So, what is digital transformation? First things first, digital transformation is NOT only about technology. Digital transformation is a lot of things, first of them being an ongoing process of business improvement with a consumer-centric focus.
Being a comprehensive process, digital transformation includes aspects like technical and logistical changes to existing business processes, evaluation of internal and external factors, change management, organizational structure improvement, people management, etc.
How digital transformation impacts business
There are 3 main areas that the digital transformation of an organization improves: customer experience, company operations, and business model. Let’s have a closer look at each of them.
Customer experience
Customers are the most important stakeholders of any organization. Digital transformation helps businesses provide excellent customer experience and serve them in the best possible way. Now, there are several ways in which customer experience can be included in the digital transformation roadmap.
Customer experience also benefits from the digitization of data. Excellent customer experience implies a fast response rate for customer queries, which digital transformation helps facilitate through connecting the customer data across the organization in one source. When all available data is collected and centralized, it becomes easier for customer support agents to solve customer requests timely and efficiently. With the improvements in customer support, customer satisfaction also improves.
Using the above customer queries and solutions to them, companies gain a better understanding of their customer base. Through analyzing customer data, companies can determine trends across geographies and market segments. In data science, we use data-driven segmentation to extract all available data and distribute customers across pre-defined segments. This approach allows businesses to proactively and efficiently improve products and services to fit consumer needs.
The same insights can be used in digital marketing for brand and product promotion, social media, paid ads, and organic reach. As the number of channels of customer interaction grows, businesses need to maintain consistency across all channels. Omni-channel communication has become a requirement for winning customer engagement and overcoming competition.
Customers understand that digital transformation opens new opportunities for companies, and they expect impeccable service “in exchange” for their personal information. After the wave of GDPR concerns, customers who subscribe to promotional newsletters expect those to be personalized and answer their specific needs.
A properly used digital channel helps both, the company and the customer. Customers do not have to scroll through thousands of products over and over again thanks to personalization. Companies can now upsell more relevant products to customers, which results in more sales and better business performance. A Gartner survey of 388 global CEOs highlighted that 56% of the CEOs said their digital transformation framework has brought increased profits.
Operational Efficiency
Apart from the transformation of customer experience, businesses can benefit from process digitization. Even though the digital transformation of internal operations will not bring visible increases in profits right away, in the long term it opens many benefits for business.
Digital transformation is all about efficiency and connectedness. For a business’ operations, it often means automation of transactional, supply chain, and HR processes. For businesses taking the digital transformation strategy further, the areas of improvement include increased collaboration among employees of different levels and improved performance management.
The digital transformation framework enables significant efficiency improvements for transactional and supply chain processes. The core value of such a framework is in the simplification of existing workflows and the reduction of manual labor in data management. The data is collected in real-time in one source, usually, a dashboard, to help businesses follow operational processes end-to-end and accurately measure productivity and profitability.
In manufacturing, for example, where many processes can be or already are automated, digital transformation can improve quality control (digital systems can perform checks simultaneously on various machines) and increase safety on the job (detecting anomalies and malfunctions). For parts manufacturers, digital transformation means a more efficient product development cycle, as comparisons and checks are now performed digitally. Digitizing the product development cycle also allows for higher flexibility and speed of design change.
Digitization of HR processes plays on the human side of the process, automating daily tasks that do not require thoughtful decision-making. Digital transformation allows HR managers to focus more on long-term priorities, such as employee satisfaction and professional development. For employees, digital transformation brings broader communication channels and opportunities to collaborate with their peers of different levels and locations.
Business model
We see this concept implemented every day. From big brands to small physical stores, the vast majority of retailers have added online shops or galleries to their services. Many restaurants have added delivery services to their offerings. Many B2B companies conduct online consultations with potential clients or work with current clients remotely, to provide their services no matter the location. They not only acquire new customers by adding digital services but also increase the consumption of the existing customer base.
Recent pandemic effects have shown how digital transformation impacts business performance. Businesses with a functioning digital transformation framework could continue their operations and enabled employees to work from anywhere in the world. For retailers having a digital presence, sales losses weren’t as significant as for the physical stores that had to close completely. Here is an in-depth overview of the pandemic consequences for business.
The digital transformation of the business model implies constant innovation of products and services to meet the ever-growing customer expectations. Being digital means being agile. Changes to products, roadmaps, or ideas can happen faster and allow for data-driven decision-making.
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