Jun 7, 2022
Across industries, the Covid-19 pandemic forced many companies to accelerate their digital transformations to compete and even survive.
As the world and its consumers become more digital, a company’s success is contingent on how digital it can become. This applies to both B2C and B2B sectors as consumer behaviors, knowledge consumption and processes have now changed.
In 2022, spending on digital transformation technologies and services is projected to reach $1.8 trillion and increase to $2.8 trillion by 2025 according to Statista. That growth demonstrates how much companies are planning to invest to compete.
So, how can your business drive its transformation to be where your customers are? And what strategies are different industries using to ensure their long-term survival in a digital world?
In this blog, we’ll dive into the ins and outs of digital transformation by exploring:
So what is digital transformation? If you type that question into Google, you’ll get billions of results. There may be a misconception that digital transformation is just about technology, but that’s not the case.
Digital transformation is a foundational change in how an organization operates, communicates, and engages with customers. It’s a disruption to the ‘traditional’ way of operating to become more digital. It’s also about cultivating a digital culture and upskilling the people in your company as it takes a team to work through a transformation.
As Brian Corish, Managing Director of Accenture Interactive simply puts it: “Digital transformation is reinventing the business model. It’s reinventing processes”
There are a lot of terms when it comes to businesses and digital, so it’s easy to confuse them. The most commonly used ones are digitization, digitalization, and digital transformation. Let’s look at each of them to see the difference.
Many organizations focus on organizational transformation, but there are four types of digital transformation that you need to consider to realize its full value. These include:
Digital transformation is a long and complex process so it’s important to take a strategic approach from the outset. That means that you should build a digital transformation framework so you can always revisit a step to see if improvements can be made. The following six steps….
1. Understand why you are doing it
A key part of digital transformation is understanding the motivations for becoming more digital. No two businesses are the same, so it’s important to know why your business is embarking on this journey.
Think about the core reasons for your transformation. Is it to improve customer experience, increase the efficiency of your processes or manage your data? Once you know the reasons, you can plan forward to ensure they are met.
2. Audit your company
To know where you need to go, you need to know where your company is now. Review what processes and systems are in place and how effectively they are operating. If you are using digital tools and technologies, what are they and are they actually working? Examine the workings of your organization, how it is structured, and how it operates?
3. Find your gaps
The reason you are looking to drive digital transformation is that there are inefficiencies in the business, or opportunities you have not tapped into. What gaps need to be filled? For example, are you extracting value from your customer data? Do you have a way to engage and retain leads that come into the business? What’s your customer experience like from one channel to the next?
You can look at some of our case studies to see how global companies identify the gaps in their business.
4. Look at your in-house capabilities
Above and beyond technology, this stage is about looking at your talent. There’s no point in transforming your business if the digital skills aren't there to steer it. What digital skills are needed to drive transformation and do you have any in the company? Do you have a training program that can upskill existing employees so they have essential digital skills or at least digital literacy?
5. Create a digital transformation strategy
Once you understand your motivations, capabilities, gaps and in-house talent, it’s time to create a digital transformation strategy that can guide your business. This should act as a roadmap for you to follow that will be tied to KPIs with a funding plan in place.
6. Review and revisit - be agile!
Your digital transformation strategy should not be set in stone. The digital and customer ecosystems change constantly so it’s important to make room to review your strategy if external or internal factors warrant it. Agility is essential when navigating this type of transformation and your company needs to be able to pivot and adapt if required.
There are some great examples of organizations that are nailing digital transformation. Here are three well-known brands in different industries to give you inspiration on what can be achieved.
The well-known pizza chain Domino’s started in the 1960s and has transformed to become a ‘truly digital-first business’. In 2021, 91% of its sales were made through digital channels according to Marketing Week.
Where it was once looking at bankruptcy, the bricks-and-mortar business turned things around in 2011. The then CEO tasked the IT team to make it easy for any customer with a smartphone to order a pizza in the 17 seconds it takes for a light to turn green!
The Domino’s app was born (and the restaurant industry disrupted) and delivery is now made even easier as e-bikes and autonomous delivery have transformed the business into one that brought in revenue of $4.36 billion in 2021.
As one of the biggest brands on the planet, Nike’s tick logo is instantly recognizable. But even Nike needed to undergo a digital transformation to remain competitive and be where their customer was - online.
Armed with strong leadership, Nike transformed the company’s mindset, supply chain, and brand. The company focused on more powerful data analytics, updated its e-commerce strategy, devised powerful digital marketing campaigns, and ramped up its direct-to-customer sales. In addition, concept stores were piloted in 2018 and membership opportunities were expanded.
The brand also uses social media effectively for brand awareness, customer engagement and promoting its social initiatives to build a community. This series of posts on Twitter is to promote Mental Health Awareness Week amongst athletes.
Nike’s CFO, Matt Friend said: “Consumers continue to shift toward digital to find the products they love, and NIKE’s digital experience continues to build deep consumer connections and capture digital market share over the past four years.”
Anyone who has furnished a house will be familiar with IKEA. Founded by Ingvar Kamprad when he was just 17, the company has gone on to become one of the most successful brands and one that’s not afraid of innovation.
Its transformation to digital has always been aggressive as it constantly strives to use technologies and channels to engage customers and drive sales. It embraces an omnichannel approach to enable customers to move from one channel to another easily.
IKEA’s decision to stop creating its well-known print catalog shifted investment to other areas. IKEA’s acquisition of Geomagical Labs will enable customers to create a 3D representation of a room, ‘delete’ the existing furniture and virtually add new pieces. The brand is also planning a ‘Shop and Go’ payment service, a geolocation system for in-store products and chatbots for simpler customer service.
Ecommerce sales boomed during the Covid-19 pandemic. In the U.S. consumers spent $870 billion online in 2021, up 14% from 2020. According to Digital Commerce 360, if the pandemic had not happened, ecommerce sales would not have reached that level until 2023 (two years later).
As a result of the pandemic, companies turned to digital technologies and networks to reach and serve customers. For businesses that were already present online, this meant upscaling operations to meet demand. For those that had just started on their digital transformation journey, this called for an unexpected pivot.
According to a McKinsey Global Survey of executives, companies have accelerated the digitization of their customer and supply-chain interactions and internal operations by three to four years. Meantime, the share of digital or digitally enabled products has accelerated by seven years.
There were also significant changes to companies during this time such as remote working (including the explosion of people working as digital nomads across cities), changing customer needs and preferences, along with cloud migration. McKinsey’s survey discovered that many executives believe these changes will remain in the business.
Ultimately, the pandemic has created a new way of working for companies across sectors.
No industry has been untouched by digital transformation. To serve its customers and compete, companies across sectors are investing in digital transformation to embed digital in their processes and culture.
Let’s look at several industries to see the areas of transformation and future trends.
Privacy and adherence to regulations is key in this sector and as a result, it’s been slow to digitally transform. A report from Deloitte found that only 30 percent of organizations surveyed assessed their digital capabilities as ahead of their public sector peers while 70 percent said they lagged behind the private sector.
The digital transformation challenges for governance are:
The key to overcoming these challenges and becoming more of a digital sector are:
The global digital health market is expected to increase to over $500 billion by 2025 with health information technology being the largest share. The sector faces a number of challenges in its transformation:
However the pandemic accelerated change in this sector rapidly due to shifting consumer preferences and care-delivery innovation which includes:
The challenges that the financial sector face is related to the protection of sensitive information and data.
Coming down the line in 2022 and beyond are digital transformation initiatives to increase security and provide a better customer experience.
Big techs like Google and Apple ramp up activities in the sector
Digital transformation in the manufacturing market is expected to reach $767 billion by 2026 with increased spending on IoT.
The challenges this industry faces are:
Like the financial sector this industry had to accelerate its digital transformation during the pandemic and ramped up activities in certain areas to make improvements such as:
72% of small businesses are accelerating their digitalization rates to address COVID-19 challenges according to ‘2020 Small Business Digital Transformation’.
Unlike large corporations, small businesses can use the fact they are smaller to their advantage. This may make it easier to make changes in the company’s mindset, enable specialized training programs that focus on key areas and see digital technologies and strategies have an instant impact. The challenges small businesses face are:
However, strategies are being made to tackle each of these by
The HR market is expected to reach $43 billion by 2028. The growth is driven by the adoption of HR software. Challenges faced by this sector are:
These obstacles are being tackled by the HR industry across the globe by introducing:
There are many benefits to digital transformation for a business and its workforce which include:
For a more detailed description, read our blog ‘What are the Benefits of Digital Transformation?’
From a commercial perspective, companies are looking to embed digital across the business in the most effective ways possible. Some of these ways are:
As digital continues to accelerate across industries, it’s important to keep the process and mindset we set out above. However, these are the key technology trends in 2022 and beyond.
70% of digital transformations fall short of their objectives according to a BCG report. That means that there can be a lot against you in your digital transformation journey. So, let’s look at the things you should avoid to ensure transformation success.
Digital transformation is a complex process and the people part of it is just as important as the technology. At DMI we can help you drive ecommerce sales, build pipelines, develop online relationships and embed digital across the organization. Check out our business page to see how your company can succeed in a competitive marketplace.