Essential Components of Digital Transformation

Most people think of digital transformation in relation to the application of latest technologies. And they’re right, but only to some extent. You can’t put new wine into old bottles, so whatever sophisticated technologies companies implement, without transforming people, culture, and processes in your company, even the most advanced of them will become a waste of money.

So, what are the essential components of effective digital transformation? We’ve analyzed several points of view provided by the experts of McKinsey, Forbes, and Harvard Business Review, which cover different sides of the process, and distinguished the following major categories. Let’s explore them in detail.

People: The Most Valuable Asset

This category embraces employees, customers, and leadership and consists of the following components.

The right digital-savvy leaders

Successful transformation must come from the top: leaders should be proactive in their attitude towards change and bring order to the processes rather than going with the flow. Also, they should be not only familiar with digital technologies, but keep abreast of them. Finally, their commitment is critically important: it significantly increases chances for successful transformation.

Developing talent and skills

Сompanies that invest enough in digital talent have three times higher chances for efficient transformation. The same can be said about companies that ramp up their workforce planning and talent development. It’s also important to redefine employees’ roles and responsibilities and align them with transformation goals as well as engage integrators and technology-innovation managers in the transformation process. Integrators are those who integrate digital methods into existing ways of working, i.e., they connect the traditional and digital parts of business. In turn, technology-innovation managers supervise the work on a company’s digital innovations.

Empowering people

There are two ways to empower people to embrace digital transformation. The first one involves consolidation of new behaviors and new ways of working with the help of formal mechanisms taking into account employees’ opinion regarding digitization and areas of its application. The second way implies the involvement of people in key roles in reinforcing change. In this regard, we can mention three important success factors: encouraging employees to challenge the old ways of working, take risks and experiment with new ideas as well as ensuring collaboration with other units when it comes to transformation and change.

Knowing your customers

One of the digital transformation objectives is improving customer experience. Therefore, before investing in certain technology, every company should have a clear idea of what their customers’ journey is, their behaviors, and expectations to make sure that transformed products or services will meet customers’ needs to the full.

Technologies: Optimization of Operations

This category describes the purposes for leveraging digital technologies.

IT modernization

This component involves the uplift of an organization’s IT and mobile infrastructure, data lakes, and the cloud. This is often the first step on the whole digital journey, which is facilitated by a company’s CIO or CTO. The success of IT uplift is determined by the access to up-to-date tools, reduced maintenance costs, increased employee efficiency and satisfaction as well as better business performance.

Digitizing operations

Obviously, digital transformation is impossible without it. Digitizing the existing processes makes it possible to reduce their costs and increase their efficiency, so that a company can gain a competitive advantage on the market. Depending on the digital maturity level, a company may need not only to apply new technologies in day-to-day operations, but also to re-architect them entirely.

In addition, we can mention the following keys to successful digitization of operations:

Implementing digital tools so that information is more accessible across a company;
Adopting digital self-serve technologies for employees, business partners, or both;
Including new technologies into companies’ standard operating procedures;
Data-driven decision making.

Digital marketing

This pillar of digital transformation involves the application of digital tools for marketing purposes, e-commerce, and customer acquisition. It’s different from the previous two components, as its focus is shifted outwards, namely on interacting with customers. For example, companies can use artificial intelligence to identify customers’ behaviors and respond to them. Effective digital marketing will reduce customer acquisition costs, provide return on marketing investments, and allow companies to provide better service for the existing customers.

Culture and Change: The Basis for Transformation

Apart from the people’s side of digital transformation, the formation of the right business culture, which is often regarded as the primary step in embracing DX, is fueled by the following components.

Effective communication

There are several communication practices that increase the chances for successful transformation:

Communicating a change story is important for employees to understand where the company is headed;
Creating a sense of urgency for change by senior leaders;
Using remote and digital tools to convey the transformation’s vision is more effective compared to the traditional channels.

Change management

Of course, any transformations are impossible without change which in turn is often accompanied by people’s resistance. At the same time, employees’ support of transformation initiatives is crucial for its success. So, companies should put their efforts into embracing change: develop a strategy to encourage it, deal with employees’ resistance as well as provide them with necessary tools and environment.

Innovation: Opportunities for Growth

Innovation

Innovation can be considered as a spark of creativity that results in creating something that changes the face of the business. Constant innovation and innovative thinking are absolutely necessary for successful transformation. Therefore, companies should facilitate them by providing people with a space for open communication, collaboration, and freedom to create.

New ventures

This pillar requires a higher level of digital maturity than components from the previous categories. Its aim is to create new business models, new products, or services. Sometimes, it involves collaboration with large ecosystems to discover new sources for growth. It also requires investment, agility, and teams capable of running experiments, and should be typically guided by the CEO or CSO. The main benefits of this step is finding the new sources of revenue and growth opportunities.

These were the most significant components of successful digital transformation. As we can see, the experts emphasize the critical importance of the transformation itself, rather than focus only on its digital side. Such a comprehensive approach will give companies an advantage in embracing digital transformation, which will become the basis for successful business.