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What is Digital Transformation?

What is Digital Transformation?

It’s the buzzword of the year, at least. Either your organization knows how to go with the digital flow or you go bust. But what even is 'digital transformation'? Let’s revisit a few key aspects.

Like so many disruptive trends the digital transformation, too, affects businesses as much as consumers, but even governments, media, art and science can’t hide from it. Surprising then that a 2011 MIT study found that only a measly third of all companies have a policy or program for digital transformation. So if you don’t have one, you’re in good company.

And in a 2014 study it was found that only some 25% of companies have a clear understanding of their digital touch points, meanwhile nearly 90% reported they are currently undergoing digital transformation. So basically while most businesses claimed they are digitally transforming, they admitted they have no clue what they’re doing.

Some managers consider the lifelong, almost utopian dream of “going paperless” to be a successful implementation of a digital transformation. And that’s not actually far off but there are more profound aspects. Let’s dig deeper.

First there’s transformation.

Transformation is deemed essential for a business's survival, it’s a state of constant reinvention if you will. What the business sells, in which markets it operates and how it acquires or retains customers–or in short–it’s entire value chain is touched by transformation. To some degree transformation is a continuous effort to change and progress, but when a business has failed to evolve things get more critical and the transformation may become somewhat a ‘turnaround’.

Transformation is driven by three key events: A change in either consumer demand, competition or technology. Most likely you will encounter a mixture of all three in real life. Evolving businesses constantly realign their business model with their customers, but when they don’t you speak of reaching a ‘tipping point’ where things start to fall down. If you don’t react quickly enough then you may become Internet roadkill, case in point Blockbuster Video, Barnes and Nobles, or Radio Shack as the latest accident.

None of this is especially breaking news. The phenomenon is academically well understood with Porter’s Five Forces or McKinsey’s 7S.

What is more interesting is the second part, digital.

Digital is any technology that connects people with information and with machines. A digital transformation therefore is an adoption and investment into digital technologies. That means improving their vision of a digital future and setting their focal point on their digital customers and how they can engage them at every touchpoint with the organization.

And this is where most organizations start to get lost in too many diverse, vague things they ought to be transforming. Based on your role in the organization you may be predisposed to certain digital misconceptions, for example strategists often equate ‘digital transformation’ with investment into IT, whereas marketing wants to have better mobile capabilities to acquire customers, for example by investing into mobile websites or Social Media advertising.

Confusing digital transformation with higher IT expenditure or revisiting the old idea of improving the website may be digital, but it sure won’t cause much transformation. Digital shouldn’t be an afterthought to your marketing or IT strategy – it needs to capture the changing behaviours of people and how this new generation of customers uses apps, price comparisons, social media, messaging apps, etc. to interact with the things they care about – if you happen to be present and pleasant on such platforms then you have their attention.

Here are a few examples that show entirely new and compelling ways to interact with customers:

  • IBM has created an app that airlines can use to rebook passengers that missed their connections right from an iPad. Airlines can, as can other transportation businesses, use this to greet a customer right at the arrival gate and save them the frustration of running across the airport in vain.

  • Apple has pioneered mobile checkouts in all of their Apple Stores. The system is integrated into an iPod touch which is carried around by all employees, effectively abolishing the Point-of-Sale concept where people need to queue for several minutes.

  • Facebook has launched a virtual concierge service called M to some of it’s California users. M can reserve cinema tickets, reserve tables at recommended restaurants or offer you to buy suggested gifts right from the screen. Businesses that have a capacity to interact with customers in chat form, as is already widely popular in China with WeChat, can leverage the full potential of their ‘Digital Native’ customers.

  • Delta Airlines lets customers book flights and check in over their Facebook page, while Dutch airline KLM offers customers to connect their reservation with their LinkedIn or Facebook profile to pick a seat next to people they know or find interesting.

  • IKEA has created furniture that charges your smartphone. You know when IKEA is going after a trend, it’s a sure-fire way to become mainstream.

  • Many consumer-oriented brands offer their customers an unofficial shortcut through their much despised hotlines by answering questions on Twitter, effectively cutting through red tape by empowering their Social Media teams.

These examples show that at the heart of the digital transformation lies a radical descent away from the classic principles of R&D, Sales, Marketing, etc. These are not discreet pillars of your business operation anymore, they have begun to merge into one strong foundation.

All departments must work hand in hand to create a customer experience that millennials, digital natives or just about anybody find more pleasant to use. People want to shop where they hang out, let it be a mall or their Twitter profile. People don’t want to queue, feel forgotten about or smothered by undirected marketing. Be present and pleasant and make sure that the customer journey shapes your organizational structures and processes, not the opposite.

By the way, if you want to create apps similar to the ones described above, check out Mobility Portal – a MEAP backend that uses data from your cloud and on-premise data sources to easily create mobile-first apps that are based on open standards like HTML5 and Google Polymer.

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