FAQ: Digital Transformation
Digital transformation is more than a buzzword. Companies have been devoting portions of their budgets to digital transformation for years now, and the trend is continuing. A recent Worldwide Digital Spending Guide from International Data Corporation (IDC) found that global spending on digital transformation technologies and services is expected to grow at 10.4 percent in 2020, reaching $1.3 trillion.
While this represents a slight decline from 2019, this is an impressive number given the impact COVID-19 is having on businesses and their willingness to invest. Personally, we are pleased to see spending on digital transformation during these unprecedented times, and we have written about why digital technology is the path to growth in the post-COVID world. We have also shared our ideas as to how digital transformation in the form of application development can help your business pivot, survive, and even thrive in our new normal.
Despite the attention given to digital transformation, we have found that many people still have questions about the best way to approach it for their business (and how to do so successfully). In an effort to help our customers and readers, we have compiled some of the top questions we get about digital transformation, along with answers based on our experience.
A. Defined simply, digital transformation is “a rethinking of how an organization uses technology, people, and processes to fundamentally change business performance.” We would like to expand on this definition.
We see digital transformation as the act of a business leader taking full advantage of amazing opportunities to build a competitive advantage using the technology now available. Technology is just as important to your business as building a factory or rolling out a new product line.
It is a massive opportunity. Your customers interact with your company now via screens; the bulk of your relationship with your customers is through various digital channels. The investment you make in digital transformation will pay off, if you do it right.
Middle-market companies—those with revenues of $10 million to $1 billion—have the most to gain from using technology to gain a competitive advantage, and to avoid being out-digitized by a rising upstart. Your business—in fact, your whole industry—can be radically disrupted by a company that provides new and convenient applications for their customers.
However, it’s also important to remember that digital transformation is more than just applications. What you do with the data regarding customers is just as important. How you use it to help them, to make their interactions with you more convenient, to offer up additional resources or products to them that they would appreciate, to be able to service them faster . . . all of this factors into true digital transformation. Digital transformation provides a seamless experience to customers, thanks to applications that instantly exchange data with each other, all while keeping customer data secure.
A. You wouldn’t bring a knife to a gunfight. You can’t compete with 2020’s digital businesses relying on 1990’s digital resources. Your customers know the difference, and their standards are established by the consumer-friendly apps they use every day.
As we like to say here at AVI, your company is only as good as your apps. In fact, as far as your customers are concerned, your company is an application—a place where they can go to get stuff done. This is more true now than ever before. In our new normal, customers and employees are relying on digital technology to communicate, interact, exchange ideas, engage, and make purchases. This shift was already happening; it just sped up when the pandemic changed the way we operate and live.
The truth is there are still many unknowns. But one thing we can be certain about is that people have quickly gotten used to relying on digital technology for almost every aspect of their daily lives. From ordering food and other products to group video conference calls and virtual school, digital is embedded in our routines. Businesses have to establish a strong digital presence that gives users what they need and want in an easily accessible format.
A. The detailed answer to this question is different for every business, but we would like to share some examples from various industries to get you thinking about the right answer for you.
Retailers can use digital technology for more than basic shopping. Suggestions on items a customer may be interested in and notifications for sales on previously purchased items are ways your business can stand out from the competition. Retailers can even use digital technology to help customers make informed purchases by using virtual technology to “try on” clothes and accessories or see how a piece of furniture will look in their living room. Just a tour through Amazon will reveal numerous other ways to help customers buy more from you: customer reviews; customers answering other customers’ questions; customer photos; “more like this”; “others also viewed”; “often purchased together”; in-stock status; sponsored products; videos; your browsing history; buy now or save for later, and more.
Service businesses such as doctors and hair salons can use digital technology to make it easy for patients and clients to schedule or change appointments. Restaurants can embrace mobile ordering and even enable patrons to schedule meal delivery for a week or more ahead. Fitness centers and other studios can provide virtual personal training and group classes.
Onsite chat is becoming the standard rather than the exception; customers are coming to expect it.
The more you leverage digital technology to make it easier for your customers or users to interact with you and use your products or services, the more likely they are to keep coming back and to recommend your company to others. Innovation through digital transformation can open new revenue streams, strengthen the loyalty of current customers, and help you win new customers.
A. We have worked with clients in various stages of digital transformation. For those who are just beginning, the best place to start is to create a clear business objective to establish a digital transformation framework. Items to cover include:
- The overall business goal, budgetary scope, and definition of success
- What the users of the digital resource will want to do with it
- The system or application you are transforming
- The scale and scope of the project
- Budgetary restrictions
- Ideal timeline
- Key stakeholders
A. We would like to tell you that digital transformation is easy. But our experience with clients who come to us after a failed attempt has shown us that it can be painful. This is particularly true if they are trying to make a large-scale change from a legacy system to one that serves today’s digital customers in the way they expect.
Another major obstacle to digital transformation is lack of a clear vision. There needs to be a consensus at the executive level about the goals for transformation, how they will be accomplished, and how success will be measured. As work gets underway, collaboration among all areas of the company is critical to success. IT cannot go off on their own and expect to successfully digitally transform the company. Input from key stakeholders across all business units must be gathered on a regular basis to make sure the path taken remains relevant and valuable to end users. Nor should the company move ahead without input from real customers.
Digital transformation requires money. Your organization has to be willing to make the investment in technology. We have seen cases where a company simply didn’t have the financial resources to invest in digital transformation, but we have also seen instances where upper management was just unwilling to make the investment. The best approach here is to create a detailed business plan that demonstrates the ROI of investment in digital, so you can gain buy-in from above.
Your overall corporate culture can also become a roadblock to digital transformation. This is a big change for some companies, and a risk-averse culture can put the brakes on change. Similar to the budget dilemma, a strong business case outlining the benefits and ROI of your digital transformation
A. A digital transformation team is comprised of individuals with skills in a wide variety of areas. Be sure to bring in people with knowledge in:
- Software application design and development, including user experience and user interface design
- Cloud computing
- Project management
- Data science
- Quality control
If you don’t have all of these skills in-house, we recommend seeking outside assistance. It costs more money to go back and fix something that wasn’t done properly than it does to invest in the necessary resources to do it right the first time. It’s also important to keep in mind that your customers will remember their first digital interaction with you, so you want to make a good first impression.
A. The bad news is you are never done with digital transformation. But this is also good news. If you are continuing to digitally transform your business, it likely means that your customers or users are engaging with you and want to keep doing so, just in new ways.
Technology is always changing, so while there may be a lull in your digital transformation work, you will eventually find yourself back at it. You may have also started small and are now ready to expand and scale your transformation efforts across the enterprise.
We work hard for our clients, thinking about new ways digital technology can help their business surge ahead and stand out in the market. It is this type of forward thinking that is essential for long-term growth and profitability.