Digital Transformation Guide: What It Means and Why It’s Important

This digital transformation guide aims to equip executives with a fundamental understanding of what digital transformation means — and why this new business imperative is spurring major investment. 

Across multiple industries, digital transformation has risen to the top of the corporate agenda. Here are some stats highlighting the emergence and growth of the digital transformation market:

• Executives say the top benefits of digital transformation are: improved operational efficiency (40%), faster time to market (36%), and the ability to meet customer expectations (35%). (PTC)
• 52% of marketers around the world say driving growth through digital transformation is their top strategic focus. (Econsultancy)
• 56% of CEOs say digital improvements have led to increased revenue. (Forbes) 
• 89% of all companies have already adopted a digital-first business strategy or plan to do so. (IDG)
• Only 23% of companies are not dependent on digital products or operations. (Harvard Business Review)

Digital Transformation Guide: Where the Term Comes From and What It Means

Pundits have been using the term “digital transformation” for at least a decade, ever since the introduction of technologies that sparked the digital business revolution: social media, mobile technology, data and analytics, and cloud computing. 

Initially dismissed by many as a buzzword, digital transformation has since become necessary and urgent. Its scope has also expanded to include newer enterprise technologies such as artificial intelligence and natural language processing, machine learning, robotics, blockchains, virtual and augmented reality, and ecommerce. 

For many organizations, the COVID-19 pandemic accelerated their digital transformation work. Digital-focused companies that were equipped to enable remote work and thrive during the pandemic did not suffer as much disruption as those that dragged their feet when it came to digital transformation.

According to McKinsey, companies, as part of their COVID-19 response, have accelerated the digitization of their customer and supply chain interactions as well as their internal operations by 3 to 4 years. The share of digital or digitally enabled products in their portfolios has accelerated by as much as 7 years. 

What Does Digital Transformation Mean?

Digital transformation can have different definitions for every organization. For the purposes of this digital transformation guide, let us consider this encompassing definition from Salesforce:

Digital transformation is the process of using digital technologies to create new — or modify existing — business processes, culture, and customer experiences to meet changing business and market requirements. 

For organizations of any size, digital transformation can be a complex and challenging process involving strategy, technology integration, and executive commitment. Digital transformation projects also vary — it can be as simple as moving from snail mail to digital marketing, or as complex as evolving brick-and-mortar storefronts to website and e-commerce channels. 

Oftentimes, these projects share common end goals, such as solving business challenges, hitting targets, reducing operational costs, and delivering better customer experiences. Multiple studies also correlate digital transformation with better financial performance and business outcomes. 

Why is Digital Transformation Important?

The ROIs from digital transformation efforts vary based on your type of project or organization, but investing in this new business paradigm can bring the following overarching benefits:

• Increased operational efficiency and productivity
• More streamlined communication
• Better resource management
• More data-driven and actionable insights
• Greater resiliency and agility
• Improved customer engagement and customer service
• More efficient customer experience management
• Increased responsiveness
• Greater innovation
• Faster time to market
• Increased revenue from investments
• Continued relevancy

Digital Transformation Guide: Examples

These examples of digital transformation show how companies adopted digital technologies to innovate, improve business processes, and offer better customer experiences. 

• Customer engagement and loyalty: Subway, one of the world’s largest restaurant chains, implements a digital loyalty program, doubling its digital orders and increasing loyalty memberships by 10x.
• Website design and e-commerce: L’Oreal moves from “business to usual” to “digital first” by developing a website factory, which allows individual L’Oreal brands across 60 countries to refresh over 600 websites in 3 years. 

• Customer experience: evo, an online retailer of outdoor gear and fashion apparel, achieves a more complete understanding of the customer experience at each of the company’s locations by analyzing data from online reviews and customer feedback. 

• Business process improvement: Domino’s, one of the world’s leading pizza chains, invests in conversational artificial intelligence and chatbot technology to enable new ways of serving and assisting customers. 

• Personalization: Credit card giant Capital One closes all its on-premises data centers and moves all its applications and systems to cloud-computing-based Amazon Web Services — enabling the company to leverage machine learning and gain insights on how to get a younger generation of subscribers to banking. 

• Customer service: United Airlines launches its QR-code-powered Agent On-Demand chat support and virtual assistance program, allowing the company to provide flexibility during the pandemic, respond to customer needs in-app, and improve customer satisfaction scores. 

• Supply chain and customer experience: Tesla provides one of the most prominent digital transformation examples in automotive, opting for in-house robots-supported production (instead of sourcing from third-party suppliers) and selling directly to consumers through its website (instead of through franchised dealerships).

Guide to Digital Transformation: Keys to Success

At a time of technological disruption, post-pandemic uncertainty, and continually changing consumer preferences, organizations that strategically allocate their resources to strengthen their digital focus stand to gain an edge over the competition.

Nurture Digital Channels

Customer experiences do not begin when people arrive at your business location. In an on-demand economy where social and mobile innovations have significantly expanded the range of crucial touchpoints, winners and losers will be determined by their ability to diversify and personalize methods of engagement across the entire customer journey.

Harness Technology to Streamline Marketing and Sales

Consumers demand tools that simplify and streamline the entire buying process — from research and planning, through engagement with the brand, to the post-sales phase. This makes it critical to invest in smart technology that will better engage consumers and make every part of the customer journey pain-free.

Stay Responsive to Customer Needs

Brands that keep their fingers on the pulse of evolving customer demands and expectations are the ones most poised to succeed. Managing customer data, feedback, and online reviews is critical and can spell the difference between experiences that delight and experiences that don’t.

Make Experience — Not Sales — the Priority

The sales process no longer begins when a potential buyer arrives at your store location or information desk. This means that, in order to stand out, brands must deliver seamless, persuasive experiences that deliver on their brand promise and match customer needs and expectations, across all channels and touchpoints. 

Capture the Voice of the Customer

The worst way to learn about the customer is to guess. With a wide range of channels generating a wealth of customer data, organizations must invest in well-developed enterprise data analytics tools and programs in order to capture the Voice of the Customer and truly understand customer needs and desires.