What Exactly is Digital Transformation?

Digital transformation (DX) is expansive and ever-changing.

It’s also a subjective, abstract concept, often dismissed as meaningless jargon. You know, the stuff pitch decks and hype cycles are made of.

All of these factors make it hard to nail down an official definition – and even harder to convince orgs to take DX seriously.

In this article, we’ll try our best to define digital transformation – beyond its reputation as an empty buzzword and separate from the technologies that defined previous iterations.

We’ll also provide more context using real data and real-world examples to give you a better understanding of digital transformation and what it means in this wild, post-COVID landscape.

Definition of Digital Transformation

One recent CIO article describes digital transformation as a “necessary disruption.” Which is… both vague and right on the money.

However, if you’re looking for a more traditional definition, digital transformation describes the process of embedding technology across the entire business to fundamentally change how it operates and generates value for its customers.

According to HBR, digital transformation is not about specific tools or technologies. It’s about outcomes. Whether that means taking down emerging competitors, anticipating new needs, responding to evolving expectations, or making high-impact decisions in real-time is more about your strategic goals than what your competitors are doing or which emerging technologies are currently trending.

A 2022 IBM report calls digital transformation “a way of life” for modern businesses, noting that tech transformations have the potential to reshape business operations — but that it’s critical for orgs to focus on continuous improvements, rather than a “perfect end state.”

What Does Digital Transformation Mean for Businesses?

Digital transformation is important because it impacts the entire business. We’re talking: how you collaborate with colleagues, communicate with stakeholders, and engage customers. The way you define strategic objectives, improve processes, and decide what raw materials to buy or services to offer.

Even your company’s culture and collective mindset. DX helps businesses become more agile, resilient, and competitive — essentially, it protects against future threats and enables orgs to move quickly to take advantage of emerging opportunities.

Every digital transformation project is different. Each has its own set of goals, metrics, and means of achieving success.

But ultimately, all DX initiatives center on building integrated systems that redefine business models, products and services, and how employees collaborate with each other and engage customers.

Here’s a look at three key things that all successful transformations have in common:

DX is Customer-Centric

Unfortunately, a lot of companies lose sight of the fact that at their core, transformations are driven by the customer.

Successful transformations start by gaining a deep understanding of the customer’s needs and expectations. Then from there, they can start redesigning business processes, products, and services around specific customer outcomes.

Aligning DX initiatives around customer needs also means companies need to ensure that their employees are prepared to deliver the desired outcome.

The more you focus on empowering your people, the better outcomes they’ll deliver for your customers and the bottom line. Investing in re-skilling employees, for example, ensures that your workforce is always prepared to meet customers where they are right now.

And — automating low-value tasks frees up allows employees to spend more time nurturing customer relationships and solving complex problems.

Transformation Initiatives Must Align with Strategic Goals

Digital transformation requires that individual processes, people, and functions work together toward a common objective. But — unfortunately, pulling it off is a lot harder than it sounds.

A 2021 BCG survey found that just 35% of companies successfully reached their digital transformation goals. Now, that is a slight improvement from the year before — with 30% of participants hitting DX goals. But it’s still a pretty grim statistic: 65% of transformations are doomed to fail.

That said, it’s not like failure is outside of your control. There’s more to it than this, but success starts with an integrated strategy and clearly-defined objectives.

• Your strategy should answer the following questions:
• What are you trying to change?
• Why are you making this change in the first place?
• Do you have adequate data to justify this decision?
• What do you hope to achieve?
• How will you achieve the desired results?

Each of those answers should also be linked to quantifiable outcomes — and the KPIs that measure progress toward those goals.

Another BCG report calls out organizations for taking too narrow an approach. Analysts note that many digitally-proficient orgs define DX initiatives too narrowly. Often, they focus on digitizing individual processes in isolation, rather than redesigning end-to-end processes across all business units.

Ad-hoc improvements to specific workflows or functions need to go. Businesses must embrace change on a holistic level to reap any meaningful returns.

Additionally, you’ll want to ensure you have the right infrastructure in place to support your transformation goals. For example, you’ll have a hard time accessing — much less operationalizing — your data without a unified, cloud-based system.

You’ll also want to look toward modular solutions — like Dynamics 365 — which will give you the flexibility to rapidly scale up or down with demand and update your stack as your strategy evolves.

It’s Cultural

Again, digital transformation isn’t just about upgrading your tech stack. It’s also about changing your company’s business processes and goals — on an org-wide level.

It’s important to understand that transformations on this scale and scope demand serious systemic change. In other words, businesses need to transform their culture way before technology comes into play.

See, it’s the people that make or break a transformation. Failing to align DX objectives with employee behavior and values not only derails the project, it threatens to undermine the company’s culture.

As an example, if employees don’t understand a change — or outright disagree with it — it damages morale, creates roadblocks, and makes it harder to attract and retain talent.

Organizations must embrace a people-first approach focused on leveraging technology to make things better for employees and customers.

A recent MIT Sloan piece argues that DX must balance cultural change and continuity to be sustainable and secure longevity.

The idea is, most failed transformation initiatives prioritize cultural change at the expense of continuity — a misstep that results in chaos. That said, continuity without change creates a culture of conservatism, which doesn’t exactly support innovation or transformation.

The article cites the New York Times as one such company that really nailed that balance. NYT was able to maintain cultural continuity while adapting to a changing media landscape. They embraced a new format, but kept the same commitment to quality reporting (and hard copy holdouts still have the option to get an actual paper delivered to their door).

The point is, transformation isn’t about throwing out the stuff that’s working, it’s about adapting your business to new conditions.

Final Thoughts

Hopefully, this gives you a better understanding of what digital transformation actually means in context with today’s business landscape.

Again, DX is about implementing the tools, tech, talent you need to get you where you need to go – and bolster your business against future unknowns. The means of getting there aren’t quite as important.

Additionally, digital transformation isn’t a fixed thing. Finishing one transformation initiative doesn’t mean you’ve reached the end of the journey – there’s always something you can automate, optimize, or improve.

Today’s business leaders need to think of DX as another element of their day-to-day, not this big push for change that comes around every decade or two.

Velosio experts can help you determine how to best leverage Dynamics 365 and the rest of the Microsoft stack to drive game-changing transformations.

Ready to get started on your own Digital Transformation? Learn more about the process here.