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What Is Digital Transformation?

Written by

Simpplr Marketing

Published

July 18, 2022

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The term ’digital transformation‘ is a lot like love. It means different things depending on who you ask.

IBM, a long-standing technology leader, offers this mouthful: “us[ing] AI, automation, hybrid cloud and other digital technologies to leverage data and drive intelligent workflows, faster and smarter decision-making, and real-time response to market disruptions.”

Still kind of nebulous, huh?

What is digital transformation in simple words?

Simply put, digital transformation is when businesses use new technologies to replace old methods, often gaining an unprecedented edge over their competitors.

Examples of digital transformation success

So, what kind of technologies lead to business transformation, and how do they give companies an edge?

Digital transformation varies from business to business and industry to industry. The best way to get a feel for it is to look at a few examples.

1. The iPhone vs. Nokia

Digital transformation typically goes hand-in-hand with digital disruption, in which a new technology emerges to upset an industry. One of the biggest upsets of the 21st century has been the introduction of smartphones and the popularization of touch screens.

At the end of 2007, the same year the first iPhone was launched, half of all smartphones sold in the world were made by Nokia. Apple’s iPhone had just a 5 percent share.

By 2013 when it was acquired by Microsoft, Nokia had fallen to 3.1% of the smartphone global market share.

There were a number of issues responsible for that sudden plummet, and a study was undertaken in 2015 to get to the bottom of it. In the end, the reason why Nokia failed boiled down to a hesitancy within Nokia to adapt to the new touch screen and mobile app systems.

When they finally did, the company was too far behind the curve, presenting what was widely considered an inferior version.

That, along with a slew of internal political problems, is how Nokia lost the smartphone battle which ultimately led to the decline of the mobile phone titan.

2. eCommerce vs. Best Buy

Around a decade ago, Best Buy stores were something of a cultural phenomenon. People lined up days ahead of time for Black Friday deals and new consumer tech releases.

Best Buy stores are obviously still around, but they’ve changed a lot since then.

E-commerce platforms like Amazon that were already gaining retail share further dominated markets during the COVID pandemic. In 2021, Amazon reported a 220% increase in profits from the year before.

Unsurprisingly, a brick-and-mortar business like Best Buy would have a hard time competing with the accessibility and ease that digital businesses provide. So, they’re in the process of adapting.

Best Buy is turning its huge showroom stores into hybrid warehouses for online orders, and re-skilling employees for digital roles. Even though Best Buy’s online sales dropped 12% in 2022, they now account for 40% of total revenue.

Will Best Buy thrive under its new model? Maybe. Either way, it‘s a good example of digital transformation and using rapid change management to adapt in real-time.

3. Telehealth vs. traditional healthcare

Telehealth technology existed before the pandemic, but it didn’t prove its business value to traditional family practices until COVID-19 breakouts made people wary of medical facilities.

Today, people are going out again to visit their doctors in person, but some of the digital technologies that were adopted in 2020 continue to improve family practice operations.

People can sign up for appointments online without waiting on hold. They can check in from the parking lot with a mobile app. They can even check their test results and message their doctor through patient portals.

Will people leave their trusted doctors for the digital convenience offered by competitors? Probably not. Digital transformation doesn’t always lead to a frenzy of Silicon Valley startups and overnight market disruption.

But for the doctors taking advantage of digital technologies, profitability is on an upswing.

As for Silicon Valley, don’t write them off yet. Tech like the Apple Watch is expanding the healthcare pie, offering customers on-demand ECGs, blood oxygen monitoring, and more.

Benefits of the digital transformation journey

Digital transformation often happens in stages. It looks different at different times and across different industries. But it always has the same goal—using digital technologies to revolutionize the way a company does business.

Leaving paper and pen behind

Moving away from paper or from analog to digital—often called digitization—is only the first step toward digital transformation. It’s a critical move, but it’s about as close to today’s digital transformation as the Wright brothers were to Boeing.

Still, when everyone else is using traditional media, digitization can be enough to revolutionize an industry. Microsoft’s Excel replaced pen and paper. DVDs replaced VHS tapes.

But digital technologies don’t just put physical things into digital formats. They open up the door to new market-disrupting innovations.

For example, people used to navigate by paper roadmaps. Digitizing those maps was the first step toward what Google Maps is today. Live traffic updates. Automated route planning. Satellite images. Even 360° interactive panoramic views of streets.

Google Maps didn’t start with all those features. At one point, they were just possibilities. But the system evolved rapidly thanks to the wonders of digital technology.

From standalone systems to cloud-based systems

Traditionally, businesses have used central data centers as the basis of technology structure. But today, companies are switching to external, cloud-based services for just about everything, from operations management to digital sales and customer service.

You’ve heard of SaaS, right? Software as a service? Cloud-based systems and tech providers now offer ‘everything-as-a-service’ or ‘XaaS‘.

There‘s a reason the word ‘everything‘ is right in the name. These vendors provide business services with a huge range of products, tools, and technologies—all deployed remotely and accessible on demand.

In 2021, the global XaaS market was valued at USD 436.82 billion. That same market is projected to grow from USD 545.32 billion in 2022 to USD 2.38 trillion by 2029.

Software, development platforms, IT infrastructure, and digital storage are all part of XaaS. And new technologies will allow for even more cloud computing opportunities in the future.

Toward increased automation

Automation is an inevitable part of the race toward operational efficiency. When mundane work is automated, it lets companies change how its resources are being used, so workers can focus on more complex issues.

World Economic Forum’s ’The Future of Jobs Report 2020’ predicted that by 2025, 85 million jobs could be changed by automation and 97 million new ones could emerge.

As innovations in automation continue, we’re seeing the next evolution already—AI and machine learning.

Toward AI & machine learning

With 72% of business execs believing artificial intelligence will soon give them an edge, and investments into AI research and applications projected to reach $500 billion by 2024, the business world seems more than ready to jump into the future of automation.

Our own daily experience with AI is likely through a smart assistant like Siri or Alexa. While those tools are helpful, AI goes far beyond everyday convenience.

As we continue to digitize our lives through mobile apps, smart homes, social media, e-commerce, and more, we accumulate huge amounts of data. Known as big data, this glut of information can offer tremendous insight into consumer needs and behavior.

In 2021, according to Statista’s big data stats and facts, the amount of data estimated to have been created was around 79 zettabytes. If it helps, that‘s 79,000,000,000,000 gigabytes. In other words, far more data than a human being could pore through in a thousand lifetimes.

That’s why companies are excited about AI—to sift through our global conversations, purchases, and even our driving habits as all our everyday devices become connected to the internet of things, or IoT.

Welcome to data as a service (DaaS) and analytics as a service (AaaS). Machine learning algorithms are taking the world of data analytics by storm, using digital technologies to overhaul industries and change the game yet again.

How to form a digital transformation strategy

Successfully implementing digital transformation projects means finding clear metrics, establishing business goals, and looking critically at business processes.

59% of technology investment in 2021 was driven by technology ”end of life,” so take a hard look at the legacy systems in your business. Are you ready to change when those systems can’t keep up with the pace of technological development?

Get ahead of a potential crisis by implementing relevant new technologies.

Sound overwhelming? Start small. Look for areas where you can bring in digital transformation initiatives for easy wins. Finding quick, low-investment solutions that yield high ROI will help prove the benefits of digital transformation.

What digital transformation trends mean for business

So, where can we see digital transformation at work today? And where is it all heading?

Leadership

In the year 2000, Blockbuster was offered Netflix for $50 million. Ten years later, when Blockbuster filed for bankruptcy, Netflix’s market cap was at $9.27 billion.

Companies live and die on the decisions of their leadership. Successful digital transformation requires leaders to see industry changes coming, and future business outcomes rely on it.

CIOs and other business leaders need to look for new business models that integrate new technologies and optimize systems.

Operations

Companies often implement digital transformation to improve business operations. Depending on the industry and company, new technology can increase profitability or streamline a supply chain.

Cryptocurrencies, for example, might have made blockchain famous, but the technology has many other uses. KODAK uses its KODAKOne blockchain platform to protect the copyright of images and videos. And Walmart is working with Intel to use blockchain to track the origins and freshness of food.

The increasing implementation of 5G is also opening up more possibilities than ever before. 4G has been a bottleneck for many business applications. It doesn’t offer the bandwidth needed to take in real-time information from consumer devices and use it to drive operations.

With the improvements in 5G, applications in automation, AI, and machine learning can be used with the internet of things to analyze and use more data than ever before.

Customer experience

Speaking of consumers, digital transformation efforts shouldn‘t just be relegated to operations. A McKinsey survey reports that COVID accelerated the digitization of customer interaction in North America by 3 years.

Customer relationships will continue to change with new technologies. Going forward, digital user experiences will lie at the heart of business strategy.

Online accessibility, texting, and apps are all ways to show off new products and services and meet demanding customer expectations. According to a survey by Google, 59% of shoppers said that being able to shop on mobile devices is important when choosing which brand or retailer to buy from.

Employee experience

In the 2020s, many companies have accelerated transforming and adapting their workplace technology for a hybrid workplace model so that employees can collaborate and connect with one another regardless of their physical location.

As part of that digital transformation, businesses are using modern intranet as a competitive advantage in retaining top talent, improving employee experience, and driving employee engagement. Modern intranet software is customizable, cloud-based, and AI-driven.

Intranet software is a critical element of the digital age—smarter, easier to use, and more agile than ever.

Want to leap ahead with your own digital transformation?

Simpplr’s AI-driven intranet software can help you get quick, clear ROI wins:

  • Nutanix saw a 60% decrease in onboarding time
  • Workday saw a 52% decrease in support requests
  • Eurostar saw a 253% increase in engagement scores

Request a demo to see how Simpplr intranet can help you prove the business case for digital transformation.

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