Digital transformation means various things to different people. However, the fundamental idea that most sources seem to agree on is that it largely refers to using digital technologies to transform how a business operates to improve service delivery and competitiveness in today’s world.
The goal of digital transformation is to make a business or an organization more effective and efficient at what they do. However, while digital transformation begins with substituting manual processes for digitization, it doesn’t end with it.
Digital transformation involves integrating digital technology into every area of all business. This integration fundamentally changes how you operate and deliver value to your customers. But beyond adapting new technologies, digital integration also requires continual cultural and organizational change.
Right off the bat, we can see that technology plays a significant role in digital transformation. However, that’s only one of four different parts that define complete digital transformation. It does not stop at changing all infrastructure and legacy systems for new technology. In fact, one could argue that technology is the least important aspect of digital transformation. Instead, it is concerned with reimagining the day-to-day operations of an organization by leveraging technology.
Digital transformation is a multi-step journey that can take months to achieve. To effect cross-cutting organizational changes, a company must focus on employees, customers, internal business processes, and technology. If you are looking for an answer to the popular question "what are the 4 main areas of Digital Transformation"? This article is right for you. Let's look at the focus areas and why you need to prioritize them in your strategy.
The 4 main areas of digital transformation, according to Kissflow, are:
- Digitizing internal operations
- Employee efficiency
Digital transformation is only achievable in an organization once there is a cultural and technological shift. Think of it as a strategy combining the big and short-term picture. Digital transformation starts with digitizing internal operations. At this level, the goal is to increase productivity, reduce cost, and improve the customer experience for new and existing clients.
Like a straight line, internal operations must flow and shift seamlessly between internal structures – largely aided by new technology. But more than adopting new tech, a business must train its employees to ensure they can use the technologies and work as a team.
The last stage of digital transformation is process transformation – the small picture or short-term goal. Process transformation focuses on specific areas of a business, and the transformation of different processes will culminate into overall digital transformation.
1. Digitizing internal operations
To improve operation excellence, the important area to focus on is digitizing internal operations as much as possible. By doing this, you are moving all the manual and time-consuming work to automate and time-saving tasks.
Generally, there are three phases of digital transformation:
- The first phase: is Digitization (adopting new technology, moving to paperless)
- The second phase: is digitalization (leveraging technology to improve processes)
- The third phase: is transformation (using technology to create new or improved processes, products, and services)
Digitization vs. Digitalization
Digitizing internal operations is different from digitalization.
Digitization talks about adopting digital technology in the representations of physical objects. For instance, ditching a manual filing system for a computer database would be digitization. Digitalization on the other hand involves leveraging digitized work to improve an organization’s processes.
Instead of focusing solely on technology, digitalizing internal operations involve implementing various digitization projects and specific automating processes. So instead of managing requests and approvals via emails, introducing a project board or digital approval workflow would be digitalization.
Digitalization increases efficiency and productivity while reducing costs, and it also improves existing processes without changing or transforming them. Like an extension of digitization, it takes a process from human-driven events to technology-driven events.
Digitizing internal operations involves using technology (digitalization) to drive efficient business transformation. An example of digitized internal operation is a shift from local control of physical processes to remote monitoring and control of the said process.
According to a recent BCG survey , organizations that introduce internal process digitization can cut production costs by 10% and supply chain costs by 20%. Not only this, but it can potentially reduce working capital by 30% and increase revenue growth by 6%. But to achieve this, companies must invest in change management, cross-functional collaboration, strategic investments, and new technical skills.
2. Employee efficiency
The second key area to focus on if you are playing to optimize your digital transformation strategy, then it is Employee efficiency. It refers to the productivity of individuals in your organization, and it measures the amount of output you get from specific people or teams relative to input. Naturally, employee efficiency is affected by various factors, including job satisfaction, work environment, personal motivation, etc.
When a company adopts digital measures in place of manual ones, you can expect a culture shift within your organization for the right reasons. As a result, more than just adapting these technologies, companies must ensure their employees are on the same page at every point of digital transformation efforts.
Staff engagement is key to digital transformation. One could develop the best workflows in the world but it would all be successful without the right set of people to put the workflow to work.
Employee efficiency and digitization
Employee efficiency is inherently linked to digitization and the digitalization of processes. For instance, you can achieve more efficiency with digital tracking software and apps instead of a manual punch system machine. Other examples include project management software to improve task management or managing work orders and requests with digital forms.
Improving employee working conditions through digitization will reduce manual labor and positively impact work productivity. Employees will also have more time and attention to focus on other vital aspects of work. This includes providing a better customer experience, improved decision-making, and ensuring better data optimization and monitoring.
Organizations can also benefit from digitization by improving employee efficiency through team collaboration. Now, team members can use digital tools to connect and collaborate without hassle.
Technology is a vital area of digital transformation. In its most basic form, it involves leaving outdated processes for new technology. According to a Statista report , IT spending is projected to grow to 4.4 trillion by 2023. Digital transformation technologies are tools businesses can use to support their transformation initiatives. Some of them include artificial intelligence, cloud, advanced analytics, etc.
Typically, people define cloud computing based on the delivery of servers, databases, storage, software, networking, intelligence, and other computing services over the internet without direct active management by the user. However, these days, cloud services are evolving beyond providing static storage and databases.
Businesses don’t just have to store data in the cloud, they can actively work in the cloud as well. With digital workplaces becoming more popular than ever, digitally transformed businesses often coordinate their day-to-day activities from a unified cloud platform. This promotes business agility, and flexibility and also allows cross-border functionality-allowing business teams to work from anywhere and at any time without stress.
Businesses of all sizes can leverage digital technology to build and manage business processes more seamlessly across their organization. Process automation involves identifying repeatable steps and tasks in an organization’s process workflows that are likely candidates for automation. Once these tasks have been identified, suitable automation tools can be introduced to carry out steps that do not require human intervention. Automation saves time, improves efficiency, and boosts process accuracy across different departments of an organization.
Reporting and analytics
Leveraging data for decision-making is a crucial aspect of digital transformation. Fortunately, digital technology tools that facilitate transformation often have analytics built into them. Digitally transformed businesses make informed decisions by examining past and current processes closely and making predictive projections based on comprehensive data available to them.
Low-code and no-code development
One of the most impactful technological advancements in the business world in recent times is the advancement of low-code and no-code development. This is at the forefront of technological advancements that power digital transformation.
Low-code and no-code app development platforms allow organizations to build and deploy full-functional apps that help them achieve true operational transformation. The process of getting these apps is faster and comes at a fraction of the typical cost when you leverage low-code development.
Low-code platforms have also allowed the rise of citizen developers. This has proven to be the most valuable asset for any organization looking to achieve true digital transformation.
And the fourth area to focus on is Process transformation. This process transformation focuses on integrating new technologies into the company’s internal process. Technologies have always been available. However, it is up to the company to determine how to reinvent and deliver their product and services.
Process transformation examples
- Uber: One popular business model in the transport industry was for a single business owner to own a fleet of taxis. However, Uber revolutionized the model by eliminating this need.
- Netflix: Netflix started in 1997 as a DVD rental service, and over time, it changed its process to match growing technology and is currently the most popular streaming platform in the world.
- Walmart: Walmart started in 1962 as a discount grocery chain store, but it currently operates as an international retailer with various stores worldwide.
All the companies above have something in common – they started like every other ordinary business. However, they have been able to use technology to reimagine their business process to produce better outcomes.
Unlike these examples, a company that wants to transform its process does not necessarily have to change the industry. Instead, they only need to find a digitized way to offer the same services. Prioritizing these key areas of digital transformation and implementing the right strategy will lead to success.
Stages involved in digital transformation
As seen from the analysis of these four areas of digital transformation, achieving true transformation is more of a marathon than a sprint. It is not achieved all at once. Instead, you can expect your digital transformation efforts to follow the following steps:
- 1) Planning
- 2) Implementation
- 3) Acceleration
- 4) Measurement
The only way to correctly implement digital transformation ideas is to evaluate the present situation and use it to plan future adaptations. The planning stage involves evaluating your company’s strengths and weaknesses, market and industry changes, achievable goals, and customer behavior.
After planning a digital transformation pattern, a business must proceed to implement by identifying predictable and repeatable processes they can implement. A crucial step at the implementation stage is getting all stakeholders (including employees, shareholders, and top-level executives) on board by communicating the potential impact of the adoption to them.
A business must constantly experiment and adapt to meet the challenges that naturally come with digital transformation. It involves identifying inefficiency, internal tools, and systems that are not delivering optimally and addressing employee issues.
The success of the digital transformation is measured based on the objectives you set at the planning stage. For example, did the new technology increase employee productivity by reducing the time spent on certain tasks? Or did it affect how customers perceive our business? Just like business ROI, measurement is vital for evaluating digital ROI and how much good it does for your business.
Factors that impact the operational transformation outcomes
Up to 70% of digital transformation efforts fail. They either have to end abruptly because they have exceeded the budget or they simply weren’t able to achieve the set goals. In some cases, digital transformation plans may simply drag on for years with no real impact on business outcomes. This can be caused by a wide range of factors. Some of them are highlighted below.
The top management is responsible for determining where digital transformation must occur. Therefore, digital leaders must be willing to effect the transformation that can drive business change and create better outcomes.
Culture refers to the way employees interact with each other and their customers, and it also affects how they communicate and collaborate. To implement a digital transformation, you must expect a difficult organizational culture shift. However, to smoothen things out, the leadership must prepare clients and employees for this shift, open dialogues, and provide training and updates to prepare all stakeholders.
Technologies are the tools and processes used in a business that influence employee productivity and customer experience. With so many options, it can take time to identify which tool best suits your organization. Therefore, the leadership must carefully select the best technology that will be a major investment in the long run
The goal of digital transformation is to improve operational visibility, ensure efficient and productive resource optimization, and build better products at a lower cost. Therefore, instead of asking, “should we digitize,” business leaders should ask, “how do we digitize? Understanding the key areas of digital transformation is a great way to start. Once this has been done, you can learn how to use technology to digitize internal operations and processes, and ensure employee efficiency. With this locked down, you won’t miss too much in today’s highly technological world.
Try Kissflow's digital transformation platform today to leverage the unique opportunities of the digital transformation journey to innovate and grow. You’ll build a strong foundation, minimize risks, make the most of the digital process, and smoothly transition into a digital organization