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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."