8 Reasons for Undergoing a Digital Transformation

From many years of consulting with organisations across multiple industries, I’ve noted several recurring themes and reasons for companies to undergo a digital transformation. In this blog post, I have laid out eight of the most compelling triggers which should hopefully give you plenty of food for thought before undergoing your own initiative…

1. Process Improvement and Reducing IT Complexity

Companies often undergo a digital transformation to improve key processes in their business. For example, older companies may have never undertaken an evaluation of processes or how they can be improved with the shift to digital. Companies who do so often undertake what’s called a ‘replatforming’ – a new direction to how they use technology in the business. Moving to a digitally enabled organisation is a significant and often difficult project. But one that undoubtedly holds unbound potential.

Many of the IT systems that businesses use are ones introduced a long time ago. These are often called spaghetti mess of IT systems. Such fragmented systems result in a lack of efficiency in processes or a lack of data transparency to name just two issues. So more often than not there is a clear need for a simplification of the IT landscape in any business of a substantial size.

In doing so, a company can reduce its operational risk by equipping itself with a modern technology platform. This can be a justification for undergoing a digital transformation project. Telling the board of management that an investment is necessary in order to reduce IT complexity will not carry much weight. Positioning it as a betterment of processes and reduction of operational risk will present far more value.

2. The Digitised Economy

The increasing digitisation of all aspects of life, not just the enterprise world, is another catalyst for digital transformation. Data is close to entirely being stored as digital, which means systems and processes need reinventing to reflect this. Technological advancements such as increasingly faster broadband connections have blurred the lines between the physical and digital worlds. Nowadays in modern economies, the recent innovations are a result of digital flourishing in the enterprise and consumer world.

Within the broad topic of the digitised economy, there are many drivers for a company to undergo a digital transformation:

• 4G and 5G Networks being one. Think how the next iterative improvement (and latency in particular) with 5G networks may open up new opportunities for the digital economy to expand – South Korea and Japan and media consumption being two countries and an industry at the forefront of this coming to mind
• The widespread adoption of cloud computing, infrastructure-as-a-service (IaaS), and software-as-a-service (SaaS) is another. The strengthening of the network of underwater cables across the World has given a platform for people to build cloud or Internet-based businesses. These businesses are now at the forefront of leading digital transformation and innovation (think Salesforce, Amazon, Google, Stripe, Veeva, Workday)

Think how digital-first business models, products and services are at the forefront of many of the leading economies. The companies that embrace the digitised economy may be the ones that lead their industries in the future.

3. Future-Proofing

A term often heard in business consulting parlance is the term ‘future-proofing my business’. Understandably, executives are keen to ensure that any digital transformations made now, will stand the test of time for the foreseeable future. Companies are looking to keep up with the times, but at the same time implement technology that will help them stay as close as possible to the technological advancement curve.

It’s incredibly hard for any technology provider, however innovative they may be, to say that technology implemented now will still be the cutting-edge solution in ten years time. Who knows how the relatively new technologies, like artificial intelligence (AI) and blockchain, will play out in ten years? Some industries may lead in use-case; financial services and blockchain being one potential trailblazer. Other industries may have less applicable use cases. A consideration to make is that if you align your business with a platform-based, innovative, and trustworthy technology provider, then you placing your company on a safer bet.

4. Changing the Culture of the Company

A company can get stuck in its way in how it goes about doing everyday things. It’s understandable. Processes and culture can get set, often going stale, and can be hard to change. A common reason for justifying a digital transformation project is reinventing the culture of a department or entire company. Take for example the projects listed below and how they’re often undertaken in combination with a digital transformation project:

• A change in approach to project management for product releases or software development; for example from a waterfall to scrum and agile-based approach
• Encouraging a start-up mentality; perhaps by starting a completely new spin-off company with its own management oversight so as not to influence the culture. New10 and ABN-AMRO being an example of this
• Introducing a culture of data visibility, transparency and accountability; an example here
• Implementing a lean management governance culture

5. Adopting New Technologies

The 4th industrial revolution has led to a new wave of emerging technologies for businesses to embrace. Think of the impact new technologies had in the 1990s and early 2000s had; the Internet, social media, mobile and cloud technology. These had a profound impact on many industries and led to an imperative to adopt them through some sort of digital transformation.

Now think of the potential for transformation and disruption that the newer technologies have. AI, machine learning, blockchain, voice, robotics, and the Internet of Things (IoT) all retain huge potential for businesses to embrace, regardless of industry. The true impact of them has yet to fully play out, and will only do so over the next ten to twenty years.

Companies that manage to seamlessly embed them into internal operations, services and products will be the best adopters. Perhaps new modes of operation, service or products will be founded in these technologies too – opening up new revenue streams initially unthought of. The more daring management will realise this and the imperative to adopt these new technologies.

6. Changing External Forces and Competitive Positioning

Some of the aforementioned technologies are unlikely to eliminate entire industries. But they do retain the potential to heavily disrupt them. The advent of the Internet and cloud computing has given us companies like Salesforce, Uber or Amazon who have all disrupted the industries they operate in. Some of these now entering new industries with their sheer scale and ability to pivot into new industries.

These changing external forces have meant existing players in industries have had to adapt or threatened to be overtaken by more agile and innovative competitors. This is a real need to consider the implications of digital and how market forces are being shaped by it.

A commonly discussed subtopic within this area is automation. Automation holds huge potential in improving efficiencies. There is also a certain amount of trepidation for the impact it will have on jobs, with it likely creating a new breed of careers in technology. Companies have to consider the implications of automation — whether it’s a simple use-case like auto-generating an upcoming contract for renewal of marketing communications or a large-scale manufacturing process.

7. A New Direction for Customer Engagement

With the advancement and ubiquity of technology in the consumer world, there has been a shift in how businesses engage in the B2C space. Consumers are more informed, demanding, and fleeting in their attention. And social media has ushered in an era where the voice of the consumer has been elevated. Similarly, in the B2B space, technology has also impacted the relationship and variety of touchpoints across digital. One of the most often pointed examples is how the role of the salesperson has changed in B2B sales.

Both contexts, B2C and B2B, have led to new strategic directions in customer engagement. Here are some examples:

• New customer retention strategy across digital marketing communications – the telecommunications industry and the concept of the customer life cycle being one
• Loyalty programs across physical and digital to engage and retain customers – the grocery shopping industry a familiar one here
• Use of marketing automation to automate digital communications – from initial inquiry to customer service responses (think of chatbots), and contract renewals (automating communications prior to key renewal dates)
• Use of a lead management system to streamline internal handling of inquiries, lead handling and prioritisation

8. Structuring for Scale, Growth and Compliance

Having consulted with many companies on digital transformation projects, a reason often given for them is organisational restructuring, or structuring the business for scale and growth. As a business grows, growing pains can be felt due to a lack of structure and appropriate systems. Negating this is a key benefit of such projects.

This topic and heavily regulated industries go hand-in-hand for such projects. Consider how the banking or insurance industry is regularly audited for compliance. Robust digital systems are a requirement to meet these standards, proof of compliance and ease of reporting on them.

A more recent example within this topic is the introduction of European legislation, GDPR, to govern data handling and management. This required many companies to address IT systems in place and the way in which they handled data.

Investor direction or acquisitions, divestitures and merges can also be a reason for digital transformations. Such changes mean new structures and divisions that require systems to be changed. A small or mid-sized company may look to make itself operationally attractive to prospective investors by implementing a strong IT strategy in support of business goals. Many companies I’ve consulted with have justified committing to a digital transformation in this regard; proof of structure, detailed reporting, and financial governance.

What to do?

If any of those eight reasons sound applicable to you and your business, download our Customer Experience Transformation ebook which is full of advice and insight to set you on your way.