense, in order for a company to effectively achieve digitalisation, it must be supported by others who have the same objective and concentrate their efforts on innovating. For this reason, it is worthwhile for a company to encourage and collaborate with partners or stakeholders to move forward digitally.
- Asset management: A company that wants to transform digitally must broaden its range of assets and identify as such elements such as customers and information itself. These non-tangible elements are becoming increasingly important in the competitiveness of companies, so it is essential to analyse the experience and interests of customers, as well as the treatment of data, its protection and confidentiality.
- Organisational culture: These are the principles that make up the "personality" of a company. It is the result of the set of norms and values by which a company is governed in any of its areas, from the skills used in the performance of work to the relationships between the whole team or even the participation in different external activities, its involvement in social problems, etc.
A company's corporate image, and therefore its competitiveness, depends on its organisational culture. Organisational culture is therefore a key aspect in the success of a company, so digital transformation must take it into account. It is therefore necessary to adapt our corporate image to the new changes, to associate it with innovation.
This reshaping does not have to mean an abandonment of the values that govern a company and with which it has functioned well. The aim should only be to adjust the organisation and established rules according to the new needs brought about by digital technology.
- The role of customers, employees and partners: The reality is that digital transformation must always put people before technology, and a company that wants to opt for success must set the expectations and needs of stakeholders at its core. Without taking the human aspect into account, an effective and productive implementation of digital technologies will not be possible. Therefore, it must be remembered at all times that digital transformation is an additional enabler to a company's development, a component of the equation, but the equation will not be solved if the focus is not kept on the role of the stakeholders.
Source: https://pixabay.com/es/vectors/formaci%c3%b3n-curso-negocio-5822607/
The training of employees in digitisation is particularly relevant and should be seen as a prerequisite for digital transformation. They must feel involved in the process and acquire knowledge on the subject in order to tackle their tasks successfully, through courses, access to seminars, the implementation of projects, etc. We cannot forget that this is a constantly evolving field that needs informed and up-to-date staff.
Digital disruption
The objective of the implementation of the digital transformation process is to achieve a digital disruption in companies, i.e. an irreversible change, a new working context based on the exponential speed of technological innovation that puts an end to the traditional business model.
It is true that an increasing number of companies are committed to technological needs, but not many, with strong projects, have achieved digital disruption by changing their business model without backtracking.
The truth is that, as innovations grow at a faster pace, this digital disruption is becoming an increasingly urgent necessity.
Source: https://www.youtube.com/watch?v=a33tgxN8x_Q
In January 2019, an article was published as part of the World Economic Forum's Annual Meeting entitled "What the next 20 years will mean for employment and how to prepare", which reaffirms this accelerating revolution that will completely change working lives. This revolution, of course, goes hand in hand with digital disruption, and is summarised in five major shifts:
- Artificial intelligence and robotics will eventually create more jobs, not less, just as they do today.
- There will not be a lack of jobs, but a need for appropriate measures, as well as a shortage of qualified people to fill those jobs.
- As remote working becomes the norm, cities and companies will enter a new war for the talent of the future. Disconnecting work from a location will give people a new geographic freedom to live where they want, and cities and metropolitan areas will compete to attract this new mobile workforce.
- According to the workforce growth rates of the FreelancinginAmerica2017 study, by 2027 the majority of workers will be self-employed. In Europe we do not have data, but the trend is likely to be along the same lines.
- Technological
change will continue to increase, so learning new skills will be a constant
necessity throughout life.
To address these predictions, it is necessary to prepare the company in a series of key aspects that make digital disruption viable:
Embracing global change: Digital transformation is an entirely global process, and as such, it must be embraced by all sectors, from large multinationals to small entrepreneurs. The latter include the rise of start-ups. New business models have taken advantage of technological disruption, finding new market niches and adapting to increasingly specialised demands.
Source: https://cdn.pixabay.com/photo/2013/12/09/20/52/news-226200_1280.jpg
Changing the business mentality: It is a prerequisite for companies to assume that the traditional business model is coming to an end. For this to happen, the most important thing is the people who manage and form part of the companies. It is they who have the capacity to transform knowledge and apply information and communication technologies. A major constraint in this respect is the constant alertness in which most leaders are immersed, fearful of risking their current models to an uncertain future. It is true that there is a growing involvement of managers and executives in facing this challenge, but the "fear" is still present.
Source: https://cdn.pixabay.com/photo/2015/04/28/07/55/mindset-743166_1280.jpg
Analyse influencing factors: As we already know, there is a wide range of factors influencing the digital transformation process that need to be studied in order to create an effective procedure. In this regard, a company should analyse the businesses that would be beneficial to engage with in triggering the disruption. It should also study the needs of its region, as well as those of the average customer, and target its strategy based on this.
Source: https://cdn.pixabay.com/photo/2013/11/20/23/00/test-214185__480.jpg
In relation to beneficial relationships, an interesting example is the partnership of the multinational Mercedes-Benz and the drone company Matternet, who created the Vans & Drones project, an integrated parcel delivery solution that would facilitate the reception of products under high demand. This project highlights the advantages that one business can offer to another, even if they are not closely related in terms of subject matter, which also allows more effort to be devoted to creating new strategies and projects instead of increasing the number of tasks within the company's own infrastructure.
Adapt to new needs: Entrepreneurs must accept the disruptive process as a paradigm that forces an adaptation that cannot be reversed. Therefore, it is necessary to learn to detect all the business models offered by the digital economy. On the other hand, in the current economic context, specialised businesses are triumphing to the detriment of a mass audience, given the needs of an increasingly segmented public.
Source: https://cdn.pixabay.com/photo/2015/06/27/09/03/adaptation-823401__340.png
In this sense of specialisation, many companies begin by offering a single product or service that identifies them and satisfies a single need, and then expand into other needs. An example of this is the company Uber, which, although it began by offering a personal transport service, has now segmented itself by offering home delivery of food through the UberEATS platform, or by providing an exclusive solution for the delivery of medical products and hospital trips through the UberHEALTH assistance platform.
Building a community: In an increasingly digitalised and networked world, the public's demands are increasing at a dizzying speed, as their power in social networks and their hyperconnectivity grows, so that they can access any business at the click of a button. For this reason, it is necessary to analyse in detail the needs of the customer, as well as those of employees, to integrate them into the means available to the company to communicate and make itself known.
Source: https://cdn.pixabay.com/photo/2018/11/29/21/51/social-media-3846597__340.png
Diagnosis of a company's digital maturity
A digital maturity diagnosis of a company consists of a detailed report that can be carried out by a technology consultancy through information it receives from managers and professionals, with the aim of allowing each business to self-assess itself and detect the areas in which to carry out efforts and propose improvements in order to achieve digital disruption.
Source: https://cdn.pixabay.com/photo/2021/02/15/16/01/woman-6018388__480.jpg
A complete diagnosis is a laborious process. However, we can offer a very simplified version that can serve as a first exercise for any company that has not yet used this tool and perhaps as a first step in a digital transformation process.
Download this Basic diagnosis document, and…
- Read each question in the first column
- Select the answer that best fits your case in the second column.
- The corresponding recommendations in the third column will apply to you.