By 2024, businesses are estimated to spend $2.4 trillion on digital transformation. This shift toward using digital tools and software to improve business processes is necessary in the face of greater competition and connectivity.
But digital transformation is easier said than done. Every company has unique needs and goals. Therefore, it’s important to understand how digital adoption fits into your business and its growth going forward.
So in this post, we’ll talk about what digital transformation is, why it matters, and examples of applying it for better profitability. Let’s get started:
What is Digital Transformation?
Digital transformation is the process of integrating digital technology into every facet of your business. It completely changes how you provide value for your target market.
It also means a culture change, where your company embraces change, experimentation, and optimization.
It can sometimes mean abandoning previous business processes to replace them with new best practices.
Most digital transformation should occur with an express aim in mind. For instance, to improve your customer service or enhance profit margins.
How Important is Digital Transformation?
There are a ton of reasons to implement digital transformation in your business. The most important ones are:
- Survival – Over the last several months, supply chain and economic pressures have made it crucial to react quickly in protecting revenue and profit. Digital transformation is no longer a luxury, it’s a way of life.
- Productivity – Digital tools are perfect for collecting and analyzing data at scale. They can also create efficiencies in communication and service, as well as automate a range of otherwise mundane and repetitive tasks.
- Collaboration – Keeping your team on the same page for projects and business outcomes becomes difficult when everyone is distributed (remote). Digital transformation lets you enjoy the benefits of remote collaboration without sacrificing speed or clarity.
- Market Expansion – The normalization of digital delivery for most products and services equates to a larger market for your business. For instance, while most people preferred in-person fitness training before, more consumers are open to online classes — which can be delivered to and from anywhere in the world.
Companies who embrace digital transformation will be poised to lead their industries in the coming years. The ability to get more done with less time creates a significant advantage and improvement in the value you bring to your customers.
What are the Cons of Digital Transformation?
With all of the benefits that digital transformation provides to organizations, it’s not without a few potential downsides. Some cons of digital transformation are:
- Information Overload – Teams can become overwhelmed with the research involved in selecting the right platforms, tools, or strategies. Leaders must place deadlines or parameters on decision making to avoid time-wasting activities that don’t truly contribute to growth.
- Complexity – In certain cases, a digital tool is not the right answer if it complicates an otherwise elegant process. For instance, providing only digital options can eliminate a large portion of your target market.
- Third Party Dependency – Basing key business outcomes on digital technology can lead to a dependence on that particular technology, reducing flexibility. Companies should have second and third options in mind to avoid dependence.
- Security – Sensitive business and customer information requires a solid approach to security. Digital security best practices must be learned and adhered to, even by non-tech savvy team members.
These drawbacks don’t mean you should avoid transforming your business with digital technology. The downsides of digital transformation are manageable and preventable, meaning that you should take them into account when strategizing your digitally-enabled processes.
What’s the Future of Digital Transformation?
Let’s look at some trends coming around the corner for digital transformation:
More Spending on Digital Transformation
As we mentioned, trillions will be spent on digital transformation. Instead of looking for offline solutions, businesses will continue to invest in technology for greater scalability.
More focus will be on customers and their problems, instead of technology. Consumers and businesses are less impressed with shiny new technology. If it doesn’t meet a specific need, then your market won’t pay attention.
In other words, a more pragmatic approach in terms of “what problem does this solve” will become the priority.
Companies no longer have to resort to banks or institutions to raise capital. They can take advantage of digital platforms that crowdsource funds from interested prospects. Even if more capital is needed, connecting with these sources is done online.
This greatly reduces risk, as you are able to pre-sell ideas, products, and services to begin producing cash flow from day one.
Manufacturing is going to be transformed. The ability to feed AI and algorithms with data about products is unprecedented. Soon, ecommerce will become much more competitive as the barrier to entry is lowered.
AI Will Meet Skill Gaps
Your IT doesn’t need to know it all, nor should they. AI can provide companies with secure, scalable solutions. Instead of knowing specific protocols or languages, developers will be able to focus on concepts and use custom tools to manage technology.
Examples of Digital Transformation
Now, let’s explore some examples of digital transformation and how it will change the way companies act internally and with their customers:
Customers today expect great customer service. Digital transformation can fundamentally evolve the way you help your customers.
For instance, chat bots can provide instant responses to customer questions via a form on your website, or even social media. And self-service customer portals allow a way for customers to solve their own problems without stressing your customer service resources.
Compare this to the traditional method of sending an email or calling a phone number, just to answer a lot of basic questions and finally be routed to the right person, video, or article to answer your question.
Fast is the new big. In other words, the ability to react to market changes, supply chain shortages, and adapt new technology is key. You don’t need to have millions of dollars in your war chest to compete.
Companies that can find a market demand, meet it, and optimize it with digital automation will be able to spend less money to acquire high value customers.
Revenue is generated with products and services. However, true business equity is achieved with scalability. How easy can you replicate your results for one customer across the market?
Using software and technology, you can market, promote, sell, provide customer service, and deliver your product in the cloud. Never before has scalability been as possible or as valuable.
Leadership is a key aspect of digital transformation. In the past, companies often utilized a hierarchy with one person at the top. Now, companies are more flat.
This means that responsibilities, ideas, and strategies are shared among the organization as a whole. The best ideas and processes win. And you can determine the best approach with objective data thanks to analysis tools.
The new way of working is much different than the past. Just a few years ago, it was rare to find a fully distributed team of remote employees. Today, it is becoming increasingly common and much easier to accomplish.
Team collaboration tools like Google Drive, Slack, Dropbox, and more help teams organize and execute on projects while meeting key deadlines.
It’s no longer necessary to have everyone in the same physical location. Companies can hire their team members from anywhere, enjoying significant cost savings thanks to differences in currency rates.
Sales is what ultimately grows any business. With new sales-enablement tools, teams can improve their sales processes.
Using digital CRMs will help businesses track customer progress through their buying journey. This creates a better communication cadence where sales reps “touch” customers, provide data for decision making, or schedule calls at just the right time in the cycle.
And using digital video call, email marketing automation, and other tools allow sales teams to sell their product or service from anywhere in the world. This reduces costs such as office overhead, transportation, and time.
Even before the coronavirus pandemic, businesses saw the value in leveraging digital transformation to become more efficient and profitable. But now, with more people working and conducting business remotely than ever before, it is a necessity.
So be sure that your company culture embraces critical thinking, planning, and usage of digital solutions. It can help you improve customer happiness, productivity, and ultimately profitability.