Digital Transformation is nowadays a key component in the overall strategy of a company. Although being pointed out as a hot topic for discussions, it should be taken seriously by companies as it is crucial for its survival and growth.
Like many technological changes, digitalization also offers many barriers but when placed on a scale, the benefits of starting now this change, offer many advantages in the long term.
How Digital Transformation has started
To understand Digital Transformation, we need first to understand how it all started.
The “father of modern digital technology communications and information theory” was Dr. Claude Shannon who wrote in 1948 “A Mathematical Theory of Communication from where all internet has been built from.
Only after the invention of the microchip and semiconductors, was possible to develop the first computers. Its job, do some tasks that took too much time to humans, mainly high-level calculus.
Once a system of computers was available for some restrict segments of the population, like military and research institutes, there was a need for connecting them. This is where the first network come along – ARPANET in 1969. Objective: help research and data be available almost instantly for faster spread of knowledge and development.
As computers grew in number and software started to be developed for business purposes, the new network (INTERNET) was presented to the world.
From 1948 with the theory, to inventing the first microchips and transistor, to the Web 1.0 (90´s), 2.0 (2000´s) and 3.0, all the systems whether hardware or software were developed to help us do some of the tasks we needed to do, with more efficiency.
All these changes reflect Digital Transformation.
What is Digital Transformation?
After this overview of how digitalization started, we can now define what it is. According to McKinsey, Digital Transformation is “an effort to enable existing business models by integrating advanced technologies”, which lead us to my definition:
Digital Transformation is the use of processes, technologies and strategies to achieve specific objectives allowing innovation, simplification and efficiency with a culture and mindset embedded.
Let’s further down this definition.
Imagine a corporate culture trying to figure out what´s the next big competitive advantage, or best opportunity, or best product fit, or best market.
To go for the next mile, we need to deepen further our knowledge, pass it along to our organization and have our people engaged in change. Change is not always easy and simple and if the culture and mindset of the organization is averse to change, then we have a strong barrier to growth.
When we have a mindset and a culture for change, then we can clearly identify our objectives, whether is becoming more efficient, highlighting new business opportunities, new products, etc.
Once our objectives are clearly defined, we need to analyze our organization and see what is missing in terms of processes and technologies, to help define the strategies to achieve our goals.
Processes help us define a path from A to B and give us guidelines of action. The processes may be for example quality, automation, analysis, etc.
Then we have technology that helps gather, store, analyze, predict, etc, etc.
At this stage, technology becomes crucial for the digitalization of a business and there are a few that should be considered.
Technologies to consider for the digitalization of companies
Technologies in an organization can be a CRM where all commercial and customer information is stored in an organized way and its outputs can give a lot of information to make decisions. All the outputs serve a specific goal and are configured as desired.
Other technologies that are being used to increase the efficiency of decisions are machine learning systems. It chooses the best option based on our customer profile, our own profile, or on the past choices of someone with the same profile. An example of this is when we go to YouTube and the first options are based on what we saw last or what people with the same profile as us also had interest in.
When you buy in a marketplace and you are choosing a specific type of product, you will see references to products that other people also bought while searching for the same kind of products. That´s an example of Machine learning.
There are technologies that go beyond the simple concept of machine learning and Artificial intelligence is one of them. Artificial Intelligence is the simulation of human processes by machines. One example of a strong AI system (doesn´t need human intervention) is autonomous driving and a weak AI system example is speech recognition.
In business, the chatbots that we interact with while doing an online purchase, have some AI capabilities to help resolve some issues to customers, without human intervention.
Blockchain technology is one of the most recent technologies and most of us know it from cryptocurrency, but its scope goes far beyond. The principle of blockchain is a network that is immutable (can´t be changed), distributed (all the network has the information), encrypted (very secure), should be decentralized (managed by its users, not a single entity controls it) and should be tokenizable (what happens in crypto).
Sensors are the base of almost all types of technologies, like IoT or AI. These are devices that create a readable signal that is then displayed on an instrument.
Sensors are related to sensing technology, which is the technology that uses sensors to get information by detecting physical, biological property or chemical property quantities transforming it into a readable signal.
IoT is known as the network that connects physical objects that have sensors, software and other types of technologies, to exchange data with other devices and systems. Nowadays we can see this technology on kitchen appliances, our cars, or even home robots but its potential is much greater for society in general.
Digital transformation strategies are involved in every area of the organization, that’s why it’s so important to involve all the organization in this process. However, there is an area that should embrace this change like no one else – The Digital Marketing Team.
Marketing will use platforms, for example, to gather all the information from the interaction of their contacts, or for the automatization of engagement flows or will be able to give information about how customers act in a sales flow.
Why is Digital Transformation crucial to every organization?
We live in a society that is fast growing, where everything moves and changes fast.
McKinsey published a study where the average lifespan of a company in the US (S&P 500) was 90 years in 1935 and was in 2018…18 years and reducing.
Fast growing opportunities lead to new challenges coming in different markets and the companies that are less flexible and have more problems adapting will be prone to close down.
Digital Transformation is the key for helping faster and better decision making, Data Driven Decision making outperforms HIPPO’s bias (HIghest Pay Person in the Office) by far if it´s well implemented.
Digital Transformation is crucial for the following:
Company efficiency – Fewer resources lost, time, energy with the implementation of new processes and workflows
Transparency – Information should be clear and transparent for the stakeholders, management, employees, customers and suppliers.
Decision making – Data should, at least, help make strategic and tactic decisions.
Employee engagement and culture – continuous growth makes the younger generation more engaged with the company.
Revenue growth – More opportunities identified and faster engagement lead to more revenue.
Flexibility – faster decision allows a company to be more flexible. We should aim to have the size of an aircraft carrier but be as flexible as a speed boat.
Improves competitive advantage – See what competitors can´t see due to “business blindness” and will make companies who adapt faster and have systems to help them make decisions, to gain share of the market
Increase the global digital footprint – digital marketing, marketplaces, communities, etc, allow companies to get new customers from places they would not reach if they hadn’t adapted to digital transformation.
The Digital Transformation of companies is today a factor of success for businesses. More digitized business processes and the easiness on getting more and better data are helping companies to define better strategies to successfully achieve main goals and consequently helping in the growth of companies.