Why You Can’t Ignore Digital Transformation
The business world is changing at a rapid pace, as companies of all sizes and vertical markets are embracing digital solutions and agile methodologies. This trend is commonly referred to as digital transformation, and it’s one of the most important ideas that you should have on your radar heading into 2020.
Digital transformation is a massive topic that can mean many things across different departments and teams. This is something we will dive into in just a bit.
First, let’s take a step back and examine how we got to this point and where we are headed in the not-so-distant future.
The Fourth Industrial Revolution
It’s easy to mistake digital transformation as the latest Silicon Valley buzzword, or a fancy new technology that you should be using. The truth is that digital transformation is much more comprehensive. It invokes a trend that’s happening everywhere, and one that’s been in motion for hundreds of years.
As it turns out, what we’re experiencing today is the latest stage of the ongoing Industrial Revolution, a process that started back in the 18th century around the time of the Enlightenment.
As you might recall from history class, the industrial revolution can be broken down into three phases:
- Phase I (1784): The first industrial revolution began with the advent of mechanical production, steam power, and the railroad.
- Phase II (1870): The second industrial revolution saw the invention of the assembly line, which enabled mass production.
- Phase III (1969): The third industrial revolution centered around the invention of the computer, and the dawn of the digital age.
Now, we are in the fourth phase of the industrial revolution—a time that will be defined by the rise of artificial intelligence, big data, automation, and the Internet of Things (IoT). Right now, businesses are embracing digital transformation as they experiment with these emerging concepts and migrate away from manual and outdated systems.
It’s a time to experiment, expand, and think big.
In the coming years, the above technologies will merge, mature and proliferate, and experts are anticipating massive changes on a level we have never seen before. According to the World Economic Forum, the economic value of digital transformation will surpass $100 trillion by as soon as 2025. That’s just the beginning of what’s in store.
Is Digital Transformation Necessary?
As you can see, digital transformation isn’t something that you can easily ignore. You and your team members can resist it, but you certainly can’t stop it. Digital transformation is happening all around you, from the smartphones and apps that your employees are using to the cloud systems they are using to store and transmit information.
Looking forward, some businesses will embrace digital transformation, while others will cling to old ways of doing business. Just as we have seen in the past, the former group will remain at the forefront of agility and disruption, while the latter group will go by way of the dinosaur—just as we have seen with companies like Blockbuster, Netscape, Polaroid, Compaq and countless others that got complacent and went out of business.
Make no mistake about it: Digital transformation is about survival. Businesses that fail to embrace, organize, and rally around digital transformation will fall behind. A digital divide is already growing among businesses, and it’s going to widen as time goes on. Last year, over 40 percent of companies reported having a dedicated digital transformation team in place. And almost 65 percent of companies feel positive about their ability to adapt to technological disruption in the next three years.
The five domains of digital transformation
People often struggle to visualize and communicate digital transformation, simply because of its sheer size and scope. As we mentioned, digital transformation is an umbrella term that can have many different connotations.
A CEO, for instance, may focus on driving support for digital transformation across the enterprise. Management may focus on improving digital competency among workers. IT, meanwhile, may talk about leveraging digital transformation to improve wide-area networking, customer experience, or data management. Business leaders and channel partners are encouraged to think about digital transformation in various domains to help drive awareness evenly across the enterprise. Companies experimenting with digital transformation should manage and track it on all levels, to ensure even and consistent modernization.
In “The Digital Transformation Playbook,” Columbia Business School Professor David Rogers points to the following five domains of digital transformation:
- Customers: Businesses should digitize customer-facing operations to connect and engage in meaningful and efficient ways. Today, we often hear about the importance of “customer experience” or CX.
- Data: Merely collecting large volumes of data is not enough to succeed in business today. Companies should focus on breaking down data silos and using data to fuel real-time business decisions.
- Competition: This involves looking beyond an immediate ecosystem of competitors and partners, and recognizing outside digital threats that are emerging, as well as unique partnership opportunities.
- Value: Customer value can change over time. It’s critical to remain agile to avoid the pitfalls of complacency and irrelevance.
- Innovation: Cutting-edge technologies should be used to drive continuous research and development across the enterprise.
We’ve only scratched the surface on the critical topic of digital transformation, so make sure to check back soon. In the coming weeks, we’ll explore how digital transformation is impacting specific areas of the enterprise.