Companies cannot hope to remain relevant without undertaking periodic digital transformations. This term refers to a foundational change in the relationship between customer and organization through the adoption of new technologies and processes. Digital transformation became particularly important for corporate survival at the beginning of the COVID-19 pandemic but has been critical to responding to changes in customer needs for decades.
However, the pace of technological advancement has picked up, as has the need to adopt it in a timely manner. As McKinsey research shows, the very best turnaround time for business cases just a few years ago is now actually slower than average response time. Shifts in customer expectations are largely driving these digital transformations, which can open new revenue streams and serve as the base for more lucrative business models when done well.
What Constitutes a Digital Transformation?
A digital transformation re-envisions how organizations use technology to connect with customers, improve service, and create more personalized solutions. Currently, digital transformation means developing mobile applications to streamline processes or creating an e-commerce platform to facilitate sales. However, there is potential to go further if companies implement cross-departmental collaboration to drive these transformations.
Ultimately, companies need to become innovation leaders to come out ahead in an increasingly competitive marketplace. Startups have instilled a healthy fear of market disruption that encourages large corporations to invest in digital transformation. As a result, even large organizations pivoted quickly during the pandemic, offering contactless purchasing options and using machine learning to make supply chains more robust.
These two developments individually do not constitute digital transformation, which reflects how abilities such as these get woven into business processes. Digital transformation is about the larger picture and overall digital fitness of an organization, especially in terms of incorporating technology strategically to achieve business goals and drive customer satisfaction. To better understand this, let’s consider an example.
Jersey Mike’s, a sandwich shop, developed a mobile app to be used for a variety of purposes. However, the company did not stop there. It used analytics data to learn how people used the app. The company paid special attention to whether users were also members of its loyalty program. It developed personal push notifications and promotional campaigns with the goal of increasing program membership and encouraging members to use reward points more frequently. It doubled online sales while increasing loyalty club membership by 38 percent and augmenting rewards redemption by 43 percent.
The Key Elements That Lead to Success Digital Transformation
This example provides a template for developing the plan behind a digital transformation. Jersey Mike’s identified clear objectives that were measurable and that aligned with their business goals. With this general framework, information technology (IT) specialists must work collaboratively with people driving business decisions to identify the right technology and decide how to implement it to move the company closer to its goals.
Many organizations need partners to move forward. This may comprise purchasing a developed piece of software, working with a boutique design shop, or bringing a major consultancy on board. Most IT teams cannot handle development themselves, at least not at the speed necessary to deliver the best results and get the largest ROI.
The process depends on listening to customers and paying attention to outcomes. Customer expectations change over time, and digital transformations need to respond to them. Often, companies need to modify or completely redesign their existing services and products when new technology services with a broad impact. This also means that employees need to get training on the new offerings and learn how technology is being used as support.
The Issues That Can Cause a Digital Transformation to Fail
Unfortunately, digital transformations can get derailed. When this happens, companies can lose out on vital ROI and fall behind their peers in terms of offering the quality of services, products, and support that customers expect. This can negatively impact the relationship between the organization and its customers, putting the future viability of the company into question, especially if a lot of money was invested into the digital transformation.
According to a report published by MIT Sloan School of Management and Capgemini Digital Transformation Institute, poor leadership or inadequate employee training efforts, and disorganization between business drivers and the IT department can all contribute to failure. This is usually because of communication shortcomings, but they are not the only issues to have negative consequences. Another counterproductive tendency noted by researchers was a focus on disruptive change rather than incremental but more manageable shifts. Companies also sometimes focus on cutting costs as a business driver, which is at odds with investing in technology. Subpar changes in strategy that fail to take the customer experience in mind can be the result.