What is Digital Transformation?

Okay. I’m doing it. I’m stepping out and admitting that “Digital Transformation” sounds vague and is reminiscent of start-up culture lingo that might mean nothing (I’ve seen it before, folks!). To be even more transparent, I didn’t understand it when I interviewed for this job and now, almost 11 months in, I feel I’m only beginning to grasp it because there isn’t an absolute definition.

I always like to maintain a customer-centric perspective so I ask myself, as a customer, what questions would I have? How would the dire need to digitally transform be explained clearly when there isn’t an absolute definition?

• “What even is a ‘Digital Transformation?’”

• “Does that mean moving tasks from paper to screens?”

• “Do I get to keep my fax machine?”

• “Will a robot take my job/will I be turned into a robot?”

According to the McKinsey Global Institute's 2016 Industry Digitization Index, Europe is currently operating at 12% of its digital potential, while the United States is operating at 18% (en.wikipedia.org). I highly doubt any of you will be transforming into robots any time soon and nor should you worry about a robot taking your job. Although, if your organization still relies on a physical fax machine, please take this as a sign to reevaluate that decision in 2021.

Before I dive in, an important item to note is that a Digital Transformation is not exclusively technological in nature— it is a foundational change in not only how an organization delivers value to its customers (cio.com), but also its strategy and culture (hbr.org).

I like The Enterprisers Project’s take on a definition:

“Digital transformation is the integration of digital technology into all areas of a business, fundamentally changing how you operate and deliver value to customers. It's also a cultural change that requires organizations to continually challenge the status quo, experiment, and get comfortable with failure.”

Additionally, a Digital Transformation is neither a short-term or one-time fix nor is it an excuse to adopt new technology for the sake of using it, or worse, just to say you’re using it. A Digital Transformation should be a well-planned and long-term process to leverage technology that adds long-term value.

The rest of this post is how I’m defining ‘Digital Transformation’ for me. I’m not implying that this is the only or even the right answer, but I’m going to break it down by covering:

• Four main areas of Digital Transformation

• Why do companies need Digital Transformation?

• Digital Transformations in Regulated Industries

What are the four main areas of Digital Transformation?

Remember to crawl, walk, jog, and then run! If you’re planning on taking on a Digital Transformation, you must consider and identify goals within these four areas:

Process Transformation

• • • When modernizing and adopting new technologies, your organization must also radically change and document processes to meet new business needs (kissflow.com)

Business Model Transformation

• • • We’re starting to see a trend of more companies looking to adopt new technology to transform their business model. While process transformation has a narrow focus, “business model transformations are aimed at the fundamental building blocks of how value is delivered in the industry.”

Domain Transformation

• • • Domain Transformation is often overlooked and overrated, but it’s the key to unlocking more business opportunities and adding more value. Adopting new technologies can very easily lead to discovering new markets to serve (LinkedIn).

Cultural/Organizational Transformation

• • • A trademark of any successful Digital Transformation is a successful cultural/organizational transformation. Organizations must come together to “[redefine] organizational mindsets, processes, and talent.” To thrive in our digital world, successful companies are adopting agile methodologies, redistributing decision-making power, and relying on “business ecosystems” (LinkedIn)

Digital Transformation Framework

Similar to how there isn’t one agreed-upon definition of a “Digital Transformation,” there isn’t one right way to do it. There is a plethora of frameworks and success stories from all kinds of organizations, but there isn’t one catch-all, fill-in-the-blank, template for this kind of undertaking. Digital Transformation strategies shouldn’t be rigid. “Digital transformation frameworks show people at different levels of the organization how to cooperate to make digital change possible.” With any framework you should be able to:

• see the big picture (ideal for executives!)

• drill-down to a set of tasks and sequences

• transform front and back-of-office

• customize to suit the circumstance (runfrictionless.com)

Why do companies need Digital Transformation?

Not to be overly dramatic, but at this stage in our digital world, it’s a matter of digitally transforming or becoming obsolete. Some people go so far as to say “transform or die.” Yikes! But it’s true! Digital Transformation is the way.

IDC forecasted that global spending on Digital Transformation would grow 10.4% in 2020 (despite the ongoing pandemic!) to $1.3 trillion. Compared to 17.9% growth in 2019, "but remains one of the few bright spots in a year characterized by dramatic reductions in overall technology spending," IDC reports. (enterprisersproject.com)

Digital Transformation Acceleration

COVID was an unexpected catalyst for Digital Transformations. Mckinsey reports that it’s contributing to companies speeding up their digital transformations by three to four years. In the first few months of the pandemic, organizations quickly set up short-term solutions to survive. “What’s more, respondents expect most of these changes to be long-lasting and are already making the kinds of investments that all but ensure they will stick. When we asked executives about the impact of the crisis on a range of measures, they said that funding for digital initiatives has increased more than anything else—more than increases in costs, the number of people in technology roles, and the number of customers” (McKinsey.com)

Digital Transformation in Regulated Industries

“Regulated industries should not pull back in their quest toward digital transformation but should instead find a way to embrace it … Theoretically, an organization could choose to adopt digital tools and methods in the parts of the organization not governed by regulatory bodies while taking a slower approach in the parts that must abide by regulations.” (cutter.com). While on the surface, this seems like an easy and obvious option, you need to consider the effects it may have on the entire organization and its culture. If the unregulated group gets to use all the shiny, new-fangled technologies, but the regulated group is stuck with dinosaurs and strict oversight there will be a significant cultural divide. Of course, ideally, the regulations will modernize quickly, but as we all know: it’s a slow process.

You’ve likely had a telehealth appointment with a healthcare provider at least once throughout the pandemic thus far. Telehealth appointments are still relatively new and growing more popular every day, but for long-term success healthcare providers and “systems must construct a sturdy, permanent bridge that includes organizational, financial, and clinical structures and processes … As health systems implement a permanent approach to telehealth, they should recognize that telehealth is a component of two broader digital health strategies: ensuring that care is delivered in the right setting and creating a great patient experience through a ‘digital front door.’” (hbr.org).

I’d love to be able to wrap this blog post up with a shiny new definition for Digital Transformation for us all, but that’s just not how this blog post will end. 70% of all Digital Transformations fail. Yep. Really. Only 30% of Digital Transformations are successful. You already know that digitally transforming isn’t optional, but I share this statistic to illustrate the importance of not just digitally transforming but doing it the right way for your organization the first time. Digital Transformation is a monumental and fundamental change to your organization’s processes, customers, and employees. A perfunctory attempt at Digital Transformation will only fail.

Get in touch with us if your organization is ready to undertake a Digital Transformation and we’ll be your partner and navigator in the seas of Digital Transformation.