“When digital transformation is done right, it’s like a caterpillar turning into a butterfly, but when done wrong, all you have is a really fast caterpillar.”
—George Westerman; Senior Lecturer at the MIT Sloan School of Management; Principal Research Scientist, J-WEL Workforce Learning
For years, organizations and thought leaders have spoken about the need to transform their businesses to prepare for a digital future. But amid the ongoing fallout of the COVID-19 pandemic, the phrase “digital transformation” has become ubiquitous across the private and public sectors. Yet for many organizations, the phrase reflects more of a general desire than a strategic plan.
So, what is digital transformation?
Digital Transformation: Definition and Benefits
While “digital transformation” is a broad term, in essence, it describes the process of integrating technology throughout and across an organization to fundamentally change the way it operates internally and presents its products or services externally.
As Emeritus Enterprise Solutions Architect Dr. Jeffrey Lent recently explained in a webinar, many perceive digital transformations as centering around the implementation of new technological tools. But those tools, he says, are actually the final step in the digital transformation process.
Instead, a true transformation involves:
- Reorienting the company to make strategic decisions grounded in data
- Being increasingly responsive to information about customer preferences and demand
- Accepting inputs and ideas from across the organization
Specific pieces of technology, then, are tools that a highly engaged workforce can implement.
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Digital transformation benefits for organizations include:
- Responding faster to customer preferences and demand
- Refocusing employee efforts on high-value tasks
- Interacting with consumers in new ways
- Bringing products to market more quickly
- Increasing revenue
- And more
Digital Transformation Examples
Successful digital transformations typically involve companies pivoting to meet customer preferences and needs using technology, rather than adopting technology for its own sake. Strong examples of digital transformation include:
1. Domino’s Pizza
Today, Domino’s Pizza is everywhere—but a stock plunge in 2008 almost took the company down. The company pivoted to re-envision itself as a technology-first restaurant. In addition to heavily promoting a mobile app allowing customers to track their pizza from placing the order to cooking to delivery, Domino’s expanded its tracking technology to work on wearable devices like smartwatches. Further, the chain has used artificial intelligence to improve operations and is even planning for and testing delivery using fully autonomous vehicles. The result? The brand rebounded from its low point to reach new heights of success.
2. Best Buy
As Forbes explains, Best Buy was once seen as being on the verge of becoming another Radio Shack–obsolete in the face of Amazon. But the electronics giant reinvented itself from a simple retailer to a technology provider. It expanded its Geek Squad services and in-home consultations and positioned itself as a source of advice and expertise. Additionally, the chain shifted to a digital marketing model that more effectively targets customers using personalized insights.
In the face of competition from online retailers, Walmart pivoted to offer a hybrid model that pairs its signature stores with a robust digital customer experience. But its transformation went much further than online ordering. The company has moved to a massive cloud infrastructure that supports its extensive machine learning efforts. These efforts aim to parse data on everything from store performance and customer experience to supply chain and inventory.
Digital Transformation Challenges
Despite the immense promise of digital transformation, in reality, most organizations’ efforts in this area fail—often bringing huge amounts of resources and investments with them. In fact, in a survey, McKinsey found that only 16% of digital transformation efforts have successfully improved performance and led to sustained change.
While many factors lead to these low rates of success, common digital transformation challenges include:
- Incomplete buy-in and lack of understanding across the organization
- Leadership that’s unwilling to let go of some strategic control in favor of a data-driven approach
- Siloed implementations of new technology approaches
- An overly narrow focus on quarterly shareholder results, which can prevent companies from making the investments and changes that will improve customer relationships over the long term
Digital Transformation Strategies for Organizations
In the face of surprisingly high failure rates, companies and individual leaders must approach transformation with a well-thought-out plan. Essential digital transformation strategies include the following.
1. Understand That Digital Transformation Requires Cultural Change
As Dr. Lent explains, successful transformation requires buy-in from across the organization. It also requires leaders to let go of some control in favor of amplifying data-driven findings and empowering employees across the organization. Having leaders at the top of the company who understand and are willing to engage with technology initiatives, even when it may feel uncomfortable, is essential for success.
2. Build Workforce Capacity
McKinsey’s report on digital transformation found that companies that invest more in their talent are far more likely to succeed in their transformation efforts. In fact, its survey respondents were three times more likely to report success if they believed their organization had invested sufficiently in digital talent.
While targeted hiring is important, companies embarking on transformations should also consider reskilling and upskilling employees. Individual leaders will also benefit from gaining skills in this area to drive strategic decision-making and organizational initiatives.
3. Break Down Silos
When a digital approach is not embraced throughout an organization, a true transformation cannot take place. As Dr. Lent explains, not only do small teams need to understand their business goals; they also need to understand how they are related to the organization’s larger digital transformation initiative. Careful communication about the aims and tactics of the transformation throughout the company is essential to ensuring widespread buy-in and engagement.
While digital transformation holds immense promise for organizations, it also comes with notable risks and pitfalls. The high failure rate of such initiatives demonstrates the need for companies to create a clear strategy before rushing to invest in new technology. It also reveals the importance of viewing digital transformation as an organization-wide cultural shift rather than a simple IT initiative.
To maximize their chances of success, organizations should invest in their leadership and workforce to ensure their teams are well-equipped for the technical and operational challenges of the future.
What is digital transformation’s role in the future of your company? Schedule a meeting with Emeritus Enterprise to learn more about our targeted employee development opportunities. We can help you ensure every level of your organization has the technical knowledge and strategic understanding to bring your company into the future.
You can also view our online digital transformation courses for individual enrollment.