What is digital transformation? A necessary disruption

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Clint BoultonSenior Writer, CIO | JUN 24, 2021 2:00 AM PDT

Digital transformation is a foundational change in how an organization delivers value to its customers. Here is what transformation entails, along with tips to ensure your company is on the correct course.

Already a key strategic initiative, digital transformation — a catchall term for describing the implementation of new technologies, talent, and processes to improve business operations and satisfy customers — has taken on heightened importance during the COVID-19 pandemic.

Companies’ adoption of digital technologies has sped up by three to seven years in just months, with companies accelerating efforts for fear of being outflanked by competitors.

Digital transformation defined

Digital transformation marks a rethinking of how an organization uses technology, people, and processes in pursuit of new business models and new revenue streams, driven by changes in customer expectations around products and services.

For many enterprises that build traditional goods, this means building digital products, such as a mobile applications or an ecommerce platform. 

To do so, they must operate at the cadence of software companies, most of which operate on product-based models, says Forrester analyst Nigel Fenwick. “There is more value, or perceived value, created through software,” he says.

Ideally led by the CEO in partnership with CIOs, CHROs, and other senior leaders, digital transformation requires cross-departmental collaboration in pairing business-focused philosophies with rapid application development models.

Digital transformation strategy

For the past several years, companies have embarked on digital transformation journeys to counter the potential for disruption from incumbents and startups, but the sledding has been slow — until the pandemic.

Retailers such as Walmart and Bed Bath & Beyond shook up store operations by switching to curbside delivery and other contactless options to help consumers safely get their goods.

IT leaders meanwhile reprioritized strategic IT roadmaps, with many adopting cloud software for video collaboration and implementing machine learning (ML) software that helps enterprises to manage how products wend through supply chains.

On a point-by-point basis, such implementations don’t facilitate transformation

Rather, how these tools and other solutions are woven throughout an enterprise presents a clearer picture of a company’s digital fitness — and reflects its business priorities.

Digital transformation examples

Carrier, a manufacturer of HVAC and security systems, regularly looks to build new software products to help building managers automate much of their facilities systems. 

Its latest product is Abound, a SaaS platform that aggregates data about indoor air quality and occupancy from building systems and sensors and transforms it into insights, says Carrier Chief Digital Officer Bobby George, who led the construction of the system, which is in pilot mode and runs in Amazon Web Services.

George says that true value is “abstracting all of that data” out of existing building management systems and helping make sense of it. 

He hopes that customers will pony up cash to use it, generating a new revenue stream for Carrier.

Sometimes the digital change comes down to capturing the right business insights and making them actionable. When Jersey Mike’s wanted to know how customers were interacting with its mobile app, it used analytics to slice and dice metrics around members of its loyalty program as well as those who hadn’t yet signed up for its program, says Kelly McGee, the sub sandwich franchiser’s director of digital marketing.

The marketing team targeted each cohort with personalized push notifications, resulting in a 43% lift in loyalty members claiming rewards prizes and a 38% bump in conversions to its loyalty reward program, doubling online sales, says McGee, who credits software from Amplitude with providing the analytics insights.

“We can follow the promotional campaigns to see which customers are bringing in the most lifetime value,” McGee says. “The main focus going forward is delivering personalized content to the right person via the right device at the right time.”

Digital transformation pitfalls

Digital transformations are lagging or even failing for several reasons, including 

  • poor leadership, 
  • disconnects between IT and the business, 
  • lagging employee engagement, and 
  • substandard operations.

But the key culprits of a derailed digital transformation are 

  • obsession with big bang change, 
  • focus on cost cutting as a business driver, and 
  • failure to loop in the business.

“Boardrooms and C-suites talk about digital and there is pressure to show something and show results, which creates wrong expectations about how quickly what can be done and when,” says Genpact CEO Tyger Tyagarajan.

Originally published at https://www.cio.com.

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