Digital Transformation: what it is and how important it is for companies

What does Digital Transformation mean? By digital transformation we mean the process of profound change that an organization, understood as a company, government, or other public or private body, faces to exploit the opportunities offered by digital innovations in a strategic and targeted way.

To be revolutionized are:

  • business strategy,
  • business model,
  • internal organization,
  • productive process,
  • skills and the culture itself of the activity.

The reasons that led to this revolution can be many: the need to respond to new and specific customer needs, the emergence of particularly innovative competitors, the urgency of a technological adaptation to keep up with the times, and the crisis in the sector.

Do you want to know how to make a digital transformation in the company? Well, then read on, and together we will see:

  • What is meant by the digitization of business processes;
  • What are the steps to take for digital transformation;
  • Do’s and don’ts for a successful digital transformation.

If, then, you want to keep up with the times and reap the benefits of Digital Transformation, then I suggest you delve into the subject with the Business Innovation path.

Why is Digital Transformation so important?

The success of Digital Transformation is therefore linked to the ability to keep up with the continuous changes in the market, technologies, and customer/consumer expectations. It is a journey that does not end with a few technological adjustments or strategic changes but must evolve over the years, involving all the human capital of the institution, changing habits, and the traditional modus operandi.

success digital transformation

At a company level, digitization is essential to be agile and competitive, especially for the most innovative companies, such as startups. It shouldn’t be done to fill the company with technology; however, technological innovation is the necessary condition for adopting digital and introducing more “smart” working patterns.

Digital transformations make it possible to create innovations and advantages for the company and the customer. For example:

  • they can improve the user experience,
  • streamline the supply chain,
  • make the commercial offer more effective starting from quantitative information (data),
  • make large quantities of content accessible regardless of the actual availability of resources (human, material, intellectual, and economic).

So, should all organizations go digital?

Yes, unless they already have a deep knowledge of customers, employees who work efficiently, and modern technological systems, updated and optimized to create innovative products and services: digital transformation affects all fields of business activities.

The 6 Pillars of Digital Transformation

Leading a digital transformation means starting a path aimed at continuous optimization between processes, divisions, and the corporate ecosystem; constant research and experimentation of the right connections between virtual and real, huge amounts of data and decisions to make, technologies and people.

To be effective, Digital Transformation must be built around 6 fundamental pillars, let’s see them in detail.

six fundamental pillars of digital transformation

1. Leadership

In managing the transformation process, employees and the company need a strong and authoritative leader. A figure capable of guiding people towards computerized innovation, motivating them to become an integral part of it. Usually, this role is performed by the Chief Digital Officer (CDO) but, in key moments, the CEO, the managing director, remains the most important company reference.

Within Digital Transformation Management, the main figures are:

  • Chief Digital Officer (CDO) – defines the corporate digital strategy and spreads the digital culture; it is usually an external consultant.
  • Chief Information Officer (CIO) – expert in the integration of systems and services: he makes people understand new technologies and deals with the information and communication that revolves around them.
  • Chief Marketing Officer (CDO) – responsible for corporate marketing activities: leads the management of brand, products/services, and related distribution channels, corporate communications (including promotions), market research, pricing, and customer support.

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2. Continuous change

It is the foundation of the success of digital transformation. This is why everyone must develop an attitude of openness to the digital world and a certain degree of flexibility. This can only be achieved by reassuring the staff and providing them with the tools and a working environment that allows them to manage and welcome new developments serenely.

3. Culture

Without an adequate digital culture, employees will not welcome innovation. Instead, by explaining to them what lies at the basis of the digital transformation process, and why it is necessary to pursue it, they will be able to understand it and have a mental attitude open to change. Who has to deal with digital culture in the company? The CEO is supported by the CDO. Together they must make people understand the importance and benefits of the innovation process, as well as the actions necessary to implement it.

4. People

In launching new digital business models it is necessary to take into account the impact they can have on company personnel. To allow them to welcome and make the best use of new technologies, it is therefore essential, on the one hand, to stimulate them to increase their Digital Mindset, and on the other to train them to acquire the necessary skills. Specifically, they must acquire technical skills and soft skills such as mental agility, problem-solving, flexibility, and resilience. In the interconnected corporate system that will be created, relational skills will also be fundamental.

5. Innovation

Understood the introduction of new technology and a change of mentality, strategy, and business models. The one who directs innovation is the CEO, through the definition of clear, strategic objectives that are consistent with the corporate vision. The actual implementers are instead the Digital Transformation Managers who, together with the cross-departmental team, find solutions, adopt the latest technologies and propose strategies.

6. Customer Experiences

The customer is the main engine of Digital Transformation, the reason why companies decide to invest in technological innovation.

The customer experience impacts all areas of the business, from customer acquisition to retention. This is why it is necessary to know customers well, their needs, behaviors, and expectations.

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Digital Business Transformation in three steps

Digital transformation is now affecting all business sectors, even those once considered traditional or not at all technological.

It is a process so complex and with such disruptive effects that it is easy to get lost along the way if you don’t have clear objectives or directives. So, how do you build a Digital Transformation strategy for companies?

digital business transformation

At the basis of any innovation process, there must be a careful analysis of the company context, technologies, customers, market, and competition. Studying the situation inside and outside the organization is essential if we want to identify pain points, technological needs, growth objectives, and needs on the user-experience side.

According to the Digital Transformation Institute, innovation is a great lever for growth. To undertake this path in the best way, however, you need:

  • a strategy, developed by the Digital Transformation Team;
  • cross-departmental coordination, carried out by HR, IT, and marketing;
  • the development of skills adapted to technological change.

There is no univocal process, which can be carried out without distinction in all contexts. Each reality is unique, with its own specific needs. However, in defining the strategic plan, common guidelines and arrangements can be followed. Let’s see specifically how to create the foundations of digital transformation.

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1. Plan

If you are wondering what steps to take for digital transformation, the first thing I suggest is: to use guides to plan and manage the strategy. The roadmap allows you to bring order to the myriad of information and data to be collected and analyzed. It simplifies your work and allows you to stay focused on the ultimate goal of technological change, which is to create innovative organizations capable of successfully using the enormous IT potential.

digital transformation strategy

With all digital, you can structure the strategic plan by following defined steps and focusing on significant benchmarks and metrics. You will be able to periodically monitor the progress achieved, thus making any adjustments during the work easier.

Digital Transformation is an ongoing process; may undergo variations during the actual realization and over the years.

Let’s take a look at an example of a strategic plan:

  • Secure commitment from managers;
  • Identify problems, obstacles, and weaknesses;
  • Establish concrete objectives and KPIs (performance indicators);
  • Plan expenses;
  • Describe the current customer experience;
  • Evaluate the technologies present;
  • Identify better solutions and partners;
  • Plan the launch;
  • Locate a qualified launch team;
  • Develop agile organizational systems;
  • Spreading a digital culture in the company.
  • Each path, to be effective, must include short, medium, and long-term objectives and phases of innovation, implementation, experimentation, and monitoring.

Among the various company departments, those on which energies and resources tend to be initially directed are IT, marketing, and operations (the set of processes necessary to create and give the customer the product or service). This is not accidental but a logical consequence of the fact that if you want to improve the user experience, a priority objective of the realities that are beginning to revolutionize themselves, it is necessary to intervene in the areas that deal with it.

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2. Building

Digital transformations follow a holistic model; to function, that is, they need integration and collaboration between the various company areas.

Being able to connect processes, information sources, technologies, and data represents one of the greatest challenges for companies that decide to embark on this path.

However, it is a necessary activity, to be defined at a strategic level, to obtain the maximum benefit from technological innovation.

What to connect, or which connections to strengthen, specifically?

  • IT and marketing;
  • Company and processes;
  • Data and decisions;
  • Company personnel;
  • Company and customers;
  • Emerging and existing technologies.

To create bridges between the departments, it is once again essential that there be figures with specific technical and personal skills: professionals capable of mediating and making technological innovations usable by as many people as possible.

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3. Dribble

Digital Transformation processes involve such important changes as completely redefining traditional business strategies and models.

Often, there is even talk of Digital Disruption, or digital rupture, understood as a significant change linked to the introduction of new technologies.

digital disruption

Even though we are in the midst of the era of the so-called digital revolution, however, not all companies or the leaders who lead them can understand or support digital transformations.

There may be various impediments to their effective implementation, such as:

  • inadequate budgets;
  • lack of people adequately prepared for new technologies;
  • lack of an adequate managerial vision.

Therefore, on the one hand, companies with a patriarchal and traditionalist structure are penalized, on the other, micro, small, and medium-sized enterprises which, due to lack of resources, are unable to follow technological innovation.

Benefits of digital transformation for Companies

Why do successful companies focus on Digital Transformation?

For the great benefits, they can derive from it. Among the main ones:

  • improvement of the Customer Experience;
  • process optimization (operating flexibility);
  • cost reduction, especially those related to filing and file management;
  • increased interaction, communication, and collaboration between company departments;
  • increased job security and data protection;
  • acquisition and analysis of Big Data;
  • development of new sources of income;
  • technological innovation;
  • promotion of digital culture.

To get the maximum benefit from it, the Digital Transformation process must be applied globally, involving every company area. 

benefits of digital transformation companies

Of the two out of three companies that have started digital transformation projects, only a part has implemented profound and structural changes, investing in research and development. Often, the changes are limited to the simple introduction of technologies useful above all to reduce costs, while the investment in other important resources, such as people, is minimal.

Digital transformation trends

Digital Transformation does not only concern manufacturing but is a transversal phenomenon that affects every type of organization and social aspect. Healthcare, Public Administration, Finance, Retail, Automotive, and scientific research are just some of the sectors in which a lot has been invested in recent years.

The benefits of digital transformation are before our eyes, every day.

digital future trends

Just think of the supply of electricity, gas, and water or the automated operation of domestic systems. Even smart working, a mode that was not widespread until a few years ago but is now an integral part of the company’s organizational model, is a fully-fledged service to support the change process.

  • Training: reskill and upskill – always transversal training courses, because the hyperconnection of company processes today must provide for a shared and proactive modus operandi. I would like to suggest to overcome this phase, that is, contact a digital coach who will be able to start the innovation process and, at the same time, train internal staff for the technological transition.
  • Cloud Computing – Essential for companies that want to securely store their data online, manage it and retrieve it quickly without investing in expensive machinery. The “cloud” offers an increasingly rich range of technologies, as well as great flexibility. Companies can increase or decrease the power and capacity of services according to their needs, scaling them over time. In particular, the hybrid cloud is gaining ground, the IT architecture that provides for the management and division of workloads between two or more public and/or private environments. That this is an increasingly widespread trend is demonstrated by the fact that the main public cloud providers, such as AWS, Azure, Google, IBM, and Oracle, are investing in this field.
  • Big Data and Artificial Intelligence – By now every company produces and has access to an enormous amount of data: information from organizational activities, the web, social networks, sensors placed on production machinery, and so on. They are a valuable source of information but without proper analysis, they are useless. To convert data into “speakers”, to be able to analyze them and make business choices, increasingly precise and sophisticated algorithms are used. The most advanced evolution of data analysis is represented by Artificial Intelligence, an area in continuous and rapid evolution. Machine Learning and Deep Learning, the two main AI techniques, find space today in numerous sectors: Security, Finance, Healthcare, and Automotive, just to name a few.
  • Internet of Things – The path by which objects acquire their own identity in the world of information technology, thanks to the Internet. These objects, called “intelligent”, are interconnected to exchange the information held, collected, and/or processed, without any manual intervention. The IoT finds application in many areas: home (domotics), cars (defined, precisely, intelligent), hospitals, to companies. It is a technology that, if it gives undoubted convenience to the consumer, can provide industries with advantages in terms of production and logistics.
  • Innovative Payments and Blockchain – In the continuous race to improve the user experience, one of the main objectives of companies is the simplification of the purchase phase. The Blockchain trend is partly linked to the world of innovative payments, a set of technologies with numerous applications united by the logic of disintermediation and decentralization. This innovation potentially allows you to do without banks, notaries, and financial intermediaries. It is, therefore, a great revolution, in a world that is still largely to be explored.
  • Information security and privacy – The massive use of digital technologies leads to an increase in threats to the security of information systems and corporate data. It has become essential for companies to “update IT security strategies by expanding them to home networks and devices used for smart working”. To secure networks, various organizations are investing heavily in technologies and professionals, such as the Data Protection Officer, essential for compliance with the requirements of the GDPR, and more. Furthermore, the protection of privacy and sensitive information has made it even more necessary to encrypt the entire data processing process, with the setting of different security levels.

Mistakes to avoid in the digital transformation process

When an organization undergoes the digital transformation process, the possibility of making mistakes, even trivial ones, is quite frequent. Therefore, getting to know them beforehand can help.

mistakes to avoid in the digital transformation

The most common mistakes that can be made are:

  • dealing with native digital companies;
  • overlook company size;
  • focus only on technology;
  • not investing adequately in training, cultural change, and communication;
  • neglect the integration between departments;
  • carry out a partial Digital Transformation process;
  • not implement digital tools or software at all stages of the production chain;
  • do not consult or have competent professionals.

These are just some of the risks that can be found in managing a company that decides to implement a digital transformation. In order not to be caught unprepared, it is advisable to adopt a Risk Management framework, which allows you to predict and mitigate the impact that these errors could have on the dynamics of the company

Conclusions and free strategic coaching

Digital Transformation processes are still rather limited due to cultural constraints or a lack of resources. However, there are examples of successful digital transformations such as the Marcegaglia group, the world leader in the B2B sale of steel.

For some time now, the company has launched a digital transformation strategy from an Industry 4.0 perspective. Through a series of pilot projects, he began leveraging Big Data analytics by creating value. Another project in which a lot has been invested is the review of the supply-chain process, especially as regards production planning and scheduling.

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