Embracing digital transformation (DX) enables organizations to leverage digital technology to become more agile, streamline operations, and adopt a more customer-centric approach. Furthermore, digital transformation promotes a culture of innovation and gives businesses a competitive edge.
The concept of digital transformation is growing in popularity. In fact, the digital transformation market is expected to grow over time. By the end of 2027, it’s estimated that the market will reach approximately USD 1549 billion, which indicates a sharp jump from 2022’s USD 594.5 billion. One of the key drivers behind the growth of the digital transformation market is the increased adoption of big data and related technologies such as cloud computing and analytics.
Data from PwC reveals that 60% of executives believe digital transformation is the most critical component for business growth in 2022. Moreover, aside from filling job vacancies, one key factor for speeding progress is enhancing digital capabilities to increase agility, develop new products and services, and enhance supply chain resilience.
Organizations now view data as a new resource that they can use to make better business decisions faster. However, while digital transformation initiatives are becoming a more integral component of businesses, it does raise a few concerns, particularly regarding the privacy and security of information.
How can organizations implement a successful digital transformation strategy? What goes into creating a digital transformation strategy? This article details key principles that will help you better understand a digital transformation strategy and how it equips your organization for growth.
This digital transformation strategy guide is intended for CIOs, CFOs, CEOs, digital transformation experts, business experts, and IT leaders who want to learn more about digital transformation strategies and how they benefit their respective organizations. It also addresses several concerns regarding digital transformation strategy, such as security and data privacy, and how it can potentially impact different business functions.
What is a Digital Transformation Strategy?
A digital transformation strategy is an approach or detailed plan that focuses on using digital solutions to transform how your organization operates, allowing you to tackle challenges to move to your desired future state.
A digital transformation strategy aims to equip organizations with solutions that will allow them to become more agile, efficient, and competitive in today's increasingly digital business landscape.
Organizations are transforming fundamental business operations, such as integrating digital technologies, that impact their workflows and upend entire business models. A digital transformation strategy essentially acts as a framework that helps guide you through such transformations.
Unlike strategies focusing on one particular aspect or department, such as IT strategies, a digital transformation strategy covers different perspectives and goals.
According to a study by Matt et al. (2015), a digital transformation strategy has a broad scope. Its “company-spanning characteristics” impact other business strategies, so it’s essential that said strategies align with your digital transformation strategy.
Why Do You Need to Create a Digital Transformation Strategy in 2023?
The digital age has dramatically altered how businesses interact with their customers and how they operate. These digital disruptions have upended traditional business models and legacy systems, enabling organizations to become more agile and better equipped to meet their customers’ changing demands and expectations.
According to the World Economic Forum founder and executive chairman Klaus Schwab, digital transformation is a part of the Fourth Industrial Revolution, which combines different technologies and breaks barriers between "the physical, digital, and biological spheres," therefore altering how we live and work. It's characterized by principles such as flexibility, customization, more efficient processes, and reduced execution time, which brings about faster and better decision-making capabilities.
Any organization can adopt digital transformation initiatives. However, without a good strategy in place, it’s not likely to make any difference. Having a digital transformation strategy framework allows you to create impactful and measurable efforts to meet your business goals.
How a Digital Transformation Strategy Impacts Business
A digital transformation strategy can alter your operations, including your systems, processes, workflows, and even your culture. For example, you can better monitor individual customer journeys by adopting artificial intelligence and machine learning technologies.
One digital transformation strategy example that’s worth noting is using new technologies to deliver personalized experiences. Companies can use data to better understand their customers, needs, interests, behavior, and preferences. To utilize these datasets, companies can use technology to provide seamless and personalized experiences across different touchpoints.
Another example is using AI and its related technologies like machine learning and natural language processing. By leveraging such technologies, companies can analyze large volumes of data to anticipate the future actions of their target audience and build effective strategies around that.
Furthermore, with AI's automation capabilities, you can cover repetitive tasks, freeing up your employees so they can focus on more complex tasks or activities involving creativity and innovation. Automation also lets you provide robust round-the-clock customer support through chatbots.
Benefits of a Digital Transformation Strategy for Businesses
Businesses that have a digital transformation strategy in place can enjoy benefits such as:
- More comprehensive and accurate data collection, which helps facilitate better decision-making capabilities, identify emerging trends or opportunities for growth and anticipate customer consumption patterns
- Improved employee productivity and efficiency through the use of collaborative digital tools and automation functionalities, which also helps mitigate human errors while reducing the amount of time spent on completing a task
- More efficient utilization of resources, given that DX, can facilitate the digital acceleration of business processes, such as enhanced asset tracking and resource allocation, while keeping costs down.
- The ability to deliver richer customer experiences because you have access to more accurate customer data
- Nurturing a culture of innovation in the workplace, given that your employees can create their own solutions to tackle existing problems. For instance, low-code/no-code platforms like Kissflow allow users to create their own applications even without programming knowledge. This not only accelerates automation but also boosts your operational efficiency. Perhaps the most significant benefit of adopting such platforms is that it allows users to be more creative and develop innovative solutions.
Potential Repercussions for Businesses That Don’t Have a Digital Transformation Strategy
Businesses that ignore digital transformation risk being left in the dust by their competitors. They won't be able to identify new growth opportunities and may eventually become irrelevant to their target audience and die out. It's not enough for businesses to simply invest in new technology—to embrace true digital transformation, you'll need to leverage technology and make critical changes to your business models.
Understanding Digital Transformation Strategy
Despite the numerous benefits of adopting a digital transformation strategy, several concerns and challenges must be addressed. These include:
- Security risks
Rushed implementation of DX strategies can lead to increased privacy and security risks. One way to address this is to have a robust and proactive cybersecurity strategy that aligns with your digital transformation strategy to mitigate and resolve issues before they become high-risk threats.
One of the biggest concerns surrounding DX is its scalability and how to implement it at scale. One way you can tackle such issues is by having a solid change management strategy in place, where you consider every aspect of the transformation and identify existing and potential problems. Another factor that affects scalability is organizational silos, which lead to a disconnect within the organization. To avoid this, you need to promote a culture of transparency in the workplace, particularly in communication.
- Aligning business goals with DX
When your business goals aren't aligned with your DX goals, this creates a disconnect that can negatively impact your outcomes. Ensure you invest in DX initiatives supporting your specific business goals. Get everyone involved in the project on board to ensure that you have a unified vision of your DX goals.
- Managing legacy systems
The continued adoption of legacy systems can hamper development. However, it can be difficult for businesses to abandon their existing systems. The problem is that, in most cases, such systems cant be integrated with newer platforms. This results in isolated data and disparate systems. There's now a growing need to modernize legacy systems to allow organizations to gain a competitive advantage, leverage big data, and identify more growth opportunities.
What Drives a Digital Transformation Strategy?
Why do businesses undertake digital transformation?
Several key factors are driving the need for DX. These include changing consumer expectations, the growing importance of speed when responding to opportunities or threats, and the rise of AI and its related technologies. Another factor is the continued importance of collecting, analyzing, and implementing customer insights.
Other drivers of DX strategies include:
- Digital disruption
- Workforce age
- Emerging technologies
By knowing what drives DX, you can better outline your DX journey, set clear and focused goals, and gain in-depth insights to improve your operations.
Assessing the Effectiveness of Your Digital Transformation Strategy
To measure the effectiveness of your DX strategy, you’ll need to look at several metrics, including:
Measuring usage metrics allows you to assess how users engage with new technology and if they face any challenges with adopting these new platforms. Some metrics to pay attention to under usage metrics include the number of daily active users, conversion rates, and abandon rates.
You'll need to determine what productivity means to your organization to track productivity metrics. From there, you'll need to devise a way to quantify your productivity. You can calculate the revenue generated by each employee to see if your DX initiatives have impacted their productivity levels.
Measuring your ROI lets you determine if your investment in new technologies is paying off. Look at how your DX initiatives have helped improve your business compared to how much you've invested in legacy systems and how they're faring now.
To measure performance, you’ll need to assess your current processes. Look at metrics such as uptime, mean time to failure (MTTF), and mean time to resolve (MTTR).
Key Personnel Involved in Creating a Digital Transformation Strategy
Digital transformation is a complex undertaking that can potentially impact an organization and how it operates. This is why it's crucial for organizations seeking a digital transformation strategy to outline clear responsibilities and steps for implementation. You must also work with people who are experienced in running transformational projects.
So, who exactly is in charge of implementing your digital transformation strategy?
Matt et al. state that aside from top management personnel like CIOs and CEOs, dedicated business transformation managers and chief digital officers (CDOs) can be put in charge of implementing a digital transformation strategy.
To execute a successful digital transformation strategy, you’ll need support from top management and adequate staffing for all phases of the transformation. That’s because a digital transformation strategy can impact your entire organization. Moreover, to create an agile organization, executive leaders will still need to establish and oversee a digital leadership team comprising different stakeholders across different departments, focusing on members who interact the most with customers.
The key to building a digital transformation strategy that works is having clear goals. You must first determine what you want to achieve by digitizing your operations. You'll also have to identify what needs to be done to achieve these goals. Aside from clear, measurable, and realistic goals, you'll need to outline steps for building, implementing, and assessing your transformation strategies. Moreover, it's also important that you devise a plan on how to adapt such strategies, as well as subject it to continuous reassessment, given the uncertainties surrounding digital transformation initiatives.
What Type of Digital Transformation Should Your Focus on in 2023?
There are four main types of DX to focus on in 2023. These are:
Adopting a tech-first approach allows your business to become more sustainable and have a competitive edge. Business model transformations involve looking at your current business model and determining whether or not it fits the current landscape.
This relates to digitizing your internal operations, such as taking measures to automate internal processes to improve productivity. To facilitate innovation, ensure your DX initiatives align with your business objectives.
Customers expect companies to be able to meet and even exceed their expectations. To achieve true digital transformation, you must leverage new technologies to deliver seamless and personalized customer experiences across different touchpoints.
DX initiatives will undoubtedly impact your organization’s culture. Aside from adopting the right technologies, you need to make sure that everyone is on board with and fully supports your DX initiatives.
4 Main Dimensions of a Digital Transformation Strategy
In their paper, Matt et al. also outline the four dimensions of digital transformation strategies, which will enable organizations to successfully implement a digital transformation strategy.
The four interdependent dimensions are the use of technologies, changes in value creation, structural changes, and financial aspects. These apply to most organizations, regardless of their industry.
Use of Technologies
According to them, this covers a company’s attitudes toward new technologies and how they will leverage them. For instance, you’ll need to decide whether you want to be a market leader that’s capable of forming your own technological standards or if you want to follow established standards and use their accompanying technologies for your business operations.
Changes in Value Creation
Marking the interdependency of how companies use technology and how it affects value creation, Matt et al. further elaborate on how adopting new technologies can impact a company's value chains. These new technologies deviate from traditional business models, allowing businesses to expand and enhance their portfolios. For instance, by embracing digitization, businesses can tap into other forms of monetization and open up their business to new markets or segments.
Adopting new technologies also changes a company’s organizational setup, as new digital activities can affect products, processes, or skills. When a company undergoes fairly small changes, it’s possible to integrate new operations into its existing organizational structures. This will likely require companies to set up separate subsidiaries for more substantial changes.
Financial aspects determine how a company will act and is a critical factor in whether it can finance digital transformation initiatives. According to Matt et al., if an organization faces lower financial pressure on the core business, it will likely not act urgently upon the transformation. In contrast, companies under financial pressure may face challenges in financing their digital transformation initiatives.
Top 5 Digital Transformation Strategy Frameworks:
A DX strategy framework allows you to implement new digital solutions more strategically because it helps you determine which areas to prioritize for your DX initiatives. Some of the DX strategy frameworks you need to pay attention to include the following:
How to Develop a Digital Transformation Strategy that Drives Business Growth
The key components of a digital transformation strategy include identifying business goals, assessing the current state of technology, evaluating the competitive landscape, and designing a roadmap for implementation.
Step 1: Start with Why?
When most business owners think about digital transformation, the first thing that usually comes to mind is acquiring a new digital tool or implementing a digital system. However, this approach isn’t really a good one because it fails to ask the right question.
The more important question to ask when you start thinking about implementing digital transformation is “Why?”. In fact, this applies to all types of initiatives or new projects an organization wants to implement including a digital transformation program.
Many organizations fail to ask this question before starting their digital transformation journey and this is often why they struggle with it. Basically, you’ll need to define what digital transformation means for your organization. Every organization is unique and the reason for starting on a Digital Transformation journey is often unique to you as well.
Understanding why is digital transformation important will help you link your current business strategy to the future digital transformation strategy you will be implementing for your organization.
Step 2: Define the Business Objectives
The next step in creating a digital transformation strategy is to define the business objectives. It's important to identify what you want to achieve through digital transformation and how it aligns with the broader business strategy. As we have established from the first step above, the reasons for implementing digital transformation differ significantly from one organization to the other.
This could include increasing revenue, reducing costs, improving operational efficiency, enhancing customer experience, or launching new products and services.
At this stage of the process, you’ll have to establish what your vision and objective for your organization are and how Digital transformation fits in to help you achieve them. Establishing your goals this way will help determine the next step of your digital transformation journey.
Doing this will also be valuable for discerning the results or defining your KPIs to measure the effectiveness of the strategy once it has been implemented.
There’s really no magic formula for setting the goals for your digital transformation efforts especially since every business is different. You’ll have to do the groundwork needed for thoughtful goal setting.
This usually involves analyzing the long and short-term goals of your organization. Identify areas where digital transformation can help achieve these goals. This also helps in determining gaps that require digital acceleration based on your current digital capabilities.
For instance, implementing digital transformation might be one of your short-term objectives towards reducing turnaround for your service delivery to gain a competitive advantage.
In this case, building a digital transformation framework will be different from that of a company whose objective is to transform the Quality Assurance process to deliver high-quality products that meet standards of engineering excellence.
The main point here is to ensure that the goals set are practical, attainable, and of long-term benefits. This is what makes the difference between unrealized ambitions and lasting change for your organization.
Step 3: Assess the current state of digital maturity
Once the business objectives are defined, the next step is to assess the current state of the organization. This involves evaluating the current processes, technologies, and systems and identifying areas for improvement. It's important to conduct a thorough analysis of the existing systems and processes to identify the gaps and challenges that need to be addressed through digital transformation.
To get started, you’ll need to assess your current digital maturity. This includes the people, platform, or technology you use as well as your processes. As the saying goes, you have to understand where you are before you can know where you want to go and how to get there.
Evaluating your current digital maturity might involve carrying out a survey of your organization, taking feedback from staff about technology and processes, gathering requirements, capturing high-level processes, examining the focus of your digital transformation initiatives, and determining the capabilities
Once this has been done, you can now figure out how to align your needs with your current business model to determine the areas that’ll receive greater prioritization towards achieving your transformation ambitions.
Conduct a Digital Maturity Assessment:
Organizations can conduct a digital maturity assessment to identify gaps in their current digital capabilities and opportunities for improvement. This involves evaluating the organization's current use of digital technologies across different functions and departments, such as marketing, operations, and customer service. The assessment can help identify areas where technology can be used to streamline processes, improve efficiency, or create new business models. This information can then be used to develop a roadmap for digital transformation.
Step 4: Identify Digital Transformation Opportunities
After assessing the current state of the organization, the next step is to identify digital transformation opportunities. This involves evaluating the potential impact of digital technologies on the business and identifying areas where technology can be used to drive transformation. It's important to involve key stakeholders in this process, including employees, customers, and partners, to ensure that their perspectives are taken into account.
Some examples of digital transformation opportunities:
Supply Chain Optimization: Digital technologies like IoT, AI, and blockchain can help optimize the supply chain process by improving visibility, increasing efficiency, and reducing costs. For example, using IoT sensors in warehouses can help track inventory levels and automate the replenishment process, while blockchain can help secure transactions and improve traceability.
Customer Engagement: Digital technologies can also be used to improve customer engagement and enhance the customer experience. For instance, chatbots can be used to provide personalized recommendations and support, while social media platforms can be leveraged to connect with customers and gather feedback.
Step 5: Prepare your organization for a major shift
According to a Jabil Survey, employee pushback and lack of expertise are the top two barriers to digital transformation initiatives. This shows that a key component of your digital transformation strategy is people.
People create strategies, use technologies, and implement digitized processes across your organization which is why it is imperative that you carry them along as you plan a major digital shift in your organization. Preparing your employees for digital transformation often involves the following:
- Get the Right Buy-in
The daunting question right now is who should be involved in building an organization's digital transformation strategy. Well, You cannot implement a strategy without the key players in the company aligning with your plan. According to a Prophet report, CIOs sponsor or own 28% of digital transformation initiatives while about 23% of CEOs play a leadership role in implementing the strategies.
A key part of mapping out your digital strategies is getting high-level executives in your organization to commit to it. This is critical to getting your Digital Transformation project off the ground and running effectively.
Considering all the benefits of digital transformation for businesses, one would think that getting top-level executives to buy in would be relatively straightforward. However, management often considers initiatives that affect every aspect of business like this as a big endeavor which is why it often takes a long time to convince them to buy in.
- Ensure you have the right skills in place
One of the top reasons for failure when implementing digital transformation projects is a lack of skills. Most digital transformation initiatives depend on cutting-edge technology that requires a level of skills and expertise that may not be readily available in-house.
According to an Indeed State of Digital Transformation report from 2017, 31% of respondents noted that a lack of digital talent and expertise was a real challenge to the success of their transformation initiatives.
Clearly, when working on a digital transformation strategy, businesses need to consider hiring skills that are needed to drive their transformation efforts forward.
Another effective solution to this problem is implementing digital products designed to leverage the existing knowledge base or skills within an organization. Platforms like Kissflow leverage citizen development as a pathway to achieve digital transformation goals.
- Prepare for culture change
Finally, you have to figure out how to get everyone in your company on board with your ideas and goals for digital transformation. True digitalization doesn’t just change the way a company works, it also transforms a company’s culture from top to bottom.
Resistance to such culture change is a roadblock that may delay or lead to the failure of digital transformation. It is therefore imperative that you communicate digital transformation goals to employees and show everyone the potential impact of digitalization on company culture.
Successfully adjusting your company culture to embrace the changes that will come with Digital transformation is key to ensuring the success of such an initiative
Once the digital transformation opportunities have been identified, the next step is to develop a roadmap. This involves creating a plan for how digital technologies will be implemented and integrated into the existing systems and processes. It's important to prioritize the initiatives based on their potential impact and feasibility and to define clear milestones and timelines for each initiative
Step 6: Implement and Measure
The final step in the digital transformation process is to implement the initiatives and monitor their progress. It's important to have a dedicated team in place to oversee the implementation and to ensure that the initiatives are aligned with the broader business strategy. Regular monitoring and evaluation are critical to ensure that the initiatives are delivering the desired results and to identify areas for further improvement. Identify the metrics to measure the impact of the digital initiatives and keep track of it. Track your digital Transformation progress by defining the right KPIs. To keep up the budget, it is important to measure the ROI of your digital initiatives. This can help you predict the state of success or failure of the journey.
Strategies in action
An example of a successful digital transformation strategy comes from one of Kissflow's clients, a leading healthcare organization. The healthcare organization had been struggling with operational inefficiencies, which led to long wait times for patients and increased costs. To address these challenges, the organization embarked on a digital transformation initiative to improve operational excellence.
The first step in the digital transformation process was to assess the current state of the organization. The healthcare organization conducted a comprehensive analysis of its existing systems and processes, identifying areas for improvement. The analysis revealed that the organization had multiple systems and processes that were not integrated, leading to inefficiencies and delays in patient care.
Based on the assessment, the healthcare organization identified several digital transformation opportunities, including the implementation of a new electronic health record (EHR) system, automation of administrative processes, and integration of various systems to improve data sharing and communication across the organization.
To develop the roadmap, the healthcare organization worked with Kissflow to define the scope of the digital transformation initiative, prioritize the initiatives based on their impact and feasibility, and define clear milestones and timelines for each initiative. The roadmap included the implementation of the new EHR system, automation of patient registration and billing processes, and integration of various systems to improve data sharing and communication.
The healthcare organization then implemented the initiatives according to the roadmap and closely monitored their progress. The new EHR system was successfully implemented, resulting in improved data accuracy and faster access to patient information. The automation of administrative processes also led to significant cost savings and reduced wait times for patients.
In addition, the integration of various systems improved data sharing and communication across the organization, resulting in better collaboration among healthcare professionals and more efficient patient care. The digital transformation initiative also resulted in improved patient satisfaction and loyalty, as patients experienced faster and more personalized care.
The healthcare organization's digital transformation initiative is a great example of how digital technologies can drive operational excellence and improve patient care. By working with Kissflow, the healthcare organization successfully defined and executed a digital transformation strategy that delivered significant benefits and improved the organization's overall performance.
In conclusion, developing a digital transformation strategy that drives business growth requires a comprehensive and thoughtful approach. By assessing your current state, defining your goals, identifying areas for improvement, researching technology solutions, and developing an implementation plan, you can ensure that your digital transformation efforts are aligned with your business needs and priorities.
And by involving stakeholders from across the business and fostering a culture of innovation, you can ensure that your digital transformation strategy is sustainable and continuously improves over time.
Kissflow’s digital transformation platform not only boosts productivity and solves multiple operational problems but redefines the way you work without the stress of a large-scale shift.
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