What is digital transformation?

Discover the truth behind the buzzword...

digital transformation illustration

‘Digital transformation’ is one of those phrases you may dismiss as business jargon, but it’s so much more than that. It can play a crucial role in evolving and growing your business. 

Most organisations will have gone through some sort of digital transformation in their lifetime. The right technology is often key to staying competitive, and during this challenging and uncertain year, adding digital capabilities and ways of working has been vital for many businesses to survive.

But adopting new technologies and digital services, upgrading IT systems, or transferring workloads to the cloud are not simple processes. They require careful consideration of exactly what the right technology solutions are, and a well thought out strategy that takes every aspect of the business into account, from the impact on staff to the security implications.

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Digital transformations often involve retraining and reorganising staff, as well as creating new roles and opportunities within the organisation. For example, an organisation adopting a more data-driven approach will almost certainly need someone in a data protection officer position. It also tends to affect several areas of the business –  adding a new system for one team or function may require new tech added elsewhere, for example, the latest enterprise computers may require bigger servers. 

Embracing this transformation can be challenging and requires employers and employees to commit to new ways of working. To help you work out what your organisation needs, we've put together a definitive guide to digital transformation and why it is important to your business.

What is digital transformation?

The Global Center for Digital Business Transformation says that "organizational change is the foundation of digital business transformation". That's because changing the nature of an organisation means changing the way people work, challenging their mindsets and the daily work processes and strategies that they rely upon. While these present the most difficult problems, they also yield the most worthwhile rewards, allowing a business to become more efficient, data-driven and nimble, taking advantage of more business opportunities.

Why is digital transformation important?

Digital transformation is not limited to particular regions or industry; it’s a worldwide, industry-spanning, on-going process that according to analyst house IDC is presently worth almost $19 trillion, 20% of global GDP. 

Unsurprisingly, CIOs are eager to collect economic benefits that are simply waiting to be picked up. Flexera’s 2020 Digital Transformation Planning Report found that 54% of organisations regard digital transformation at their top priority as digital projects take a higher percentage of a business’s overall revenue year upon year.

Digital transformation initiatives are expected to generate more revenue as digital channels are able to capture greater volumes of business. Flexera’s report found that to support digital transformation organisations were also prioritising cloud migrations, with cloud technology acting as an enabler. Cyber security makes up the top three; as organisations expand their digital footprint they will come into contact with more threats that must be addressed.

Flexera is correct in naming the cloud as the great digital transformation enabler. Along with greater cost-efficiencies and refined processes, utilising the cloud brings a host of security benefits that make enterprises more secure and robust in the face of IT outages.

Cloud-based backup and disaster recovery are the new trend, overriding previous assumptions that on-premise servers are more secure. It’s true that there are advantages to maintaining some on-premise servers, but the best backup and recovery strategies tend to involve a blend of increasingly secure cloud technology and physical servers. The growth of cloud services, platforms, and infrastructure have seen vast improvements in how reliable cloud-hosted and cloud-native apps and services can be.

Major cloud providers like Amazon Web Services (AWS), Microsoft Azure and the Google Cloud invest millions upon millions of dollars into building out their cloud infrastructure, from expanding capabilities to boosting redundancy and security. These days cloud providers can offer better services and security than all but the most robust private data centres and server rooms. And they can offer such cloud services at extremely competitive prices.

As such, it makes pursuing digital transformation, especially from a 'move to the cloud' perspective, a much easier and appealing process than it might once have been.

Define 'digital' in digital transformation

Digital transformation is a neat term at explaining a doctrine of modernising older IT infrastructure but it goes well beyond simply adopting technology; it is a shift in corporate culture as well.

The 'digital' part of digital transformation involves moving from existing systems and infrastructure onto modernised platforms and software delivered as services through the cloud rather than traditional desktop apps

For example, if an organisation shifts from Office 2010 to Microsoft 365, whereby the regularly updated cloud-based service might look unfamiliar to workers used to older, on-premise and on-device productivity tools.

This could mean workers will need to familiarise themselves with new user interfaces, methods to access file systems, and security policies. As such, CIOs and IT teams will need to focus on fostering 'buy-in' around a companies staff to ensure all are aware of the benefits moving to digital services can deliver despite their potential unfamiliarity.

There is the whole range of options the use of 'digital' technology opens up within a business. Whereas some companies might have struggled to make sense of the data they legitimately collect from their customers and various business operations from sensors on industrial robots to supply chain information there are now swathes of tool that can make gleaning actionable information from vast pools of data a much faster and easier task than ever before.

Doing this does require the right tools and skills to be in place to unleash potential information in what may seem like disparate data, but people invested in a firm's digital transformation journey will likely embrace the digital tools that could make their lives easier and give them a competitive edge over rivals.

This puts analytics near the top of the list for most businesses, while cloud is often a must because it provides a reliable way to store this data without having to refresh on-premise servers every four years or so. 

Collaboration tools that allow staff to work more productively and in a flexible fashion also give huge boosts to productivity if used properly. File-sharing services are almost standard now, and they let colleagues collaborate on documents wherever they're based, without building up multiple versions of Word files as a document is updated by different people. Mobile devices with access to apps that allow staff to message each other and share files mean no train journey is ever wasted time and can improve employee satisfaction by giving them the option of working from home, or out of the office, when necessary.

Finding the right digital transformation strategy

Digital transformation can be a complicated process and finding the right strategy for your organisation can be one of the biggest hurdles to digital freedom.

Deloitte's report, 'Strategy, not technology, drives digital transformation', discusses the merits of looking to a strategy for rolling out a path to digital maturation rather than the technology itself. Technology changes and adapts over time and it's likely that in a few years, the technology your business needs will change. However, it's vital that the way you implement that technology is watertight to prevent any hiccups along the way.

The report explains the importance of scopes and objectives in a digital transformation strategy, with the technology the last consideration. It's the technology that enables the processes to be fulfilled, but it's the way they're implemented that will have the biggest impact on company success.

It added that digital strategies can't just focus on the online world, but need to bridge the gap between online and offline worlds. For example, a museum needs to consider offering an enthralling experience for both the customers physically visiting, but then continue that experience through mobile and social platforms.

To succeed in creating these new digital experiences requires a shift in skillsets, and embracing a collaborative culture, where people pool ideas and share expertise. The companies that are most likely to succeed in digital transformation are those with open minds that are happy to take risks.

But Deloitte added that having the resources available to them is also crucial. Leaders at forward-thinking businesses must have the tools at their fingertips to develop skills and know-how across their entire organisation.

Forrester, an analyst firm, recommends a dual-path approach. This allows IT to achieve long term transformation goals and reach a number of quick-wins to bring about business buy-in.

Forrester analyst Ted Schadler wrote in his report, titled 'Take Two Technology Roads to Digital Experience Success', that a business should begin by prioritising investments that give benefits to customers and generate business value. From there, you can then split the strategy into the two paths of quick projects and longer term transformation.

When describing the quick-win path he highlights: "On this path, you will turn on functionality you aren't using and extend your existing platform with new software. The cloud is your best way to layer in new functionality without rebuilding your existing platform."

And for the longer-term path, he underlines: "You will define, select, and implement a modern platform to deliver long-term agility and capabilities. The cloud is also your friend here: It's the future of digital experience platforms."

Examples of digital transformation projects

Digital transformational doctrines are being embraced by organisations in all manner of industries.

Case in point: Thames Water, which is funnelling 1 billion into a project that will see the company set up a command centre to be used to monitor trunk mains, take live readings from up to 200,000 sewer depth monitoring points and link its engineers to a smartphone app. The idea is to make life easier for engineers to pinpoint where they need to be on the underground pipe network at a street level.

And Thames Water will also create a digital app to monitor water pipes and sewers using sensors and acoustic loggers to create a real-time nervous system to help anticipate and prevent incidents or speed up response times.

IBM has shown how the adoption of the latest technology can evolve business processes, with a demonstration of how blockchain technology can be used to better track the origin and ownership of jewellery through a digital distributed ledger that provides visibility for all involved in the jewellery supply chain.

The NHS also has numerous digital transformation projects, ranging from a move away from using fax machines to adopting robots and AI technology, and even turning to space-grade scanning systems to improve x-ray scanning in GP surgeries.

While the automotive world is best associated with mechanical devices and industrial environments, many car companies are also embracing digital transformation projects, especially given how much technology can be found in modern cars.

One such car maker is Volkswagen, which recently revealed it will be investing a hefty $4 billion in digital transformation projects with the aid of fellow German company SAP.

The project will involve Volkswagen making use of SAP's SAP4/HANA enterprise package to add a dose of digital technology to its back-office administration, purchasing and HR processes.

This digital transformation drive will see at least 2,000 new digital roles created in the car company, with an aim to boost Volkswagen's productivity.

However, this example also highlights that digital transformation comes at a human cost, in that Volkswagen said it will cut 4,000 workers from its non-production business units, as the company makes way for greater use of automation technology.

While Volkswagen said it will take a "socially responsible" approach when adopting new technologies in its corporate mass, some digital transformation projects that lean heavily towards automation technology do come with the caveat that they may replace some human workers.

This is not always the case, however, as such technology has the potential to also aid existing workers to be more efficient and productive.

In a nutshell, the potential of digital transformation is wide and varied, with projects that range from modernising systems to evolving the core processes of an organisation.

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