In digital transformation, companies leverage new tools and technology to improve workflows, develop smart products and processes, achieve greater customer engagement, and create a more efficient operation.
It can happen incrementally, with small changes to modernize legacy systems at different levels of the organization, or through a broad shift in the culture and operating model of the entire business.
In either case, companies typically pursue one or, depending on the specific goals and digital maturity of an organization, a combination of the 4 main types of digital transformation outlined in this article.
Table of Contents
- What Is Digital Transformation?
- The Benefits of Digital Transformation
- The Types of Digital Transformation
A digital transformation strategy is when a business creates new processes and practices or when already existing ones are modified through the use of technology in order for the business’ operations to become more efficient.
Companies tend to attempt a digital transformation strategy to evolve along with the advancement of technology and continue meeting the market’s ever-changing needs.
Many companies that have been active for quite a long time adjust their operations to the digital age by adopting new processes at a slower pace, changing a smaller number of functions each time. Others attempt to make the transition rapidly and all at once.
The full integration of technology in a company’s culture and workflow is called digital transformation.
The Benefits of Digital Transformation
There are a lot of benefits for companies that go through a digital transformation. By incorporating advanced technology, a company can improve internal processes, lower labor costs, and increase productivity.
This is because the use of software, applications, automation, digital tools, and data collection allows the business to utilize staff members better, manage a more significant number of projects, and meet shorter deadlines. This results in the provision of better products and services.
Of course, one of the most important benefits of digitization for a company is that it allows for a better customer experience.
The COVID-19 pandemic made many businesses digitize their services and the way they communicate with their customers.
While the circumstances around their digital transformation strategy were not favorable, the leap that many of these businesses made will prove to be a great achievement for many of them in the long run.
Our society is generally fast-paced, and one of the most highly valued commodities today is time. People are looking for businesses that provide easily accessible products and quick services.
Therefore, many companies that have augmented their business models to offer their services and interact with the customers online are often preferred by customers over others that have not.
For example, many people might prefer a clothing store with an online store option over one requiring a customer to shop only in person.
Digitization allows for customers to have more options, increasing customer satisfaction.
Another great benefit of a company’s digitization is the fact that through online interactions with its customers, it can collect data that can inform its future marketing and sales approach. Through the collection and study of data, a company can monitor its performance and make more strategic decisions. Moreover, innovation allows companies to surpass competitors that have not yet leaped in digital transformation.
Let’s take a look at the four types of digital transformation.
Business process transformation refers to a company’s use of technology to update some of its internal processes.
As mentioned earlier, these types of technological improvements can significantly benefit a company by minimizing costs, accelerating the supply chain, and improving the quality of the provided services or products.
For example, if a company decides to use Robotic Process Automation (RPA) to automate a routine task previously completed manually by employees, that would be part of transforming an internal business process.
In that case, the company would be able to lower labor costs as employees would not have to be involved in that task anymore. Moreover, the productivity of the employees that previously completed the job would increase as they would be able to now work on less tedious tasks.
Business Model Transformation
Business model transformation attempts to change the traditional way the industry operates.
When a company proceeds to go through a business model transformation, it employs technology that will enable it to offer services or products differently than most other competing companies in the same field do.
For example, Uber changed the way people look at transportation today.
It solved a vital need: people needed to travel from place to place but either did not drive themselves, found public transportation time-consuming and unreliable, or deemed taxis too expensive.
Uber’s winning element was that the way they provided the service was different from any other competitors at the time.
Uber connected clients that needed transportation with drivers, and the overall service was significantly less expensive. Today, many other companies, like Lyft, follow Uber’s business model and offer similar services.
Related: Digital Transformation Industries Report (Across 15 Different Sectors)
Domain transformation refers to a company utilizing new technology to expand its offerings. Many companies often choose to grow by entering new fields and offering a wider net of services or products that do not necessarily all belong to the same market.
For example, Facebook started as a strictly social media platform. However, due to the popularity of video-on-demand streaming services, Facebook Watch was launched in 2017.
Since its debut, Facebook Watch has developed a lot of original content like scripted TV series, talk shows, sports shows, documentaries, and much more. Its competitors include other popular streaming services like Netflix, Amazon Prime Video, Disney+, etc.
This type of digital transformation journey relates to transforming a business’ culture. Total digital transformation for a company cannot take place without the support of the organization’s workforce.
A company that enters such a process needs to shift its practices, goals, and overall way of thinking towards supporting digital innovation and embracing more forward-thinking attitudes and emerging technology.
To change a company’s culture, it usually needs to start from the top with staff members following the example of their leaders.
In some cases, a reconfiguration in staffing might also need to take place as new talent might need to be recruited to help the company succeed in its new direction.
However, the change in mindset often happens organically in some companies.
Digital transformation is a kind of evolution that currently takes place in many businesses and organizations.
Digital transformation success is kickstarted by introducing new and emerging technology that allows companies to expand in a lot of different ways as it offers deeper insights into the organization and operational processes.
There are four different types of digital transformation, including process transformation, business model transformation, domain transformation, and cultural/organizational transformation.
Each type refers to another aspect of the business transformation process that allows a company to advance itself and its business strategy in various ways.