How to Reshape Your Business and Align with the Digital Age – A Short Guide To Digital Transformation
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Digital transformation is often quoted as an umbrella term for the integration of digital technologies into the core of organizations. Digital transformation is gaining momentum across the globe, signaling digital supremacy in the world economy.
The contribution of digitally transformed businesses to the global GDP was USD 13.5 trillion in 2018 and is expected to cross USD 53.3 trillion by 2023. This accounts for half of the nominal GDP.
With a cultural shift from going non-digital to digital, businesses are becoming more resilient and agile in responding to the changing aspects of the global market. DX is helping businesses to drive new revenue streams and stay ahead in the competitive edge.
Before moving further, let us give you a brief introduction to Digital Transformation.
What is Digital Transformation?
Digital transformation (DX) means integrating digital technologies in all areas of an organization to improve the efficiency of existing operations and create new development opportunities. Powered by technologies and backed by tools, DX represents a shift towards more agile and smarter business models for delivering higher VALUE to consumers.
This blog is your encyclopaedia for digital transformation; we have answers to all your questions. Let us dive deeper into this ocean and find out the real essence of digital transformation and how it is reshaping businesses to enter the digital era.
Let us start with bursting the two myth bubbles surrounding digital transformation.
Digital transformation is a commodity:
No! Digital transformation is not a commodity, it is a process triggered on the C-Level. It is a chain of processes taking place to encourage change in the organization.
Where does this change come from? Changes are ultimately invoked by consumer demands, that we must respond to.
Digital transformation is an exchange of old tools with new ones:
Mere substitution of old tools & technologies with new ones does not sum up to digital transformation. It is a holistic approach that includes a tectonic shift in prospects of how an organization thinks about leveraging new tools & technologies, and how they are tweaking internal operations.
To illustrate, what would your organization prefer? Sending handwritten notes, or emails. Storing physical copies of documents or saving their digital copies. To sound more advanced; sharing important files to colleagues via emails or opting for collaborative cloud sharing?
So, going digital does not mean the adoption of a few innovative technologies. Digital transformation covers a wider perspective including both external and internal operations of an organization at the macro and micro levels.
So, coming to the point, how will you reshape your business to meet the digital age? Here are the four major aspects you need to consider while invoking digital transformation at the internal and external core of your organization.
How to digitally transform your business model?
After doing thorough research on digitally transformed business models, we are here with a consolidated bifurcation of 4 major business aspects where you must imply a change to bring digital transformation.
Let us delve deeper and understand the importance of each aspect and how they interact.
1. Core Operations: How to choose between two Digital Transformation Roadmaps?
The same medicine does not work similarly on different bodies; likewise, a single playbook cannot help in reshaping all types of business.
To illustrate; The video industry could not bear the wave of digitization and went obsolete with the entry of Hulu and Netflix on screens. Whereas, Amazon has entered the retail market and has encouraged the adoption of new digital instruments.
Some entirely physical services have completely lost their identity with digitization. Whereas some services running in brick & mortar have subtly embraced digital change.
The degree of digitization across industries decides the path of transformation. This brings us to the crossroads on which roadmap to follow while approaching DX.
When an industry sustains digital growth, the transformation must be focused on ‘How Value is being delivered.’ In the case of disruptive innovation, businesses must consider reshaping the value proposition by changing what is being delivered. How? Let us further understand.
Roadmap 1: Changing How to Deliver
It suits the industries delivering physical products because consumers do not expect radical changes in the value proposition. Here, the revenue streams are independent of digital means.
This path demands a change in the operating model to supplement the existing workflow, without redefining bottom-line propositions.
How to reach the Delivery transformation Milestone:
1) Introducing new digital channels: You can keep old revenue streams as it is, and use new digital channels to target different consumer segments, optimize existing operations, or engage existing consumers.
2) Analyse the acquired information: Once you introduce new digital channels, you get a new flow of information. You can store and analyse it as well as use it to devise new business strategies.
3) Complete integration of new digital means into the operating model: The experience is monitored and feedback is processed. This is used to optimize delivery as per the customer/partner/employee requirements.
Roadmap 2: Changing what to deliver:
When physical revenue streams do not match the digital expectations of consumers/partners/employees, follow this path of transformation. The process starts with identifying the requirements of digital consumers and evolve by redefining the core value proposition. As the majority of consumers are demanding digital products the physical proposition is replaced by the digital proposition.
How to reach the proposition transformation milestone?
1) Redefine existing value propositions using digital channels: Doing this you can enhance existing customer experience and build new digital communities.
2) Introduce a completely new revenue stream: Introduce a new revenue stream which is completely based on the digital community and goes parallel with the physical revenue stream.
3) Transform to the digital proposition: Based on the type of industry, propositions can either be transformed by replacing physical values with digital, or by combining the physical & digital Values.
2. Experience: How to set up an effective feedback mechanism?
Experience has always been paramount. By experience, we mean user/consumer experience. However, the communication between brands and their consumers has always been one-sided, and it’s the brand that dictated the rules of communication. With increased mobility and trends in digitization, the brands are left with little/no tools to control this interaction.
To build a firm community across your brand you ∞need to adopt a dual-track interaction system. This system entails you to reshape the experience as per the user’s feedback and deliver it accordingly. This is the concept of Experience Continuum introduced in 2010 by Esteban Kolsky.
The social business model suggests that every level of an organization must participate in giving continuous experience-feedback loops. By doing this an organization can update experience to meet customer expectations.
This mechanism challenges the traditional lifecycle approach that separates marketing and sales operations by following the single-process approach. Instead, this approach is more inclined towards an end-to-end process that involves sales, marketing, and all areas of an organization in an integrated process of feedback collection.
However, it is difficult to make a rapid shift from a single process to end–to–end feedback mechanism. So, we recommend the Evolutionary Approach for reshaping the experience.
Support cross-channel coherence: Coherence amongst multiple service channels is very important for an organization to render seamless operations. For this, you must ensure cross-channel accessibility across all operational ports.
Individualize customer experience: The collected customer data can be converted into actionable insights for providing individualized customer experience to meet their expectations.
Digitize operations & internal communications: All the customer-facing efforts are useless if the internal organization is not digitized. Imagine, your organization is receiving consumer feedback via digital channels but the internal organization is not digitally equipped to rapidly process the feedback and give an instant response.
Employee mobility with BYOD (Bring Your Device) or permission to access information directly via mobile/tablets, can also be rewarding.
Automation & Optimization: Automation is the need of the hour. The competitive bars are rising high with automation in organizations at both internal and external levels.
Converge marketing, sales & customer services: A converged approach involving sales, marketing, consumer segments, and all the departments of an organization into the feedback loop can give a 360-degree view of consumers’ perspectives.
Streamline the Partner Experience: Do consider your partner’s or vendor’s experience in the operational framework. It is good to digitize mutual contacts between partners for streamlined operations. This helps in reducing overall costs as there is only one communication channel to focus on.
3. IT Infrastructure: How to migrate to the public cloud and adopt a three-tier service model?
The IT infrastructure is becoming more and more complex. It can no longer sustain the subsequent growth of applications or the exponential growth of endpoints. The age of mass mobility has already passed away and we are entering the new era of digitization with IoTs (Internet of Things) Every operation can be easily monitored, tracked and real-time data can be collected with endpoint chips. This increase in infrastructural complexity makes:
- Computing the workloads unpredictable
- Cross-application communication difficult
- Interfaces intricate.
Whereas, the three-tier cloud model solves these complexities by shifting the load from internal IT infrastructure to a third-party cloud.
The Cloud Report 2022 by Flexera indicate that businesses have already shifted their 49% of workload and 46% of data to the public cloud. You can study the details in a below-given pie chart.
Similarly, Small & Medium Businesses have also relocated 57% workload and 56% of their data to the public cloud.
The given statistics make it completely clear that shifting workload & data to the public cloud can drastically reduce complexities, enables scalable computing power, supports cross-device accessibility, and offers a unified development ecosystem across the organization.
The Public Cloud offers a three-tier digital infrastructure:
1) IaaS: Infrastructure-as-as-Service
2) PaaS: Platform-as-as-Service
3) SaaS: Software-as-as-Service
Let us understand each in detail.
It is the lowest tier in the cloud computing infrastructure. All the infrastructure components including software &hardware are provided, supported, and maintained by a third-party provider.
Here, the end user is a software engineer who chooses PaaS to develop and integrate software applications within a single development environment. PaaS offer a streamlined flow of data among applications. It has great integration capabilities to fulfil multi-tenant operations like authentication, UIs, emails etc. Moreover, PaaS enables low-cost integration for meeting customer demands and expectations.
It is the most viable tier of cloud infrastructure. It provides a unified experience across the applications by offering visual access to applications that function in the platform layer. SaaS also supports access to legacy systems that fall beyond the platform layer.
SaaS offers visualization reports and approachable analytics. It provides a central access point to all software applications and operational accessibility to all endpoints (laptops, desktops, mobiles, etc)
Cloud migration is trending as a primary measure in security mitigation. Cloud security is proving better than on-premise data storage security with its major benefits like high scalability, streamlined updates, and increased efficiency.
4. Information Management & Analytics: A shift from descriptions to predictions & prescriptions:
The objective of Analytics is to optimize existing processes, personalize consumer experience and reduce overall cost.
How can we shift from assumptions surrounding past experiences and move to data-driven decision-making? Let us understand this in detail.
Analytics Maturity Model:
This data describes how analytics evolves step by step as an organization moves from assumptions to data-driven decision-making.
Descriptive Analytics: It is a basic level that answers ‘What Happened?’ by viewing dashboards or reports. Decisions are derived from partly analysed data and are still based on assumptions.
Diagnostic Analytics: These analytics relates to ‘Why did it happen?’. With the constant flow of data descriptive analytics is not capable to identify the pattern acquired by a problem in the records. The organization requires hiring a dedicated software team capable of yielding insights. Being well-equipped with data mining and machine learning tools is equally important.
Predictive Analytics: Here the question is ‘What will happen?’ Once the pattern is identified and insights are yielded, the next step is to forecast what will happen, based on the historical data. Predictive Analytics can be realized by Machine Learning tools.
Prescriptive Analytics: Now we come to prescribing the solution: ‘What should we do?’ When the specific condition is confirmed, prescriptive analytics automates decision-making based on practices of resolving issues.
The transformation from descriptive analysis to prescriptive analysis is only possible if the organization is ready to make a set of operational changes.
Building Data-driven organization
The essence of analytics lies in providing a fertile ambiance. However, internal and external barriers restrict people from making informed decisions due to their lack of enough experience or lack of talent. There is a strategic approach to developing a data-driven organization. Let us find out what can it be:
Democratize access to data
An analytics jumpstart would be needed when you find your organization departments are hoarding data and impeding a universal understanding of processes of other business units.
Collect adequate and relevant data
By harnessing the latest technological advancements and initiating predictive and prescriptive analytics can be very helpful in collecting maximum data. Also, it enables to capture of decisions that are related to data usage and the confidence with which the data is collected and used.
Practically, it is difficult to convince people to think out of the box. In machine learning we see complicated algorithms acting as black boxes being unsure of what shall draw out of prediction. On the other hand, people can justify decisions by experience. And that is why experience makes them professionals.
Hiring the right talent
You rarely get a talented analytics expert who can provide relevant data results. Over and above, the bigger challenge is to find a business translator who has both technical and data science expertise. Because this is the only person who can bridge the gaps between technical aspects of analytics with deep business interests. They sometimes even act as visionaries.
Digital Transformation In Various Other Industries
- A recent study done in the US finds 77 percent of Property and Insurance companies are introducing digital transformation activities to distribution. Some of them are already benefiting from this invention. Digitization has boosted various internal operations such as automated claim processing and AI in insurance
- With Covid, digital transformation in healthcare was accelerated. People went digital during the crisis and human health services in the US showed 63 times growth. The pandemic enhanced the internet of medical things (IoMT) and remote patient monitoring (RPM) services.
- In the manufacturing industry, digital transformation was put into practice via industrial IoT and AI. Smart factories started using robots to perform repetitive tasks, connected sensors to continuously gather information from machines, and monitored operations, a centralized IoT platform was created. With digital twin technologies and big data analytics, industries could gather insights into equipment performance and could run predictive maintenance operations to avoid downtime and higher costs.
- In the banking sector, digital transformation went to promote online and mobile banking services that have already become commonplace today. Several banks have now re-designed their legacy systems.
Digital transformation is vast and extensive. It embraces a gamut of elements and when collaborated with various other technologies, it can define how companies interact with customers and clients. With powerful digital technologies, it helps you to operate internal tools and can manage employee interactions. However, the impeding challenge a company may face is overcoming the challenges while undergoing digital transformation. If the entire part is done right, this transition can immensely reduce costs.