Is digital transformation actually business transformation?

Digital transformation continues apace around us. There is hardly a day that goes by when you do not hear of a company undertaking a digital transformation of some sort. Companies are investing in new technology, setting up innovative campaigns and finding more efficient ways of doing things.

There is no doubt that digital transformation is important for all businesses in this day and age. Companies need to keep up with their competitors and are faced with an ever-increasing rate of disruptive technological change.

Yet there is also a need to proceed with caution. After all, effectively, digital transformation is just business transformation with a shiny new name. In the end, transformation is transformation, and the “digital” part is arguably just the cause — after all, a business could equally undergo economic transformation, social transformation or environmental transformation, among many others. But what does this mean for businesses that are rapidly undertaking digital transformation programmes?

Well, like any other kind of transformation, digital transformation needs careful planning and consideration. Yes, there is a need to move quickly to keep up with the pace of change. But putting some forethought into digital transformation activities is essential to avoid jumping on a bandwagon that will not take your business in the direction it needs to go. There are so many possibilities for digital transformation across organisations, but not all of them are right for every single company. Companies come in many different shapes and sizes and undertake vastly different business activities, serving an equally wide range of different types of customers across varied market segments. Therefore, assuming that you must do big data or social media, or whatever it is just because someone you know somewhere else is doing it, is poor business decision making. The problem with this is that ill-thought out decisions in the digital space have the potential to lead to massive expenditure on systems, tools, processes and infrastructure that your business might not even need. If you do not think about what you are doing and why, the return on investment could be minimal or nothing, at best. This means that coming up with a digital strategy for business transformation is critical.

In particular, one key area for consideration is what is the benefit of a digital transformation for your customers? Will it help you to retain customers more efficiently? Will it allow you to bring on new customers at a lower cost? Will it improve the customer experience? Will it mean that you stop shedding customers? (If it is the latter, this is likely to make a fairly strong business case). Will it allow you to reach more customers with marketing promotions? If the digital transformation that you are planning to do will allow you to build and retain your customer base with greater ease, it is probably worthy of significant exploration to see how it could be done.

However, while all of these customer areas are important and may need addressing, it is critical to also understand the other side of the equation, namely: What will it cost? And, will it be worth it? Performing a cost-benefit analysis is extremely important in understanding the business case for transforming the business using digital technologies. As mentioned, it is essential to examine the possible return on investment that can be gained from undertaking the transformation. For example, out of home advertising has been undergoing digital transformation, but analysts have found that digital out of home advertising is only worth it to a point, up to a certain percentage of the total out of home advertising, due to the significant costs of investing in digital out of home advertising. Thus, if you have a sports-related business it makes sense to advertise out of doors, since that is where a lot of sports is done, but transforming your out of home advertising all the way so that it is 100% digital, is likely to be a poor decision in terms of cost-benefit and return on investment achieved from the advertising.

Ultimately, the message is that digital transformation is business transformation under a different guise, and just like any other transformation it needs to be undertaken with care. Yes, it needs to be done quickly, but when you consider that Maven Wave reported that only 41% of CIO-led digital transformation activities lead to double digit growth, those technologies and activities invested in need to be selected with great care. There needs to be consideration made to cost, and to what is going to be needed to compete in the future, and generally, digital transformation activities need to be as future proofed as possible. Don’t get pulled along on a wave of digital transformation for digital transformation’s sake. It may turn out to be a very expensive mistake.

• Have you seen benefits to your processes and strategies since you’ve adopted new technologies ?
• What problems did you face when undergoing a digital transformation?
• What advice would you give to someone looking to digitalise their business?

Please share and comment — I will try to interact with as many as possible!