A digital transformation refers to the adoption of digital processes and tools to achieve strategic business goals. It’s a complex, multifaceted process that represents a massive cultural shift in the workplace and changes that affect every part of an organization.
Digital has transformed how we shop, listen to music, read the news, and make dentist appointments. So to keep up with customer expectations and competitors, businesses need to steadily evolve too. Yet according to technology media company IDG, 89% of companies plan to adopt a digital-first strategy, but only 44% of them have actually done it. If your business is among the 56% stuck on the planning (or pre-planning) phase, don’t worry, you’re not alone.
But what does “digital transformation” mean for your business? How do you take that big, abstract concept and turn it into actions and strategies that will benefit your employees as well as your customers?
Here, we break down the concept into meaningful parts and provide concrete tips for how your business can begin to develop and implement an effective digital transformation strategy that encourages team members to contribute their best work and keeps customers happy.
Fundamentally, digital transformation is about changing how teams work together, not just what tech they’re using to get that work done.
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What digital transformation means for business
When it comes to digital transformation, it’s tempting to fixate on the digital part—the platforms and processes—rather than the transformation part. The idea that you could just buy the right software and instantly increase productivity is appealing. But fundamentally, digital transformation is about changing how teams work together, not just what tech they’re using to get that work done.
While digital transformation looks different in every company, digital businesses share some fundamental characteristics:
- Collaborative: Every member of the organization is meaningfully involved in achieving a shared vision. This means working together at different levels of the organization and across teams to build trust, promote transparency, and engage employees.
- Cultural: Requires shifting away from traditional business structures and hierarchies and empowering employees to make decisions and contribute ideas.
- Cloud-based: Cloud-based services are economical and agile, allowing businesses to choose the ones that meet their needs and streamline their IT and infrastructure costs.
- Mobile: Customers expect ease and convenience from businesses, which means they need to be on mobile, where more than half of all web traffic is generated.
- Innovative: Digital businesses are always experimenting and then learning from the outcomes to inform larger changes across the company.
- Continuous: This isn’t a project with a start and end date. Technology will continue to evolve and call for adaptations to current processes, which means you need to keep learning and evolving.
- Data-driven: This includes not only collecting and analyzing data about your customers but measuring what’s happening inside your company too.
- Customer-centric: Ultimately, these shifts are all focused on providing better service and a better experience for your customers.
Notice that none of these is about what your company does; they’re about how you do things. Digital transformation companies don’t change the core values or offerings of their business. Instead, it’s about developing a connected workplace culture and acquiring digital transformation tools that will support strategic goals.
For example, The New York Times uses data on audience engagement to generate internal alerts, letting staffers know when a story is performing well and merits a push notification. But the alerts don’t automate the process entirely; they generate important information that allows staff to communicate with one another about how to share the story with readers. Technology-enabled collaboration, not just data, was key to improving their processes and outcomes.
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Why start a digital transformation now?
We hope you agree that digital transformation is inevitable and necessary, but you may not think it’s urgent. Maybe sales are strong, your customers are happy, your employees are productive, and now doesn’t seem like the time to embark on a resource-intensive project that will shake up your operations.
There are a few reasons to embrace the digital future sooner rather than later.
- Engaged employees. Disengaged employees cost the U.S. economy up to $605 billion each year. Digital businesses empower employees through transparency, learning opportunities, and open communication. By providing employees with data (something 90% of employees want, according to a recent survey in the MIT Sloan Management Review), businesses can track and improve their performance.
- Increased profits. Businesses can expect to grow revenues by 23% as a result of adopting digital strategies like using data to make smart decisions and training employees in emerging technologies. AT&T has accelerated its time-to-revenue by 32% through professional development initiatives that increase its employees’ digital skills.
- Greater resilience. New technologies will continue to shake up customer expectations and processes. A digital business builds resilience by replacing rigid structures and inflexible processes with a workplace culture and infrastructure that can respond and adapt to new demands.
- Avoiding the competency trap. Many companies assume that their current success (and the methods that enable it) will continue indefinitely. Then they end up scrambling to adapt when it stops working. You’ll have to change eventually, and waiting until you have to means you’ll be making decisions for short-term survival rather than long-term growth.
Digital strategy in small companies and enterprise businesses
The challenges and opportunities of a digital shift are shaped by company size and structure. Enterprise businesses and established companies can tend to enforce rigid, formal hierarchies, which contribute to less collaboration and a slower pace of change.
That could be why only 38% of enterprise businesses have digital strategies, compared with 55% of startups. Digital transformation companies in the enterprise realm may need to focus on breaking down silos, improving communication, and increasing transparency.
But big businesses have advantages too. A larger size (and budget) means they can dedicate significant resources to improving. For instance, when La-Z-Boy redesigned its headquarters, it used the opportunity to identify solutions to the company’s challenges. “We involved all our employees to think about what would go into this new building and how we could increase communication across the organization, provide more flexible ways of working, and develop more engaged and empowered employees,” said company president Kurt Darrow.
It’s not feasible for every company to build a brand-new headquarters, but many of La-Z-Boy’s solutions are scalable to other businesses, including reorganizing uniform desk layouts into versatile arrangements so that employees can choose an environment that suits their working style or collaboration needs.
Smaller businesses often have leaner structures and more fluid teams, which can help with collaboration and transparency. But they also have smaller operating budgets, which means they should focus their efforts on a single, specific goal that supports the overall strategy for the business, like improving customer experience or reducing operational costs through cloud services.
Molly Moon’s, a Seattle-area ice cream company, focused on improving communications among its team, which was spread across eight locations and fluctuated in size depending on the time of year. The company’s priorities were smooth onboarding for new and seasonal hires, streamlining communication channels so everyone could find the information they needed, and building collaboration and culture across a distributed group of employees. By shifting from group texts to an online collaboration platform, Molly Moon’s was able to organize conversations and information, support new employees to get up to speed quickly, and develop a team culture through fun, social channels like #moon-crew-pride. The result? A more integrated, efficient, and engaged team.
Your digital strategy will be informed by the unique strengths and challenges of your company, so take an inventory of them before developing your objectives and goals. Michael Gale, the founder of marketing data company Strategic Oxygen, said, “Basic awareness about those challenges is probably the key indication of how well the process will be successful.”
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Leadership of digital transformation comes from the top—and everywhere else
To be a truly digital organization, transformation initiatives shouldn’t just come from the top down. Changes in customer expectations, and how the business responds to them, will affect the workloads and processes of employees, which means they have to be well positioned to identify risks, suggest solutions, and lead experiments. The Bring Your Own App trend demonstrates that employees are often a source of new ideas and digital transformation tools that can ultimately benefit the entire company.
Who leads digital transformation, exactly? Business management consultancy Altimeter reported in 2016 that CMOs most often led digital transformation, followed by CIOs and CTOs. In the past four years, the number of companies with a chief data officer role has quadrupled, underscoring the vital importance of data collection and strategy. CHROs are also important partners, leading employee engagement and ensuring that diverse teams are well supported, as well as working with IT on infrastructure and internal communication.
The title is less important than having senior leaders recognize the importance of an internal digital strategy and dedicating resources to unlocking more capabilities across teams within the company.
According to Janice Miller of Harvard Business Publishing, “When leadership development is factored in, organizations have a greater likelihood of a successful transformation.” And as MIT Sloan found, the most digitally mature companies are four times more likely to be developing digital leaders than the least mature ones.
Digital leaders need to create the conditions where employees are included as valued collaborators by giving employees the data and digital transformation tools they need and building a culture in which teams feel safe and supported to speak up and drive change.
Planning and preparing teams for a successful digital shift
Regardless of the size or scale of your business, a digital transformation can be met with discomfort and uncertainty. As a leader, you can prepare for these challenges before you start rolling it out.
- Provide the vision. Your role as a leader is to stay focused on the goals of the company. Times of change cause stress and anxiety for everyone; reinforcing the mission and inspiring a sense of purpose can help employees stay motivated.
- Create a learning culture. Nurturing the people inside your organization to learn and grow will support your transformation and keep employees engaged and committed. MIT Sloan found that while 90% of employees needed to upgrade their skills annually, only 34% felt their organizations supported their development.
- Listen. Communication is key, but that doesn’t mean you should be doing all the talking. While leading a massive digital shift at legacy company the Yellow Pages, now known as YP, CEO David Krantz met face to face with employees across the country to hear what they were working on and what they were worried about.
- Go slow. Focus on testing small shifts in processes and culture that will eventually impact the entirety of your business. Proceeding cautiously will let you identify if a process that’s supposed to help employees is making their jobs harder or a strategy that looked promising is failing to deliver results.
There are no shortcuts to a digital transformation, but ultimately it will make your business more efficient, effective, and resilient.
And though it may feel like a race against your competitors, the fact is there is no finish line. The needs of your customers and how you meet them will change. Your mission is to build the capacity of your company to adapt and respond to a digital ecosystem that will continue to transform.
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