Why is digital transformation necessary, and what does it entail?
The integration of internet-based tools and technology into business processes is necessary for digital transformation, or DX. This enables a company to satisfy and foresee the requirements of its stakeholders, including its workers, the market, and its consumers.
Therefore, digital transformation (DX) necessitates more than just digitizing procedures or updating an organization's technological infrastructure; rather, it demands an ongoing rethinking of how the company might use digital technologies to engage, communicate, and assist its consumers.
In a separate 2023 KPMG survey of 400 U.S. technology executives, it was discovered that although 51% of participants had not noticed a rise in profitability or performance as a result of DX investments, 56% had experienced above-average returns on their DX investments in the areas of increasing employee productivity, boosting customer engagement, and improving efficiency.
Executives are nevertheless dedicated to change because they regard it as necessary for their company to survive, even in the face of inconsistent outcomes. According to PwC's 26th "Annual Global CEO Survey," 39% of the 4,410 CEOs who participated don't think their businesses will be financially sustainable in ten years if they continue on their current course. When asked to go beyond ten years, that percentage rose to 59%.
What advantages does the digital transition offer?
Given the success of many digital transformation initiatives, the executive's assessment of the importance of transformation is not without value.
On the other hand, DX priorities are still determined by those anticipated advantages.
The following are the top 10 reasons CEOs undertake transformation efforts, as per "2023 State of Digital Transformation" report: greater innovation (31%), enhanced cybersecurity (29%), enhanced employee experience (24%), introduction of new business models/revenue streams (23%), increased speed to market for current products and services (22%) and introduction of new products and services (21%), improved customer experience (40%), enhanced efficiency (38%), business process transformation (38%), modernization of IT infrastructure (35%), and increased innovation (31%).
In the same way that they would analyze the return on investment of more traditional projects, organizations involved in transformation initiatives frequently assess the performance of their digital initiatives using a variety of business indicators.
Experts indicated that although the projected return on investment (ROI) for DX projects varies from program to program and company to enterprise, there are a number of interconnected and interdependent advantages that an organization may anticipate from its DX activities.
Among the advantages of the digital transition are the following:
1. Enhanced effectiveness and output
Digital technologies increase productivity and efficiency by optimizing workflows and accelerating procedures.
Artificial intelligence (AI), which includes machine learning, and robotic process automation (RPA) technologies have proven time and again to be able to surpass humans by many factors in terms of accuracy and speed.
Businesses taking part in transformation projects frequently gauge the impact
In the meanwhile, data analytics and business intelligence technologies can gather and analyze data faster and more accurately than people can. Employees can make judgments more quickly with the aid of such analysis than they could in the absence of sophisticated tools.
The benefits of these technologies are quantified in a 2023 report from global consulting firm McKinsey & Company titled "The economic potential of generative AI: The next productivity frontier," which notes experts estimate that roughly half of the work activities that exist in 2023 could be automated by 2060. Additionally, the study mentioned that generative AI would "allow labor productivity growth of 0.1 to 0.6 percent annually through 2040, depending on the rate of worker time redeployment into other uses for technology and adoption."
In addition, "combining generative AI with all other technologies, work automation could add 0.2 to 3.3 percentage points annually to productivity growth."
2. Improved handling of resources
As businesses change, they're swapping out outdated IT infrastructures that supported separate business units for more contemporary ones that streamline operations and allow data to move easily between all divisions.
Experts claim that by using an end-to-end digital technology approach, CIOs and other executives have been able to decrease expenditures connected with unnecessary and redundant technologies. Additionally, by delivering as much computing power as needed at any given time rather than paying for surplus capacity to cover sporadic surges in consumption, on-demand computing resources and as-a-service platforms have assisted companies in making the most out of their technology investment.
Gains in productivity and efficiency may be seen across the whole organization, not only in the IT sector. TEKsystems Global Services' practice senior director, Ramesh Vishwanathan, cited the application of digital technology in agriculture as an excellent illustration. According to Vishwanathan, farmers may be informed about the precise amounts of water, fertilizer, herbicides, and pesticides they require, as well as the locations and timing of those needs, by utilizing data, analytics, intelligence, and geospatial technologies.
3. Increased adaptability
Organizations that adopt digital technology and cultivate a digital culture that embraces change are better equipped to respond swiftly to dynamic market conditions, such as the rapid ascent of ChatGPT or significant social and economic disruptions like the COVID-19 pandemic.
Since they're constantly paying off technical debt and updating their IT environment and procedures, businesses, nonprofits, and other transformation-focused organizations are better equipped to withstand regular business ups and downs as well as more significant, once-in-a-lifetime disruptions, according to James Brouhard, director of consulting and professional services at IT services provider FNTS.
Its widespread usage of digital technologies—cloud computing in particular—also contributes to its resilience by providing inherent flexibility and redundancy.
4. Increased dexterity
Digitally astute businesses may take advantage of change rather than merely react to it, according to DX experts.
According to Brouhard, transformation initiatives compel companies to update their antiquated technological and cultural debt, which were both created for stability and take a long time to adjust. By doing this, these companies are able to adapt faster. For instance, they may instantly scale up or down in response to demands by utilizing cloud resources.
Similar to this, their use of contemporary software development approaches like Agile and DevSecOps facilitates improved teamwork and allows them to quickly build and release new features and functionalities in response to changing market demands.
5. Enhanced interactions with customers
According to Schrage, becoming customer-centric is essential to digital transformation.
Digitally mature organizations, he said, have learned to innovate by first asking how they can better serve their customers through new offerings in terms of goods, services, and experiences, and then figuring out what digital capabilities will enable them to provide those offerings in a "faster, cheaper, better, and more agile" way.
According to Schrage, these companies "design from the customer or client experience in" as opposed to basing decisions on their technological capabilities.
Digital technologies enable organizations to gather, store, and analyze consumer data in order to get deeper insights about their clientele. Businesses may build and provide goods and services that are specifically catered to the requirements and preferences of each individual client by using data analysis and artificial intelligence (AI) to obtain deeper insights.
Joan Smith, managing director and worldwide solutions lead at Protiviti Digital, stated, "Digital puts a lens on your customer experience and making that experience as seamless as possible for the customer, so that [the company] can retain or build its market share."
6. A higher level of reactivity
Organizations that have undergone digital transformations are better at engaging with their customers, which helps them anticipate changing market dynamics and client needs.
"Organizations are using technology to alter how they develop and present a value proposition to their clients," stated Bryan Throckmorton, head for global digital strategy and transformation at Protiviti, a management consulting firm.
7. More inventiveness
Businesses in all sectors now have new chances to develop goods and services that they were previously unable to produce thanks to digitalization. Examples include home gym equipment that provides virtual on-demand workout teaching and tool firms that provide online services to pair contractors with clients.
According to Kamales Lardi, CEO of Lardi & Partner Consulting and author of The Human Side of Digital Business Transformation, "new technology solutions enable organizations to innovate their business models, opening up avenues for diverse revenue streams." "For example, a car manufacturer might introduce a subscription-based model for electric vehicles, offering charging maintenance and periodic upgrades as part of the package, thus creating a recurring revenue model."
8. Quicker time to market
A shortened product lifecycle is one of the main advantages of the digital transformation, as businesses can quickly test, pilot, iterate, and launch by utilizing contemporary technologies like digital twins, which virtually replicate environments, and contemporary processes like analytics for insights and decision support.
"It's about how fast you can go from ideas to putting ideas into the world," clarified Sheldon Monteiro, head of product at Publicis Sapient, a worldwide consulting firm supporting digital transformation. "If it took you months or years before, transformation can help you reduce [that timeline] to weeks, days or hours."
9. A rise in income
Research has shown that digitally mature organizations do see an increase, even if studies have indicated that leaders don't always receive the ROIs they anticipated from their transformation initiatives.
Digitally mature organizations gain 6% greater earnings before interest and taxes, according to the June 2023 "Digital Maturity Index Survey" from professional services company Deloitte Digital.
Similarly, digital leaders outpaced digital laggards on a number of financial criteria, including total shareholder returns, according to a 2023 McKinsey & Company report.
10. Persistent relevance
Effective implementation of transformation programs enables firms to promptly recognize and address emerging opportunities, industry trends, and customer demands.
According to experts, this capacity not only keeps businesses operating but also maintains their long-term competitiveness, irrespective of industry.
However, such organizations might not make it through without that skill. "When my customer wants a certain thing, and I'm not providing it, then why am I in business?" questioned Randstad Digital's chief growth officer, Raja Ranganathan.
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