Many newer companies have emerged in the wake of a digital era, so they naturally have a more innovative, modern approach to business.
However, in older organizations, both operational structures and working culture are built on traditional models. So it can be far more challenging to transition to effective ways of working and adapt new technologies and methods.
As much as it is difficult, though, it is also necessary.
To kickstart digital transformation, businesses can begin by focusing on its key pillars or first principles. This approach enables coordinated change across all departments.
The impacts of digitization have long extended past digital-focused companies, affecting organizations and individuals across a variety of industries. In the contemporary business environment, it’s even more essential for enterprises to go digital — and most organizations now have a clear understanding of the potential benefits.
We often discuss digital transformation, one of our main areas of expertise as a consultancy. As a reminder, IBM defines digital transformation as follows:
"Digital transformation takes a customer-driven, digital-first approach to all aspects of a business, from its business models to customer experiences to processes and operations. It uses AI, automation, hybrid cloud, and other digital technologies to leverage data and drive intelligent workflows, faster and smarter decision-making, and real-time response to market disruptions. And ultimately, it changes customer expectations and creates new business opportunities."
In short, digital transformation is the process of adopting and integrating technology across an organization to work more efficiently and better serve customers.
When done correctly, a shift to digital can accelerate change and empower people in the organization to embrace change and strive for growth. But digital transformation doesn’t occur as a single, isolated event — it’s usually a combination of several factors and changes that occur in alignment. For example, to improve IT practices within the organization, companies may need to integrate new infrastructure and processes to support this.
The issue is that, often, businesses are built and optimized for a pre-digital world, so they have long adopted traditional ways of running things and rely on outdated technology investments. No organization can become digital overnight or invest in costly (and risky) transformation programs. Instead, they need to work toward digital transformation through a series of steps — 1% improvements — balancing old and new capabilities.
To stay up-to-date with the modern business landscape, organizations may rush to achieve digital transformation. In the process, some could resort to an unbalanced approach, addressing only one isolated aspect of change at a time.
This results in a fragmented process, causing digital disconnects within the business and making it challenging to adapt to new tools and techniques. Both employees and customers can lose trust in the transformation initiative and doubt its positive outcomes. For the organization, this will also make it impossible to know whether the outcomes of the initiative are successful.
Businesses that have succeeded in their digital transformation efforts are characterized by an end-to-end approach that ensures that all areas of the enterprise are adopting changes simultaneously.
They focus on 4 pillars of digital transformation:
For many businesses, the first step to creating a truly digital company is adopting newer tools and platforms to upgrade the IT infrastructure. Modernizing tech and communications platforms will support innovation both internally and externally.
This might involve purchasing and implementing up-to-date software (and hardware, like new devices), which can improve employee efficiency and productivity, and will also help in updating business processes. Process transformation (covered in the next pillar) will likely require technology upgrading as many older systems become obsolete. For instance, companies that use CRM (customer relationship management) platforms may find new options that are faster and more efficient.
This primary pillar offers an opportunity to invest in digital resources, which will make the remaining changes more seamless to implement. It will also further help businesses satisfy changing customer demands and expectations.
The second crucial pillar of digital transformation is redesigning business processes and operations. Organizations can use their newly adopted digital tools to optimize and simplify existing processes, as well as create new ones.
This might involve restructuring internal systems to streamline company-wide operations or adding more efficient methods to meet evolving customer needs. We like the term rearchitecting processes, used by Harvard Business Review, that helps encourage digital transformation and “unlock more transformational possibilities.”
Organizations can start by analyzing all the processes required to run the business, and then apply new knowledge and tools to digitize these processes and design new ones. Success can be measured by tracking changes in the time and finances required to solve problems and serve customers. Time is particularly important because everything moves much quicker in a digital world, and there is no time for slow-paced, redundant processes!
The rapid evolution of the Internet has highlighted a necessity to adopt online-focused business models, which has changed how businesses approach sales and marketing.
Along with completing internal preparations and updating operations, companies need to pursue digital marketing in order to win over clients and build better brand awareness — especially after the business has gone through a transformation.
This pillar shifts the organization’s focus toward interacting with its client base and selling its product or service via increasingly digital channels. Just like updating business processes, companies need to ideate new marketing strategies and invest in digital marketing tools. For example, a business may want to run Facebook ad campaigns, and this will require other resources (e.g., a graphic designer or design software) and ad spending specifically for Facebook.
Going more in-depth, businesses that want to build a solid online presence and improve client acquisition will need to implement innovations like data collection and analysis software, AI tools to understand customers, and even new talent that handles digital presence.
Often, digital transformation efforts fail because companies forget that their digital initiatives have to be led and executed by people first. Simply buying new devices and software or designing complex processes without considering how to introduce them to internal teams can easily result in confusion, wasted resources, and unsuccessful efforts.
To ensure the transformation process is running smoothly across all departments, businesses must prioritize their talent and culture.
Generally, most organizations’ primary aims are attracting talent, maximizing employee productivity, and retaining customers. This should also be a focus for digitization: it can be achieved by creating a consistent and connected experience for employees, customers, and stakeholders.
Finally, the most critical initiatives — developing a vision for digital transformation and then crafting a strategy — have to be introduced and spearheaded by leaders. This is crucial to help people get things done, which is what will drive the shift across the whole company. Fortunately, many of today’s business professionals are digital natives who can spark innovation and help bridge the gap between old and new capabilities and business goals.
The 4 pillars are a helpful framework for companies that are starting to immerse themselves in digital transformation — and dealing with the accompanying organizational shifts. It outlines a thorough approach, covering all aspects of the business to ensure that change occurs across the entire organization.
Digital transformation is certainly not an easy process. A transition at that scale requires not only financial investment in new tools and methods, but also the ability and willingness to adapt and embrace innovation.
But the effort is worth it — a shift toward digital generates endless opportunities for modern organizations. It enables companies to develop better business models, create novel products and services, and even collaborate with the larger business ecosystem to pursue new sources of growth. Businesses must be agile and resilient enough to grasp these opportunities and thrive.