The digital technologies inclusive of information, computing, communication and connectivity, have unleashed new opportunities for business model innovation. It has, over years, transitioned from being just an administrative tool to a one that drives organizational activities in a strategic way thereby supporting the realization of the business strategy. The new digital technologies have a growing impact on an organization’s activities due to the significant increase of computational power, storage volume capacity, and processing, which allows the organizations to make better decisions, enrich operational excellence and provide customers with an engaging experience. [1] Moreover, the rise of digital technologies and digital technologies applications has offered innovators and entrepreneurs opportunities to value creation and value capture.
The emergence of digital technology as game changer, in the recent years, have resulted into the bankruptcy of large and well-established companies that were disrupted by innovative business models which was tightly integrated with new digital technologies. Nokia, Kodak and Blockbuster are paramount examples of once a behemoth in respective industries failing to survive the change. On the one hand, they failed to acknowledge that the new digital technologies enable significant business improvements such as enhancing customer experience, streamlining operations, creating new business models, or transforming the traditional business. On the other, the brands that embraced digital technology and walked the path of digital transformation changed the way industry operates. For example, Netflix transformed the entertainment industry by offering on-demand subscription-based video services to its customers. Like the video rental company Blockbuster, Netflix also had a pay-per-rental model, which included DVD sales and rent-by-mail services. However, Netflix anticipated a change in customer demand with rising digitalization and provided online entertainment, thereby wiping out Blockbuster – and the movie rental industry – entirely. In 2007, Netflix survived as it used digital technology to transform the business model. It launched a video-on-demand streaming service to supplement their DVD rental service without any additional cost to their subscriber base.
In the business world, digital transformation challenges managers to rethink their business models, foster digital innovation as a key driver for economic success and adapt their organizational strategy, structure, and culture to the requirements of the digital age. For an example the luxury clothing and accessories brand – Burberry has always focused its digital strategy on driving improved customer experiences, and this includes launching virtual stores, where customers can get hands-on with digital likenesses of its products as well as receive personal one-to-one attention from the virtual sales associates with expert product knowledge.
No digital transformation discussion is complete without acknowledging the implementation of unconventional ideas of Elon Musk at Tesla. Over the years, Tesla has innovated continuously to improve its product, make itself more economical, and reduce its carbon footprint by effectively using digital technologies like connected car technology and over-the-air software updates. Digital transformation at Tesla is not a one-time activity but part of the corporate culture. At Tesla they understand that the digital transformation is a continuous complex undertaking that can substantially shape a company and its operations.
Digital transformation is the strategic adoption of digital technologies. It’s used to improve processes and productivity, deliver better customer and employee experiences, manage business risk, and control costs.
Definitions of digital transformation
The term digital transformation has been widely discussed and extensively promoted both to and by companies in every industry to become overused. While generally accepted as a boon and often marketed as the only alternative to extinction for a firm, digital transformation remains a significant challenge for those assigned to implement it. [2] The journey of digital transformation is not easy and so is the evolving definition of digital transformation. There are various definitions of Digital Transformation from different perspectives but there is no generally accepted definition for the term digital transformation.
Digital transformation is the result of the digitization and digitalization of economies and societies, and it is an ongoing process. The term “digital” indicates that the changes will be driven by information technologies that allow real-time data processing and intelligently derive information to provide stakeholders with improved knowledge of processes and products.[3] It is also agreed that the term digital is less about one process and more about how companies conduct their business. It will only be apt to say that digital is the strategic application of advanced interactive technologies that end users access to facilitate transactions and interactions, that are logical, efficient and superior in experience. [4]
The term transformation expresses fundamental changes in organizations, which have an impact on strategy, structure and the distribution of power. The organizations can use business transformations to identify market obstacles, capitalize on evolving technologies, and adapt their business practices. Business transformations are designed to boost overall performance through increased revenue, lower operating costs, and better customer satisfaction and workforce productivity. [5] Hence, Digital transformation can be seen as a process of the continuous adoption of a changing digital technology to meet the ever-changing expectations of customers, employees, and partners. The implementation of technology in business processes is only a small part of digital business transformation.
Three dimensions of Digital Transformation
The academicians and practitioners both agree that digital transformation is a profound change in business that strongly influences the opportunities offered by digital technologies. It affects business activities, processes, competencies, and models to create value for the customers, acquire new capabilities in response to rapidly changing market requirements, manage risk, or improve efficiency. It is also agreed that digital transformation is not something that can be accomplished overnight. MIT Sloan Management Review sees it as a journey, a progression comprised of three phases – Digitisation, Digitalisation, and Digital Transformation. The first phase is the fundamental change from analog to digital or digitization. The next phase is the digitalization of industries: the act of making processes more automated through the use of digital. The final phase in this framework is digital transformation, which occurs when new digital business models and processes restructure economies. A successful digital transformation can happen when people, processes, and technology are considered as an integrated set, aligned to the corporate vision and business model. Let’s explore the three phases – Digitisation, Digitalisation, and Digital Transformation
Digitisation: Digitisation is the process of translating analog information and data into digital form – for example, scanning a photo or document and storing it on a computer. It is the most common way of converting analog information into digital form. For example, scanning a paper document, keying in data points into an Excel spreadsheet, etc. This is the first phase – where most traditional companies make errors that greatly impede their efforts. Many organizations fall prey to the temptation to quickly acquire and incorporate new technologies, viewing them as panaceas and not as essential elements in a long-term strategy. The truth is that the process is much more complex and layered, and it requires careful planning. Coca-Cola Bottlers’ Sales & Services (CCBSS) adopted automated document scanning and processing in the first phase of the digital transformation journey. CCBSS worked on the change as it found that the then system in place was unreliable and needed a digital technology upgrade.
Digitalisation: Digitalisation is the use of digital technologies to change business processes and projects – such as skilling employees to use new software platforms designed to help launch products faster. It deals with information processing, or how digitized data can be used to improve workflows through automating existing processes. Digitalization refers to enabling or improving processes by leveraging digital technologies and digitized data. Gartner defines digitalization as the use of digital technologies to change a business model and provide new revenue and value producing opportunities. This is the next phase of digital transformation journey. In this stage it is mostly about act of making processes more automated through the use of digital. In this stage information is combined and thus connected and easier to use, to simplify or speed up some operations that were previously done manually. This implies that digitalization induces transformation rather than supporting and developing traditional ways of working. The CCBSS in the next phase of the digital transformation journey to help put its document processing efforts on track are using Ripcord’s robotics and ML software. The CCBSS can now flawlessly process documents. The new technology removes staples, accurately reads scans using ML, and automatically sends finished documents to customers – with near-zero error rates.
Digital Transformation: Unlike digitization and digitalization, digital transformation changes the way of doing business and the way things are done. It adds value to every customer interaction. During the process of digital transformation, businesses are reevaluating everything they do, from internal procedures to online and in-person customer encounters. Digital transformation includes all aspects of business that change due to the digitalisation of business processes, like new customer interactions, online growth strategy, remote work, and more. It is a completely new use of digital technology that solves new complex problems. These series of digital solutions can lead to new types of creative innovation, rather than just upgrading what already exists. This is the final phase in this framework is digital transformation, which occurs when new digital business models and processes restructure economies. Societies also evolve as people integrate the technologies into their lives and habits. Digital transformation is a systems-level transition that alters behaviors on a large scale. Dominos is one of the classic cases of an organization transforming itself regularly to be on the top of the growth curve. Over years, Dominos has invested heavily in multi-channel approach to customer experience – letting customers order pizza using just about any device or service you can name. It not only encourages one to order through mobile apps, but also offers option to order pizza directly from televisions, social media platforms, and home assistants like Alexa and Siri. The brand has worked on “zero-click” ordering to reduce customer friction to the bare minimum. Dominos in last few years have successfully transformed itself into a food-tech company.
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 is the process of using digital technologies to create new or modify existing business processes, culture, and customer experiences to meet changing business and market requirements. In simple words, Digital transformation is the strategic adoption of digital technologies. It is used to improve processes and productivity, deliver better customer and employee experiences, manage business risk, and control costs. The hotel chain Marriott uses digital technologies to prioritize customer relationships and personalize customer experiences. Marriott to drive customer satisfaction has automated processes such as booking, check-in and checkout. The brand strongly believes in the power of data drive customer experiences. It aims to build 360º customer profiles and make them available to personalize the entire travel journey, which requires accurate data collection and analysis. The digital transformation initiatives has helped Marriott gain stronger customer loyalty, boosting its revenue and market share.
According to Harvard Prof. Michael Porter, producing greater operational efficiency [using technology] is something that should be done but it’s not strategic. Digital transformation is the strategic repositioning of one’s business in the digital economy. The digital transformation is an organizational transformation that integrates digital technologies, business processes, organization culture and people.
Digital transformation might appear different for each company, so it can be difficult to find a universal concept or a definition that applies to all. We can describe digital transformation as integrating digital technologies into all business sectors, resulting in profound changes in how businesses function and give value to consumers. [6] It is the use of technology to radically improve the performance or reach of enterprises. Let’s explore dimensions and understanding of various experts: Source: [7] [8] [9]
Matt et al. ( 2015 ) Digital transformation strategy is a blueprint that supports companies in governing the transformations that arise owing to the integration of digital technologies, as well as in their operations after a transformation.
Hess et al. ( 2016 ) Digital transformation is concerned with the changes digital technologies can bring about in a company’s business model, which result in changed products or organizational structures or the automation of processes. These changes can be observed in the rising demand for Internet-based media, which has led to changes in entire business models (for example, in the music industry).
Liere-Netheler et al. (2018) The use of new digital technologies (social media, mobile, analytics, or embedded devices) to enable significant business improvements (such as enhancing customer experience, streamlining operations, or creating new business models).
Horlach et al. (2017) Digital transformation as encompassing the digitization of sales and communication channels and the digitization of a firm’s offerings (products and services), which replace or augment physical offerings. Furthermore, digital transformation entails tactical and strategic business moves that are triggered by data driven insights and the launch of digital business models that allow new ways of capturing value.
Henriette et al. (2016) The digital transformation is a disruptive or incremental change process. It starts with the adoption and use of digital technologies, then evolving into an implicit holistic conversion of an organization, or deliberate in pursuing value creation.
Horlach et al. (2017) Digital transformation as encompassing the digitization of sales and communication channels and the digitization of a firm’s offerings (products and services), which replace or augment physical offerings. Furthermore, digital transformation entails tactical and strategic business moves that are triggered by data-driven insights and the launch of digital business models that allow new ways of capturing value.
Schmarzo et al. (2017) Digital transformation is the adoption of digital technology by an organization. Common goals for its implementation are to improve efficiency, value or innovation.
Fitzgerald et al. (2014) Digital transformation is the use of new digital technologies such as social media, mobile technology, analytics, or embedded devices to enable major business improvements including enhanced customer experiences, streamlined operations, or new business models.
Solis et al. (2014) Digital transformation is the realignment of, or new investment in, technology and business models to more effectively engage digital customers at every touch point in the customer experience lifecycle.
Hinings et al. (2018) Digital transformation is the combined effects of several digital innovations bringing about novel actors (and actor constellations), structures, practices, values, and beliefs that change, threaten, replace, or complement existing rules of the game within organizations, ecosystems, industries, or fields.
Bondar et al. (2017) Digital transformation is a consistent networking of all economic sectors and an adaption of actors to new circumstances of the digital economy.
Martin (2008) Digital transformation is the use of information and communication technology, not when trivial automation is performed, but in the case where fundamentally new capabilities are created in business, public government, and in the lives of people and society.
Ismail, Khater, and Zaki (2017) [Digital transformation is a] “process through which companies converge multiple new digital technologies, enhanced with ubiquitous connectivity, with the intention of reaching superior performance and sustained competitive advantage, by transforming multiple business dimensions, including the business model, the customer experience (comprising digitally enabled products and services) and operations (comprising processes and decision-making), and simultaneously impacting people (including skills talent and culture) and networks (including the entire value system).
European Commission (2019) Digital transformation is characterized by a fusion of advanced technologies and the integration of physical and digital systems, the predominance of innovative business models and new processes, and the creation of smart products and services.
Bloomberg (2018) Digital transformation requires the organization to deal better with change overall, essentially making change a core competency as the enterprise becomes customer-driven end-to-end. Such agility will facilitate ongoing digitalization initiatives but should not be confused with them.
Deloitte (2018) Digital transformation is the use of technology to radically improve the performance or reach of an organization. In a digitally transformed business, digital technologies enable improved processes, engaged talent, and new business models.
PwC (2013) Digital transformation describes the fundamental transformation of the entire business world through the establishment of new technologies based on the internet with a fundamental impact on society as a whole.
Westerman et al. (2011) Digital transformation (DT)- the use of technology to radically improve the performance or reach of enterprisers- is becoming a hot topic for companies across glob. Executives in all industries are using digital advances such as analytics, mobility, social media, and smart embedded devices- and improving their use of traditional technologies such as ERPto change customer relationships, internal processes and value propositions.
Bouee and Schaible (2015) We understand digital transformation as a consistent networking of all sectors of the economy and adjustment of the players to the new realities of the digital economy. Decisions in networked systems include data exchange and analysis, calculation and evaluation of options, moreover, initiation of actions and introduction of consequences.
Mazzone (2014) Digital transformation is the deliberate and ongoing digital evolution of a company, business model, idea process or methodology , both strategically and tactically.
Bowersox et al. (2005) Digital Business transformation is a process of reinventing a business to digital operations and formulate extended supply chain relationships. The DBT leadership challenge is about reenergizing businesses that may already be successful to capture the full potential of information technology across the total supply chain.
Digital transformation is reshaping the world.
The digital transformation is accelerating the pace of technical and organizational innovation, empowering new market entrants, and generating new categories of goods and services. In the last two decades the convergence of digital technologies including social media, smartphones, data analytics, cloud, and the IoT created both opportunities and significant threats to established companies. Some of the large corporates like Comcast, Netflix, Nike, Nestlé, Spotify, Sephora, UPS, and Domino’s used these technologies to their advantage. These new technologies have also emerged as the foundation for the new start-ups transforming the way businesses operate and changing the way people live; testament to it is the rise of platforms like Apple, Microsoft, Amazon, Alphabet (Google), Meta (Facebook), Tencent and Alibaba and emerging as tech giant. These organizations both, traditional and new age have increasingly invested in most of the emerging technologies like social media, smartphones, data analytics, cloud, and the IoT. These successful companies have also invested their resources in building and supporting data network and global data value chain – data collection through the user-facing platform services; data transmissions through submarine cables and satellites; data centres; and data analysis, processing, and use.
Digital transformations are an imperative as today’s leading corporations need to build bionic capabilities in order to harness the potential of disruptive technologies and integrate them into new processes, organization models, and ways of working. The consulting group BCG suggests six critical success factors for digital transformations – One, An integrated strategy with clear transformation goals; Two, Leadership commitment from CEO through middle management; Three, Deploying high-caliber talent; Four, An agile governance mindset that drives broader adoption; Five, Effective monitoring of progress toward defined outcomes; and Six, Business-led modular technology and data platform.
[1] Digital Transformation Framework; Tomas Alegria Garcia Aguiar
[2] Digital transformation and corporate strategy; Anna L. Denisova, Alexander N. Lopatnikov; Management information technologies – 2022.
[3] Digital Maturity Assessment Model for the Organizational and Process Dimensions, Agnieszka A. Tubis
[4] What ‘digital’ really means ; McKinsey & Company; July 2015
[5] What is business transformation?; McKinsey & Company; April 2023
[6] Digital Transformation – More About People Than Technology; Serengeti
[7] A Systematic literature review of Digital Transformation Mohamed-Iliasse Mahraz , Loubna Benabbou, Abdelaziz Berrado, Proceedings of the International Conference on Industrial Engineering and Operations Management Toronto, Canada, October 23-25, 2019
[8] Key activities of digital transformation – comparative analysis of selected models, April 2023, Jakub Semrau, Mateusz Zaczyk
[9] Digital transformation: conceptual framework; Natalja Verina, Jelena Titko, J. VGTU Press 2019.
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