The term “digital transformation” often evokes a sense of skepticism, raising the question: Is it just another IT buzzword? Unfortunately, many times it is misused as a marketing gimmick to sell unnecessary, high-tech products, but that shouldn’t obscure its importance. Positively, a robust digital transformation strategy is crucial and goes beyond simply being a passing IT fad or a mere operational expense.
In this article, I will make clear the true essence of digital transformation, emphasizing that it’s driven by business goals, not technological advancements. Further, I’ll detail how it serves to optimize and transform business processes leveraging digital technologies. Lastly, I’ll specify the four different approaches that your organization can take on its digital journey—ranging from modifying a single process to overhauling your entire business culture.
1. Digital Transformation: Business Leads, Tech Enables.
Even though information technology is a change agent, tech should not drive businesses. In fact, it is the other way around! Businesses set their objectives and use technology to meet these goals. So, digital transformation is driven by business goals. On the other hand, business leaders need to know the capabilities of emerging digital technology in order to leverage it. So, let’s look at how best for business leaders to lead an effective digital transformation.
a. First, Digital Transformation Is Driven by Business Goals.
Without a doubt, information technology (IT), while crucial, is not the primary driver of businesses. Instead, businesses set goals focused on financials, customers, or operations, and IT supports these objectives. Today, IT integrates deeply into business practices, enabling growth, innovation, and competitiveness. Indeed, IT is more than a mere back office operation as it integrates deeply into modern business practices. Moreover, companies rely on IT as a vital change agent to stay competitive and accomplish their objectives. So, IT does more than just streamline operations; it also enables organizations to grow and adapt.
Accordingly, digital transformation is about reinventing business strategies, creating new products, and entering new markets, not just funding another IT project. In fact, this is why business managers and corporate executives need to lead these digitalization efforts. For more on this topic, see my article, Digital Supply Chain Transformations Require Innovation: Here Is Some Advice for Executives That Will Make It Happen.
b. Second, Business Leaders Need to Know the Capabilities of Technology to Undergo a Digital Transformation.
Increasingly, IT and advanced digital technologies are not just beneficial but essential for business growth and success. Business leaders must, therefore, keep up to date with the latest developments in these areas. To fully leverage these innovations, it’s crucial to engage with IT leaders and vendors to discover the specific benefits these technologies can offer to your organization. This entails keeping informed through industry publications, and participating in product demonstrations. Also, businesses can gain knowledge about emerging tech by initiating pilot projects to determine their suitability and impact on your business operations.
For ideas to help you get started on your journey toward digital transformation, see my article, Examples Of Digital Transformation Within Supply Chains – The Best Way To Achieve A High Tech Redesign. Indeed, these 14 supply chain examples are just a small sampling of tech initiatives that businesses can incorporate into their digital transformation.
2. Digital Transformation Breaks Down Department Silos to Re-Invent and Digitize Corporate Operations.
A digital transformation is designed to integrate information technology into all aspects of a business. Thus as a minimum, a digital transformation will make businesses more efficient and cost-effective. Ideally, a digital transformation will drive innovation leading to enhanced customer experience, reduced lead times, and a competitive advantage. Lastly, digital transformation allows businesses to reinvent their product and service offerings using advanced technologies and new processes. To sum it up, here is a digital transformation definition.
“Digital transformation leverages information technology to move the organization from siloed departments that are project-based and output-focused to being product-based and outcome-focused.”
What I like about this definition is it focuses on business products and outcomes versus focused solely on technology for technology’s sake. Also, this definition addresses how information technology is evolving in its relationship to business organizations. Specifically with a digital transformation, business leaders take a strategic viewpoint of leveraging technology, not just a project view. Hence, information technology can no longer be thought of only in project-based terms or system outputs. Also, per Gartner, the outcomes of a digital transformation strategy fall into two broad categories:
A Digital Transformation – Two Types of Transformations
- Digital optimization outcomes result from improving existing processes and customer experiences.
- Digital transformation outcomes result from reinventing how the organization serves its market through net-new products, services or business models
Indeed when corporate leadership develops a digital transformation strategy, it is critical that they understand that there are two types of digital transformations. Specifically, a digitalization strategy needs to combine both digital optimization and transformation into a master plan that encompasses the entire organization. Hence, with a digital transformation strategy, both optimization and transformation occur in parallel. Ideally with an organizational strategy in place, transformation initiatives take center stage. As a result, businesses bring to market new products, services, and even new business models.
“… information technology is now part of a business’ DNA.”
3. Four Possible Goals to Digitally Transform Your Business: Change to a Process, Model, Domain, or Culture.
When determining digitalization goals for an organization, corporate leaders basically have four business transformation choices. This includes digitalizing an existing process, transforming or creating a new model for doing things, transforming to add new domains now possible with digitalization, or even transforming the entire business culture. Hence, these corporate strategies can have limited goals such as to optimize a business process. Or, on the other hand, these objectives can be a revolutionary change to fundamentally change the culture of an organization. See below for details.
Four Types of Digitization Goals
a. Business Process Optimization.
Here, an organization’s digitalization goal is focused on traditional business process optimization that will streamline operations and improve efficiency. For example, implementing robotic process automation (RPA) can automate repetitive tasks. As a result, this reduces human error and frees up employees’ time for more strategic activities. For more information on business process automation, see my article, What Is Automation? High Tech Ways To Better Replicate, Apply AI To Business Processes.
b. Business Model Transformation.
This is a type of strategic digitalization initiative that adapts to changing market dynamics and leverages new opportunities. For instance, traditional brick-and-mortar retailers shifts to an ecommerce model, expanding their reach and offering customers a convenient online shopping experience. Thus, this business model transformation allows organizations to tap into new revenue streams, reach a wider audience, and stay competitive in the digital age.
c. Business Domain Transformation.
As part of their digital transformation journey, organizations can also initiate a business domain transformation by expanding into new markets or diversifying their product/service offerings. For example, a software company specializing in accounting software may expand its domain by developing project management software to cater to a broader customer base. Hence, a business domain transformation enables organizations to capitalize on emerging trends, enter untapped markets, and drive business growth.
d. Organization or Business Culture Transformation.
Also, organizations can focus on transforming their culture as part of their digital transformation journey to foster innovation, collaboration, and agility. For instance, implementing agile methodologies and promoting a growth mindset can encourage employees to embrace change and experiment with new ideas. As a result, this cultural shift enables organizations to adapt quickly to market changes, drive continuous improvement, and nurture a culture of innovation.
More References.
- Gartner’s Where and How to Target Your Digital Business Transformation
- For examples of digital transformations within supply chains, see my article, Examples Of Digital Transformation Within Supply Chains – The Best Way To Achieve A High Tech Redesign.
- PlanView’s DIGITAL TRANSFORMATION STRATEGY: WHAT YOU NEED TO KNOW
- AWS’ What is Digital Transformation?
- GEP’s Digital Transformation Roadmap for Supply Chains
- For the latest trends on supply chain digital technologies, see my article, Logistics Technology Trends: The Best Advice To Empower Your Supply Chain Right.
- Lastly, for more information on how for a business to succeed with a digital transformation, see my article, Digital Supply Chain Transformations Require Innovation: Here Is Some Advice for Executives That Will Make It Happen.
Need help with an innovative solution to make your supply chain systems work together? I’m Randy McClure, and I’ve spent many years solving data interoperability and visibility problems. As a supply chain tech advisor, I’ve implemented hundreds of successful projects across all transportation modes, working with the data of thousands of shippers, carriers, and 3rd party logistics (3PL) providers. I specialize in proof-of-concept and operational pilot projects for emerging technologies. If you’re ready to modernize your data infrastructure or if you are a solution provider, let’s talk. To reach me, click here to access my contact form or you can find me on LinkedIn.
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Greetings! As a supply chain tech advisor with 30+ years of hands-on experience, I take great pleasure in providing actionable insights and solutions to logistics leaders. My focus is to drive transformation within the logistics industry by leveraging emerging LogTech, applying data-centric solutions, and increasing interoperability within supply chains. I have a wide range of experience to include successfully leading the development of 100s of innovative software solutions across supply chains and delivering business intelligence (BI) solutions to 1,000s of shippers. Click here for more info.