Digital transformation: What is it, and how do you start?

Digital transformation: What is it, and how do you start?

Digital transformation: What is it, and how do you start?

Digital transformation is now one of the most talked about phrases in business, and not just in the technology space.

But yet, it’s also controversial – 70% of digital transformations fail, a well-known figure at this point, leaving some business owners hesitant to take the first steps on this journey.

So, what is digital transformation, and why should you care? Or at least, why should you start some form of conversation on the topic within your business? Let’s discuss.

What is digital transformation?

In very simple terms, digital transformation is the act of taking non-digital or manual processes and replacing them with new technology (i.e. automation) backed by digital processes. Often it will include the updating of old or outdated business hardware and software tools. Of course, this also generally requires the upskilling of staff and a rethink of business strategies.

Learn more: Your guide to the best business systems software

In short, business transformation is not just buying new tools, but fundamentally evolving the people, processes and technologies of your business.

So why should you care?

At the moment we’re seeing technology paradigms moving at an exponential rate – at times, entire industries are flipping on their heads in a matter of months. If you look at recent major digital disruptors such as Uber or Airbnb, both are globally dominating their respective sectors yet neither own physical taxi cabs or properties of their own. That in itself is a mind-blowing concept! And none of it would have been possible a few years ago, because the technology just wasn’t there to support their business models.

This is creating a situation where business leaders who can’t keep up fall behind. Whether you like it or not, your organisation – and every other in New Zealand and the world – is now in a technological arms race.

Seeing the opportunity in digital transformation

If you break down the essence of digital transformation, it does provide a great opportunity for a business to pivot and to map out all of its current processes, much like an audit. This ‘audit’ allows you to assess what is essential and what could be replaced with better-practice workflows.

You could be asking yourself: Can we do more with less?

This journey of auditing and improving processes comes before adding or bolting on any new pieces of technology. In fact, when businesses focus too much on technology it is often why their transformation fails – tools need processes behind them to succeed, and if the processes aren’t there, the tools can’t possibly generate the right results. It would be like trying to drive a car without knowing how.

Learn more: Be honest – do construction companies really need ERP software?

5 things to think about before starting a digital transformation

It is my belief that, based on my experience with numerous digital engagements both on the customer and supplier side, the following five points are arguably the most critical – and should challenge your thinking before you embark on your digital transformation journey.

1. Self assessing

Before seeking third-party help, first you need to take ownership internally and look inwards – understanding your current state. You can seek help later.

You know your business and so do your staff, customers and suppliers, so this is the place to start. Take time to stand back and look at all the moving parts, collaborating with key stakeholders to gain their insight into different parts of the business, its processes and its challenges.

Consider also talking to others who have successfully demonstrated digital transformation and learn from their successes, and mistakes.

Once you have an idea of where you are now (your ‘as is’ state) and where you want to be (your desired state), finally you can engage a specialist who will help review these two states, plot out a roadmap to connect them, and support and guide you on achieving your transformation journey.

2. Willingness to change

As you seek to invest in new technology, it may seem natural to want to bend new tools to fit your existing manual processes. But, you must avoid this. The smart way to transform is not to try to break the technology to fit your processes, but break your processes to fit the technology – quite frankly, one is a lot more expensive to implement and maintain than the other.

With a good process, even bad technology can achieve good outcomes. But good technology with a bad process can hamstring your business, hurting you, your staff and your customer experience. This is another common pitfall of the companies that end up in the 70% of failures.

We’ll come back to this willingness to change in point five below, as it requires good change management to succeed.

3. Risk

Everything you do in business involves risk, and more importantly, mitigating risk.

Digital transformation will require resources and commitment from your team in order to be a success, and this will always carry with it a degree of risk. You must understand the impact these changes will have on your business and your most important asset: staff. Do you have the right skills in place? Can you take your people with you? How will you backfill these roles?

Once you understand the human capital impact and cost, you can start to evaluate the total cost of transforming your business versus current costs to the business. Real RIO assessments (Risk, Issues, and Opportunities) can be modelled and this will form part of your budgeting and decision-making process.

4. Scale

As mentioned earlier, organisations are in a technological arms race against one another whether they want to be or not. Customer expectations are evolving and this forces change.

Whatever you decide to do in the way of change, you’re going to have to move to a technology-based solution which is scalable. This will enable your company to grow and shrink at it needs to, without causing significant stress or cost. 

If you haven’t already heard, on-premise technologies are fundamentally dead or dying. IaaS (infrastructure as a service) is now king, and is the overarching cloud computing service which looks after cloud-based apps known as SaaS (software as a service).

These services are the global standard and the new normal. Just about every technology you are currently interacting with in your daily lives probably uses IaaS in one way, shape or form.

5. Change management

This is the big one! In fact, it is by far and away the most critical part of any successful digital transformation.

Not only will transformation impact staff by making them learn new technologies and deal with change (something which humans have a natural inclination to dislike), they will also need support to operate in a high-stress environment for a time while technology shifts and takes over as a new and improved business process.

Managing staff resilience and overall morale will become a daily task that requires an abundance of empathetic leadership. Business leaders will need to bring their A game, from frontline supervisors right up to C-suite executives and the board.

Every manager in the company must become an evangelist of change and take all of their staff on the journey, 100% of the time. You will need to ensure that staff know, understand and believe in the “why” of change. Don’t just try to sell them on “because”, as you will lose them – literally! There’s a reason you’re taking such a big business risk and working hard to transform, so all you need to do is communicate that effectively and help include your teams on why it’s important.

Conclusion

Most digital transformations fail, but this is often caused by business leaders focusing too much on the ‘digital’ part and not enough on people or processes.

I have long believed in combining great technology with great people for a focused purpose of improving or enhancing a customer experience. Today it is critical to the ongoing success of any B2B business, as we are very much moving towards an era of customers in the B2B space wanting the same experience as the B2C space. This requires real and fundamental transformation.

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