A digital transformation strategy can give you a clear picture of how digitization is helping your business. While the main benefit of digitizing manual tasks is often thought of as a linear increase in business efficiency, this doesn’t always mean increased productivity.
Furthermore, process efficiency isn’t the only benefit. To dig deeper into the topic, we need to look at the business-wide benefits, as well as the common challenges digital transformation can bring.
We’ll also look at how a strategy for digital transformation (also known as DX) can help you plan the how, when, and where of further digital implementation as well as maintenance.
We’re going to start with the basics by answering the questions “What is digital transformation?” and “What is a digital transformation strategy?”
What is a digital transformation strategy?
Digital transformation covers the processes by which a business adopts digital technologies. While it started with the digitization of analog systems, digital transformation now involves rethinking existing systems to accommodate the latest technological innovations. Currently, businesses must continually improve their processes to keep up with changes in their industry.
A digital transformation strategy is a plan or roadmap for these digitization efforts. However, when we discuss it in the digital market, we often mean “How well our business is positioned to offer digital services compared to our competitors.”
The goal of DX is normally to increase the efficiency of a process, team, or department, but we need to remember that digitizing a task doesn’t necessarily make it more efficient.
To give a quick example, say you’re implementing a new business-wide digitization project. Your business will already be dealing with staff training, updating archives, and so on as you go through mainframe modernization.
The challenge that immediately becomes apparent is how to deal with the additional disruption another digitization project will cause. With a DX strategy, you can plan, schedule, and project manage all your digitization efforts, making it easier to coordinate multiple projects.
The point is, when digital strategy becomes a phrase rather than a plan of action, it’s very difficult to communicate effectively.
Key components of a good digital transformation strategy framework
The key to creating a worthwhile DX strategy is laying a good foundation. Most projects will need flexibility in terms of time and resources, so let’s take a look at how to create a framework that allows for that.
The five pillars below will create a strong base for any digital transformation strategy framework.
Strategy
Starting with strategy might seem redundant—we’re creating a strategic framework after all. Nonetheless, we can’t build the rest of the DX framework without thinking of both your long-term goals (say, a three-to-five-year plan) as well as your short-term strategy for the next few months.
This will allow you to prioritize your digital transformations, as you’ll likely have many that you’ll want to implement across your business. To explain a little better, we’re going to stick with the example we used above of mainframes in digital transformation.
These are often seen as a stumbling block, but they don’t have to be. The main issue is that when a mainframe is updated, the middleware your business uses also needs to be updated or changed to keep up.
So, your long-term goal might be to update your legacy mainframe. At the same time, your short-term strategy would involve switching out, or updating, each piece of business software that can’t keep up with your planned changes.
Communication
It’s important to update your methods and procedures for communication as you develop your strategy. Many of the major challenges of DX can be overcome with better communication.
To gain organization-wide buy-in for your DX initiatives, you need to communicate your ideas and motivations to your teams. Get colleagues and employees on board by examining how processes will become more efficient, productivity will increase, and their jobs will be made easier.
Even if your teams are ready for your digital transformation, you may still need to convince your customers that it’s the right path for your business. While some companies try to minimize disruptions by pursuing a strategy of quiet background change, your digital transformation will almost always cause some disruption, especially if you aim to effect significant change in your business. This creates a challenge, as your customers will experience disruption even if you’re not open about your transformation plans.
To turn this on its head, allow your customers to participate in your decisions on whether to prioritize continual operations, planned downtime, or other methods for your new technology roll-outs. By taking advantage of this unique opportunity, you can gain real-life feedback about your service from your customers. This can then be used to inform the rest of your transformation process.
Data
Data and how you handle it is integral to the success of a digitization project. A big part of digital transformation is moving information from a physical business space to a digital one. This means you’ll need to find ways to accommodate more varied data types as well as higher volumes of data processing.
Even if you’re already well underway with digitization, there are some ways to modernize your internal data handling. For example, reducing ESB/SOA layers between your mainframe applications and business use cases, such as your front-end software, can speed up internal data usage.
Technology
When it comes to your technology stack, it can be tempting to focus solely on new and upgraded hardware and software for digitization projects. However, it’s often best to take a step back and consider whether optimizing existing equipment and systems is the most efficient or the most cost-effective choice.
Furthermore, the reason technology is fourth on this list, despite being a major part of DX, is that your implementation strategy has to come first. We briefly mentioned staff development earlier—this, and your work culture, will need to be updated in line with your tech, otherwise, you’re at risk of leaping ahead of your capacity.
Innovation culture
Innovation is all about moving forward, which means you can innovate in any area of your business. Building a culture of innovation is a little different though. When you implement this ethos, there’s no settling for second best.
Think carefully about how far your business really needs to innovate. Coming up with brand-new ideas and processes is great, but rushing to implement them might leave you in a worse position than when you started.
Take the example of digital transformation in healthcare. While innovation has been present in many of the technologies and processes that DX has enabled, this is an area that has seen both success and failure with its digital strategies.
Five steps for preparing a digital transformation strategy
1. Goal setting
When you start to create your strategy, think about your long-term organizational goals first.
Discuss your next three, five, or even ten years as a business with your C-suite as well as with your teams. This will help you bring your whole business into alignment with your strategic direction.
Once you’ve got a clear picture of your long-term goals, start looking at the path to get there. This will involve setting yourself smaller goals along the way. As you work from the top down, you’ll begin to clearly see where and when your smaller improvement projects can fit in.
So, don’t be put off from setting large goals for your business, just make sure you can chart a clear path to achieving them.
2. Situational review
When it comes to established DX frameworks, models like the SOSTAC planning methodology agree that a situational review is a necessity after the goal-setting stage.
This means reviewing the current status of your business processes and tech to identify opportunities for digitization.
There are some standard analytical methods you can use to help with this decision-making process. We recommend using:
- Market (competitor) analysis
- SWOT analysis
- Buyer persona segmentation
- Digital marketing performance analysis.
Start with analyzing where your business is positioned in relation to competitors and the market as a whole. Focus on two key questions here. First, who are the innovators in your market? Second, where do opportunities exist for your business to innovate new solutions to meet customer needs?
At this stage of digital strategy development, use a thorough SWOT analysis to identify your strengths and weaknesses. This will help you identify internal opportunities for change as well as areas you want to maintain during any planned downtime.
Existing marketing data is a great asset to use during your review. Look at your buyer personas and the segmentation you’ve already applied. Then, look at your digital marketing performance stats in the context of these.
Once you’ve done this, you’ll be able to identify new opportunities for digital marketing campaigns or even new uses for existing campaigns.
Of course, the potential to analyze your business goes even further, but it's best to avoid changing too many processes at once. You should already have enough information to make some useful decisions about how to move your business forward.
3. Tools and method selection
Selecting the technology and methods to implement your DX might seem like the hardest part of the strategy. However, these decisions should be a little easier if you’ve completed the two steps above.
At the top level, there’s a common goal for most businesses looking to digitize—improve efficiency to improve customer experience and, therefore, loyalty.
Let’s look at the example of OpenLegacy partnering with the manufacturing and industrial corporation JSW. They needed to make changes to everything from their Oracle database to their SAP integration.
This was a thorough transformation that took a significant amount of time, but the end result was notable cost and efficiency savings. This was mostly down to the ability to track errors in real-time with their SAP ECC quality control module. This gave JSW the ability to automatically notify teams about errors instantly as well as prioritize critical errors over simple reports.
However, this was only one part of JSW’s full digital transformation. This doesn’t mean the other tools and methods they used were redundant—far from it—it indicates that every part of their digital transformation strategy worked as intended.
4. Implementation
We now need to move on to what many would consider the “real work” of digital transformation. That’s implementing your new processes, tools, and technology in line with your strategy.
You’ll need to set schedules for implementing departmental and/or business-wide changes, and there are a number of key areas that you should ensure have the proper time and resources allocated. These include:
- Task prioritization for accurate scheduling
- Planned downtime allowances and service impact management
- Staff training and development
- New software or hardware roll-outs
- Plans for results, analytics, and reporting
If you take each of these areas in order, you should be able to perform most digitization changes smoothly. Remember that while operational efficiency will be important during this time, customer experience should never be neglected.
5. Measurement and control
You should have already rolled out methods for monitoring, analyzing, and reporting the results of your digital transformation during your implementation phase. This means that the final stage of your preparation should be the easiest.
Take note of your methods of data collection, storage, and analysis. Make sure it’s easy for your data team to find and extract the necessary insights from your business data. Then, set a schedule for reporting your results.
Leave room to adjust your strategy based on the results of your analysis, but always keep your long- and short-term goals in mind. Stick to your plan and try to adapt to challenges rather than rushing into different digitization changes.
A digital transformation strategy example to serve as your guide
There’s been a lot of talk in the financial market about the future of open banking recently. OpenLegacy has made great strides in this area, developing a digital-first, API-focused method for this new form of event-driven, digital platform banking.
There’s no better example of this than our partnership with Union Bank. When the U.S. bank decided they needed a new framework for their digital services, they decided on an Apache Kafka event-driven architecture.
OpenLegacy joined the project when the bank ran into some issues with mainframe integration. Having a digitization partner allowed Union Bank to develop a much more efficient framework for its digital system.
Practically, this involved bypassing some existing middleware to connect directly with the CICS as well as automating API creation across tasks. This enabled Union Bank to call external APIs from a CICS mainframe application.
Not only did this significantly decrease the time to market for the company’s ongoing digitization efforts, but it also led to an ongoing partnership between Union Bank and OpenLegacy.
Best practices for implementing a digital transformation strategy
Begin with a proof-of-concept
Starting with a small project that can be highly controlled is common practice in digital transformations. A proof-of-concept project will allow you to assess your operational capability without impacting your day-to-day business.
There are two key benefits to this. Firstly, if you focus on a project with ROI potential, you will be able to see a quick time-to-value as well as how it will help your bottom line.
The other benefit is being able to set best practices for your ongoing DX projects. A proof-of-concept project allows you to find out what works and what doesn’t before you commit to a larger DX.
Get ready for a cultural shift
A cultural shift within a business isn’t something that will happen overnight. Your onboarding, branding, and internal culture will all be affected.
Implementing changes in each of these areas will help you build your ideal work environment - but you will have to be prepared for it to take time.
Plan for the required technology
Make sure you account for both software and hardware installation, as well as training and deployment.
These areas are key to successful implementation. If business is disrupted, or your teams become dissatisfied with your new technology, implementation will stall.
Obviously, your customers' perception of any newly implemented technology also matters, but this will only become clear once the product is on the market. Alpha and beta testing can be a helpful way to plan for this aspect before your product’s launch.
Future-proof your business with a digital transformation strategy
One advantage of creating a digital transformation strategy is the flexibility to adapt it for future projects. You’re essentially developing a roadmap that will not just be suitable for your current business goals but could be applied to future modernization efforts as well.
A guide like this can become an essential point of stability as your company grows and changes.
FAQs about digital transformation strategy
What are the main areas of digital transformation?
It’s generally accepted that there are four main areas of digital transformation:
- Business model transformation
- Process transformation
- Domain transformation
- Organization transformation
These relate to different areas of your business to focus on when setting strategic business goals for digitial transformation.
Who leads digital transformation?
There are three main schools of thought on who should lead your digital transformation projects.
The most conventional method is to work from the top down with executive oversight from the CIO or CEO.
Other businesses have chosen to appoint new talent from middle management as “digital transformation directors”, creating fresh job titles in the process. The logic behind this is that these are candidates with the business technology and management expertise required to succeed as project leaders.
A third possible approach is the grassroots model, which drives change from the front line of your business. This approach relies on employees taking the initiative and implementing new tools or technology to aid their roles or departments.
What is the difference between digital strategy and digital transformation?
Digital strategy and digital transformation are linked, but they’re not identical. The difference is that digital strategy focuses on using technology to improve businesses at an organizational level.
Digital transformation, on the other hand, is more focused on the planning, implementation, and project management of process-level changes. For example, your digital strategy might decide on an API management platform. The digital transformation team involved would then work out how to integrate and implement this.
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