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What does digital transformation mean

Written by Ana Canteli on May 04, 2018

It is not easy to define what digital transformation is. In fact, many organizations believe they are implementing it when what they are really doing is carrying out optimization projects since they are actually improving the business models that already exist.

It is true that digital business transformation identifies outdated business processes and replaces the legacy technology of companies with new business and technology. However, this is only an element that is part of the concept, which does not define it in its total scope. In fact, this is something that also happens with digitization. Digitization is in many cases, a necessary step for digital initiatives to take place; but they are not synonyms.

According to George Westerman, MIT Sloan researcher in the digital economy, digital transformation - or DX economy - occurs when companies use technology innovations to radically change their performance in the same sector.

In its most generic meaning, digital business transformation means using technology to improve - and yes, also to radically change - business processes, enhance the customer experiences; focusing on the points in which the expectations of the client and the business are located, to detect and develop new possibilities, at the same time that technology is used intensively to achieve said objectives.

Digital strategies in digital business transformation involve the integration of digital technologies in all areas of the business; so that it substantially changes the way in which people operate in the company while providing value to the customer.

Digital strategies in digital business transformation are also the change produced by the use of digital innovations in all aspects of business and society. The digital transformation framework is a human issue, as it requires a cultural change, which constantly challenges the status quo of the organization that has to experiment, get used to the changes and also learn from the failures in this area. Because digital transformation is a project that has a multitude of intermediate and interconnected objectives in the foothills of continuous optimization through processes, departments and ecosystems of the company in the era of hyperconnectivity; where creating the necessary bridges to induce, create or maintain digital transformation is the key to success.

To begin with, the digital transformation supposes a radical change in the concept of the use of technology, as has been done up to now in the company. It can provide renewed sources of income and change the business model.

However, achieving this requires a deep interdepartmental collaboration to apply the business-centred philosophy and the rapid assimilation of the new business models, simultaneously.

What does digital transformation mean in the company?

Digital transformation really means the radical change of the business and activities of the organization; business processes, competencies and business models that allow the full development of changes and opportunities in the field of digital technology, in conjunction with the accelerated effect that this is causing in society. In turn, this must be managed in an organized manner, taking into account current and future changes.

For this, it is essential to have digital transformation strategies, which allow applying the changes that are necessary, while taking into account the causes that lead the company to implement this transformation. The digital transformation can be triggered by various causes, which can even occur simultaneously at different levels; expectations and consumer behavior, economic reality, generational change and the emergence of disruptive technology (for example, the accelerated adoption of innovations that change the sector considerably).

Holistic approach

Technology is only part of the equation of digital transformation. The technological evolution and the technologies that go from the cloud computing, big data, data analytics, artificial intelligence, mobile application to the internet of things (IoT)*or blockchain technology, are catalysts of the digital transformation or cause of the need - among others, since they condition the behavior of consumers or completely redefine the sector - or an accelerator of that innovation or transformation.

After all, the objectives of the organization, clients, and stakeholders decide the agenda. The main role of any organization is to unite the points and overcome the internal difficulties in all areas to complete their objectives; thus the elimination of silos becomes the norm. This change happens at a technological, cultural, business and organizational level.

The holistic vision of digital transformation will allow companies to acquire the core of the skills they need to succeed in the changing environment in which they operate, and in which such changes occur faster and faster. The dynamization of the changes has resulted in a phenomenon that pivots between technological acceleration and disruptive technology that challenges the status quo of the traditional business model, opting for the rapid reaction to changes in the customer behavior and demands of interested parties, through the chain of the supply chain.

It is necessary to have the leadership to achieve the application of this holistic approach. This quality will make possible the implementation of the digital transformation strategies, regardless of how the organization is; do not think that this can only happen in technology companies or companies with "new" organizational models. Regardless of how it is drawn in the holistic approach, the overcoming of the silos and the differences between perception and reality will prevail. In practice, the application of the digital transformation strategies occurs in pilot projects from the bottom up, tailored or in specific departments.

This process does not happen overnight. There are many components and a multitude of intermediate objectives. The digital transformation takes place in incremental stages and according to the degree of digital maturity of the company.

Digital transformation areas

Digital transformation is an issue that is on the table of many organizations. To obtain the benefits, it is essential to focus on the challenges faced by a real business (and its consumers) and to have a clear and organized plan to prioritize and involve all actors in the digital transformation process.

• Business model: how the sector works, from victualing, production/elaboration and sale of the product or service to the market, going on to define the way in which the company seeks methods of financing; all this to transform the heart of your business so that the company obtains new sources of income, even going so far as to change the traditional nucleus of your business.
• Organizational ecosystem: relationships with partners and interest groups, as well as the context that affects the company - regulations, economic priorities, and evolutionary improvements. The ecosystem is the result of linking the company with its past, with its collaborators, in which information, whether data or business intelligence, become elements of innovation.
• Activities/functions: customer service, after-sales service, digital marketing, operations, administration and more.
• User, partners and customer experiences: The digital transformation has to have people as a priority. Changes in needs, expectations and behavior are crucial. Because we must bear in mind that digital technology is not the only answer to address these human realities, from the satisfaction of the worker or the enhancement of the customer experiences. The people involved have to take people into account first because technology is just an additional catalyst and part of the equation of fundamental needs and the choice of choosing to correct them.
• Organizational culture: the organization must have a clear orientation towards the client, agile and aware of what is the objective to achieve. This approach will lead the company to acquire, instinctively, the necessary skills and through business leadership and the identification of failures in the knowledge of employees.

Customer loyalty

Digital transformation is vital to customer loyalty, as it resolves the difference between what customers expect from their digital experience and what companies offer them in reality.

It is an element that well applied integration of digital technology can provide satisfaction to consumers, but also enhance the user experience (internal customers of digital transformation), since people, in general, have long adopted digital practices in other facets of Their lives, from buying on the network through the mobile devices to the management of home automation.

In other words: digital businesses are experiencing a decentralization of the focus of attention of the final customer of their products or services, to the simultaneous coverage of the ecosystem of the organization. The client in a broad sense is the fundamental integrant of the equation in which the experience of the final client, the satisfaction of the worker, the valuation of the interested parties or associated with components of this approach.

The digital transformation by sectors

Retail

It is one of the vertical sectors that is changing the most and which is considered as the precursor of technological advances that helps to maintain a correlation with the evolution of consumer needs 24/7.

Digital transformation is omnipresent in all aspects of this sector, from data management to information technology and optimization, through digitization of the supply chain, delivery process, to the relationship between the administrative part and the attention to the client, where consumer expectations are measured with the needs of transformation in an environment that seems neutral as to the origin of technological initiatives.

With the help of services in the cloud and big data, retail businesses enjoy a wide range of technologies that are completely changing the image of the sector. In this aspect, analysts see a prominent role in the Internet of Things, in particular, related to digital signature services or cross-platform scenarios. Obviously, these cases are closely associated with the new technologies mentioned.

Digital transformation provides the possibility of matching the business to the constant change in technology that occurs in the industry, which will allow companies in the sector to focus their efforts on what really matters to these organizations: the empowerment of employees who will count with the necessary tools to quickly meet the needs and expectations of the client and thus transform the products and services they offer.

Manufactures

Under the umbrella of the industry 4.0 or industry of the internet, the digital transformation in the sector is advancing at different speeds with the integration or convergence of information technologies and operational technology, as a fundamental element for the improvement of efficiency and speed. Information technologies and operational technology are used to control events, processes, and resources to carry out the necessary adjustments in the organization.

The slow technological evolution of the manufacturing sector is offset by the speed of adoption in this sector of the Internet of Things. The implementation of cyber-physical systems and innovative technological systems and services allows companies in the sector to identify and define the obstacles that arise. To be successful in Industry 4.0, it is necessary to combine a vision of the changes that digital transformation implies with the challenges and technological evolutions that will have to be faced, in conjunction with the effects that this has on the human resources of the company.

Public sector

The application of digital transformation differs from country to country and also depending on whether we are talking about a public institution at the national, local, or organizational typology to which we refer.

From the point of view of the citizen, the role of digital transformation is very clear in areas such as e-government or personal identification programs. For public administrations, the implementation of digital transformation is carried out as a means of reducing costs; in an increasingly ageing society and in which coordination of institutions at the local, regional and national level and transparency are objectives that must be met using the available resources as efficiently as possible.

Another factor to consider is the search for citizen satisfaction in the digital age, improving the digital experience of the taxpayer. In the information society, it is increasingly essential to meet the expectations of a population more familiar with the use and consumption of mobile services, which are less willing to participate in paper-based processes. Overcoming and eliminating these frustrations is critical in today's society.

Healthcare

Digital transformation in the field of medical care is fostered by a growing and ageing population that presents its own challenges, such as the rise of chronic diseases, the increase in costs and changes in people's expectations and behavior.
A tangible example is the change in the behavior of workers in the sector, who use technological devices every day, such as computers, tablets or mobiles for the development of their functions and in the provision of services, making health care more focused on information.

Supply chain: logistics and transport

There are not many sectors such as logistics where the interconnectivity of organizations, ecosystems, processes, information flows, products, and distribution are present and have such an important role in the business.

In the current context of globalization with the constant change in customer expectations, the growing pressure on profit margins, the risk on large volumes of information, the logistics and transport sector is continually fluctuating. In this scenario, coordination in the transport chain, speed, visibility, digitization and digital transformation are among the priorities of companies in the sector.

How to approach digital transformation in your organization?

Historically, digital transformation has been seen as the digitization of information; that is, transferring it from paper format to digital format. This step is obviously necessary since the digital transformation process needs various elements to be successful. Here we will also highlight some of them.

Change management

The application of digital transformation in the company also means an opportunity to make the necessary changes that affect at the same time various groups, divisions, processes, and technologies already implemented. Moreover, it is not just an opportunity to analyze what can be improved and what can be reframed to make it better.

Knowing the role of data and analytical activities in digital transformation, there are even more opportunities to change management.

For example: when web analytics apps became a trend, it soon became clear that it was necessary to make changes in theoretically unrelated areas such as customer service or marketing, also revealing the existence of silos in many aspects related operations focused on customer service.

However, in any case, the importance of changing management is based on human capital: the internal customer (user/employee) partners, stakeholders and the general ecosystem in which the company moves.

Business strategy

The debate about who has to take charge of the project of digital transformation in the organization is older even than the minting of the term. It is possible that is why positions such as director of information systems, director of the digital transformation or analogous figures have been created, which most likely have a role to play in digital transformation goal of global reach and transversal application.

Managers in the digital age have to be informed of what others do (competition, other departments, associates, interest groups of the company) and what are the experiences, methods, and skills that others have or are developing.

All digital businesses are different, and there is not a single solution that is a response that works for everyone. However, there are some valid premises.

• Silos, responsibility, and skills: digital transformation must be used to increase coordination between departments and for marketing personnel to learn from the department. IT for example, or what purchases you get information from the customer service area, etc. Digital transformation does not aim to create digital intelligence, but it is a goal that can be a strategic advantage for the organization.
• To get the right answers, we have to ask the right questions: Is digital transformation useful for the future of the company, for obtaining objectives, to overcome possible technological disruptions in the sector, for employees, for the market, for customers? Complex challenges are not usually solved by asking simple questions, but in the technological field, the basic is often ignored.
• Information management: it is crucial but not sufficient. In the current context in which the position of companies is based on the value of business content, the results that can be obtained with it, make the difference. This is where the context is crucial; Semantics, artificial intelligence becomes more important to get results from sources of unstructured information.

The human factor as a differentiating element

In the digital age, it is important to recognize that we are in a state of constant revolution. Today, we can no longer make a technological change and expect it to work for the next five years.

To begin, we must bear in mind that the role of management in digital businesses is not the same as it can play in a company with a traditional structure. One of the challenges facing current managers is that they are not fully prepared to face the challenge of digital transformation and maintain and motivate staff throughout the transformation process.

In order to make digital transformation a reality, it is necessary to enjoy a complete alignment of the organization to that end. Without the coverage that the directive must offer and without the support of associates or interest groups that participate in the process, it is very challenging to succeed in the project.

However, one thing that can be made clear is that the best companies - those that manage to implement the process of digital transformation - are those that enjoy strong leadership and that turn technology into a transforming force.

To understand what digital transformation means, it is essential to prioritize people and processes over technology. Because the digital transformation can be seen as a trojan horse that comes to disrupt the organization as it is established and understood by its members. The digital transformation must be seen as a renewing force, as an opportunity to rethink and improve the top-down processes, and with them the talent, the organizational structure, the business model, the products, services, etc. Some of these changes will be easier than others.

In this context, the power of words is very important; something that is often underestimated or not taken into account. The language that is used internally in the company - about products or opportunities, and how it moves abroad (customers, or consumers) can have a powerful impact on the management of the business and the results it provides. For example, internally, acronyms are often used to talk about products that are well known to the staff, and this vocabulary often goes to the organization and is used with clients, who may feel annoyed or inferior. When they contact the company that speaks to them in a cryptic language, this is a phenomenon that can occur internally, constituting a communication problem between departments.

OpenKM, the driver of digital transformation

The OpenKM document management system can play a crucial role in the company's digital transformation projects.

The functionalities of OpenKM can be used to optimize processes, from the automation facilities to the workflow engine included in the document management software, through the OCR engine that streamlines and implements the scanning processes if necessary. Not in vain, the OpenKM program suite offers a scanner client that allows the integration of the business content system with the scanner used in the company.

The communication tools included in the program contribute to improving coordination between departments and areas, making communication between staff and public more fluid. OpenKM can be used to manage the company's social media.

The complete search engine inserted in OpenKM allows quality information about featured insights or relevant enterprise content to be easily obtained.

On the other hand, the OpenKM suite offers the necessary resources so that the organization can complete or expand the services of the platform. From digital signature clients, through the use of MS add-ins for staff, desktop sync and email archives to facilities designed for technical staff, such as a complete API, SDKs for Java, PHP and .NET - that allow the free integration of the manager in the company's technological platform - or the import station. These are just some examples of the facilities offered by the OpenKM document manager to meet the present and future needs of the organization and thus convert the acquisition of the document manager into a strategic plan decision and amortized in the long term.