To stay competitive and relevant in a digitally disrupted world, companies everywhere are embracing, or sometimes wrestling with, digital transformation, which is the use of technological advances, from analytics to smart devices, to dramatically improve performance and reach. But what does digital transformation actually look like to individual businesses? In other words, in what areas are companies looking for digital transformation opportunities, and what digital changes are they choosing to make?
These are the questions that George Westerman and his colleagues at MIT Sloan School of Management set out to answer in early 2014 by surveying 157 executives in 50 large-sized companies around the world. While the survey’s findings revealed, naturally enough, that companies were proceeding with digital transformation at different paces and with varying levels of success, they also revealed some important patterns—namely, that three key areas were the primary focus of digital transformation across all enterprises and that each of those areas encompassed a further three distinct elements that companies were working to change.
The following is an overview of the nine elements that Westerman dubbed the “building blocks for digital transformation:”
The digital transformation of customer experience includes these factors:
Customer understanding—Thanks to a range of advanced digital tools, it is now possible for companies to gain a deeper understanding of their customers than ever before. Companies are developing their analytics capabilities and building new online communities to learn more about where their customers are, what makes them happy, and what dissatisfies them.
Top-line growth—Companies are increasingly finding that technology can enhance or drive in-person sales conversations. These dialogues can be as simple as financial service companies making sales pitches using tablets rather than paper, or as sophisticated as a company leveraging analytics and location-based marketing techniques to send personalized mobile coupons to customers who are physically near one of its locations. Companies are also streamlining the customer purchasing experience through such techniques as automatically displaying a customer’s last order when he or she logs into the firm’s e-commerce site.
Customer touch points—More and more customers want to be able to use digital tools and techniques to connect with companies. Consequently, digital initiatives have become a standard part of customer service for most businesses. For example, some companies now use Twitter accounts to handle client complaints; this allows the company to deal with issues quickly, and it also crowdsources the expertise of multiple employees and other customers for better problem-solving. In addition, multichannel services are becoming more commonplace. These services include companies that provide an integrated experience by offering home shopping with mail delivery or in-store pickup options.
The digital transformation of operational processes includes the following:
Process digitization—The automation of routine tasks and processes can free up staff and allow them to focus on more strategic responsibilities. It also enables businesses to collect significant streams of data, which they can use later for data-mining activities.
Worker enablement—Digital transformation has allowed individual-level work to be almost completely virtual; that is, the work process is now essentially separated from the work location, but digital tools make it easier than ever for workers to collaborate and share knowledge, wherever they may be. Worker enablement is a useful way that companies are leveraging digitization to reduce operational costs and provide the flexibility that today’s workers seek.
Performance management—Because transactional systems can provide critical data, and thus deeper insights, into a company’s products, regions, and customers, companies are now better able to make strategic business decisions based on hard facts and data rather than on assumptions. Furthermore, digital transformation is not only providing the information used in strategic decision-making, it is actually changing the process itself; some companies, for example, are using digital collaboration tools to boost the number of participants in their strategic planning sessions from 12 to more than 300.
The digital transformation of business models includes these components:
Digitally modified businesses—An increasing number of previously traditional companies are realizing that digital transformation is not just about changing the use of technology, it’s about fundamentally changing the way they conduct business. These companies are not only working to augment their physical products and services with digital offerings, they are also striving to digitally share content across previously distinct organizational silos.
New digital businesses—New digital products are also appearing alongside traditional products, but as a complement rather than a replacement in many cases. For example, GPS and digital fitness devices are being sold together with sports apparel. Other previously restricted organizations, such as airport authorities, are using digital to transform their boundaries and offer travelers an integrated multichannel experience, including travel reservations, information on flight status, and duty-free shopping promotions.
Digital globalization—Digital transformation is allowing companies to move from a multinational status to a truly global one. As global shared services for HR, finance, and sometimes even core capabilities like manufacturing become more commonplace, businesses are finding that digital technology and integrated information help them gain global synergy while staying locally responsive.