What is digital transformation?

Over the past few years, technology has forever changed how businesses run. Old ways of interacting with customers are as outdated as keeping all your plans on sticky-notes: it’s just not sustainable in the modern day.

Working to change that is digital transformation.

It’s not tied to a specific department or piece of technology. Instead, digital transformation is what happens when you use new techniques and tools to overhaul how a business relates to customers. The focus, appropriate for the fast-paced modern world, is on becoming more agile and adaptable.

Needless to say, it’s a big undertaking. But it’s also increasingly necessary. The International Data Corporation published a report in May 2020 that expected global spending on digital transformation to reach $1.3 trillion. That’s more than the GDP of most nations.

This guide will explain the ideas behind digital transformation, as well as what it looks like for various industries. Finally, we’ll give some practical tips on how to make your own digital transformation successful.

Is it all about technology?

Any good digital transformation consultant will tell you the same thing — no!

Digital transformation isn’t about the Next Big Thing that will magically change our lives. 

In fact, blindly adopting new technology is one of the many things that makes digital transformation strategies fail more often than they succeed. (The typical figure is around 70%).

Reality, it turns out, often fails to live up to expectations. Companies have breathlessly awaited AI-driven translation for decades, for example. Despite that, old-fashioned human translators are still the only serious option out there.

Instead, it’s best to think of digital transformation as using technology to open up possibilities.

No new tool can give your customers a new experience by itself. You still have to put in the work of integrating any changes you make into your overall business model.

The simple version goes like this:

• You restructure your business to be more receptive to new technologies
• That new technology helps streamline existing practices
• In turn, that increased efficiency opens up new ways of doing business

What does it actually look like?

The best way to understand digital transformation is through practical examples.

You can find them in almost any industry. A classic example would be the digital-only ‘neobanks’ revolutionizing the banking sector, like Chime, Revolut and Starling bank.

But digital transformation is more versatile than that lets on. Let’s instead focus on two less obvious examples to show the mindset that goes behind a successful transformation.

The NHS

Digital transformation for healthcare organizations comes with high stakes.

Healthcare organizations need to collect and act on massive amounts of data. Falling behind the times could lead to bad treatment, illness or even worse.

The WannaCry ransomware attack in 2017 cost England’s National Health Service just over $128m in damage, primarily due to their outdated systems and processes.

They recognized that they needed to change. In 2019, the NHS published a Long Term Plan for their digital transformation strategy, which stated that they had remained “locked into the service model largely created when the NHS was founded in 1948”.

To remedy that, their plan contains numerous strategies for updating their care model:

• Using artificial intelligence to help doctors follow best practice
• Letting patients access and control their medical records online
• A nation-wide rollout of their own NHS app
• Electronic services for booking prescriptions and doctor’s visits

The NHS shows that digital transformation isn’t just about chasing new technologies for higher profit. Instead, it’s about using technology as a platform to interact with your consumers in new and unique ways. 

Their transformation was spurred on by a disaster, but yours doesn’t have to be. 

Think about the ways technology could give your customers more freedom in how they use their services. Self-service record management is a great cost-saving measure that works for many more industries than just healthcare, for example.

Microsoft

Here’s a surprising example of someone pulling off a digital transformation: Microsoft. 

Needless to say, the world’s biggest tech company already had a pretty good grasp on how to use computers.

But they’ve also long been thought of as dinosaurs in the tech world. They were stuck in the mindset of selling their programs on CDs well into the age of cloud computing. As a result, they were plagued by piracy — a 2010 report called it their main competitor. 

They responded to this in several ways. The most straight-forward one was making that shift to the cloud, where piracy is much harder.

But much more interesting is their continuing embrace of ‘open-source’ software under current CEO Satya Nadella. Long known for exclusivity and secrecy, Microsoft has put the source code for many of their flagship products online.

Needless to say, piracy stops mattering when you just give stuff away for free!

Anyone with an internet connection can go online and see the code behind some of their most profitable products. This model invites companies and independent developers to collaborate with Microsoft on them.

It’s like Ford letting you walk in off the street and help design the next Model T.

This is a prime example of a good digital transformation strategy. It uses new technology —  online code-sharing platforms like GitHub — to flip the traditional company-consumer relationship. The end users of their technical products are brought into the development process from the very start.

As a result, Microsoft has enjoyed a surprising amount of support from upcoming developers who might otherwise head to trendier companies, like Google, Twitter or Facebook. In 2018, their Chief Technical Officer had this to say:

“We have any number of masters and PhD students, so being visible, being a thought leader […] gives us credibility when we want to bring in the very best people in the field.“

You don’t, of course, have to follow in Microsoft’s footsteps. 

Going open-source doesn’t make much sense if you’re not making software, after all. But the general idea is still valuable. Can you use technology to build more personal, engaging customer journeys?

Strategies for digital transformation

That’s it — you’re a convert. 

Your company needs a digital makeover, and it needs it now. But how do you actually implement these broad, wide-reaching ideas? More than two-thirds of digital transformation attempts fail, after all, and you don’t want to be one of them. Here are some practical tips.

1. Planning

Digital transformation is a vague term. As such, the first step to any serious digital transformation strategy is to pin down exactly how you want to change the end-user experience.

This is better than starting off with a specific technological shift in mind, like deciding to hold all your meetings over Zoom. Details like that are inward-looking, whereas digital transformation should be customer-focused.

A good mission statement might be, ‘our customers should be able to do everything on a mobile phone that they can do at a store counter’.

Once you have an end goal in sight, it’s time to actually draw up a plan. Here are some common steps to include:

• Research — what are your current digital strengths and weaknesses? What do your customers want that you’re not giving them?
• Quantify — turn your problem areas into hard facts and figures. How much money would you expect to save after a digital transformation? How much would it cost?
• Staffing — who is going to lead the transformation effort? An internal team, or outside digital transformation consultants? (See below for more on this!)
• Incremental change — changing everything at once leaves people unsure where they’re standing. Updating your business one process at a time also lets you gather feedback for continual improvement.
• Review — set aside time to consider how the transformation went. If it failed, understand why to make future attempts easier.

2. Leadership

Transition needs strong leadership. You can’t sail a ship through stormy weather without a hardened captain, and the same is true for a digital transformation.

This is where specialized digital transformation consultants can really help. Organizations that do so are 1.6 times more likely to succeed in digital transformation.

These are people with experience in revamping the basic structure of corporations to bring them into the digital age. They know what works, and, more importantly, what doesn’t.

You’re looking for someone with experience in the following areas:

• Long-term business roadmaps
• Change management
• Cross-department communication
• Industry-specific expertise — every company’s transformation is different

A good example of a company using digital transformation consultancy is Chipotle.

They worked with PricewaterhouseCoopers to develop a digital roadmap that doubled their online sales and saw a nearly 15% increase in total revenue. PwC helped break down barriers between Chipotle’s departments to build more unique customer journeys.

Don’t feel like you need to rely on outside consultants, however.

Digital transformation isn’t an arcane art. Existing managers or team-leaders already have many skills that transfer perfectly onto digital transformation. All they need, in most cases, is extra training and a course or two.

Training up your own digital transformation gurus can be a cheaper and more effective option than outside consultants. Your leaders already know the inner workings of your company, and they have a vested interest in it succeeding — never something to underestimate!

3. Communication

A hallmark of bad transitions is bad communication.

The people on the ground floor of your organization should always know what’s changing, and why. This is your company’s ‘change story’. Good change stories make people actually care about the new tools you’re offering them and prevents regression. 

You should take this story to your employees, rather than making them come to you.

Don’t, for example, force everybody to talk on some new platform you just found. That kind of sudden shift just breeds resentment. Instead, it’s better to broadcast your change story via the emails, text messages and Slack channels your teams already use. 

Streamlining your communications to keep every message valuable is also critical. It’s hard to get people engaged anyway: drowning them with useless messages every day won’t help.

Finally, you should remember that good communication is a two-way street.

Rather than blasting out your change story like you’re using a megaphone, take it as an opportunity to get feedback. If some part of your digital transformation strategy isn’t working, the people on the ground floor are going to notice it long before you do.

Conclusion

We’ve seen how digital transformation can completely change the way a business operates. Examples like the NHS and Microsoft show that it’s not limited to a few specific sectors or ideas: it’s a movement that anyone can get value from.

Big shifts like this aren’t easy, of course.

Beyond good planning and a keen awareness of the technology available to you, a good transformation requires well-trained leaders who aren’t afraid to make bold choices.

Getting that training used to be fairly difficult, which is why consultants are still such a popular option. In a wonderful example of digital transformation in action, though, there are now plenty of online leadership courses out there that have changed management training going forwards. 

But if you’re willing to put in the effort, a good digital transformation strategy might just be the thing that sees you bringing in profits for the next decade to come.

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