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What is digital transformation? With this process companies improve operations by adopting and implementing digital technologies. Read on for more answers.

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What is Digital Transformation?

Posted by Angela Davis on June 28, 2023

Digital transformation is a trend that has grown rapidly in the last decade. Thanks to the continuous advancement of Internet functionalities, the world has become a more connected place, and businesses and enterprises are eager to take advantage of this digital space.

Statista forecasts that global spending on digital transformation technologies will hit $2.16 trillion in 2023. This staggering number indicates that businesses are dedicating immense resources to digitally reinventing their operations.

However, the digital transformation of businesses is often referenced in conversations without any consideration of how clearly key decision-makers may or may not understand it. 

If your enterprise still uses legacy systems and databases, this article is for you. Here, we’ll explore digital transformation frameworks and why it is necessary to allow your business to thrive in the digital age.

 

Code for a digital transformation framework

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What is digital transformation?

To the average manager of an enterprise organization, digital transformation is a vague idea that’s quickly becoming a cliche. 

We often hear people describing it as “a fancy way of saying move your business online”, but this only addresses a small aspect of it. 

Put simply, digital transformation is the process of companies adopting and implementing digital technologies to improve their operations at a fundamental level. The main goal is to update business processes to keep up with market and industry changes.

This originally started with digitization (the move from analog to digital systems), and was followed by companies evolving through digitalization, i.e. leveraging digital data for business operations. Digital transformation is the next step in this evolutionary ladder. 

The core concept of digital transformation involves rethinking and reinventing existing operational models to accommodate new technological innovations. To do this, enterprises must continually identify ways to improve their processes and outputs.

Is the digital transformation of business really necessary?

Digital transformation fundamentally drives improvements in processes, encouraging the discovery and adoption of more efficient ways to orchestrate business activities. 

It helps organizations provide better outputs for end-users, translating to increased customer satisfaction and revenue generation. A 2021 survey by Gartner revealed that 83% of CEOs intended to increase investment in digital capabilities.

Digital transformation in financial services provides a good example of how the process can help businesses. Digital transformation has facilitated the birth of several new fintech solutions, and customers can now easily complete cross-border transactions on their mobile devices.

If you want your businesses to keep up with technological changes in your industry, then digital transformation is absolutely necessary. Furthermore, if your company relies heavily on IT, digital transformation is crucial to prevent process breakdown while scaling your services.

Global spending on digital transformation from 2017 to 2026

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Key benefits of digital transformation

When asked about the benefits of digital transformation, most people think in terms of return on investment. While this is certainly a key factor, the most significant advantage is how it influences elements that directly affect ROI.

Cost-efficiency

One of the core concepts of digital transformation is increasing efficiency by deploying technology that cuts out time- and resource-consuming activities. 

An example of digital transformation is task automation and the use of intelligent systems to manage activities. These functionalities help reduce the resources needed for less-productive tasks, allowing you to focus on operations that contribute more to your output.

Digital transformation also helps businesses manage their outputs at all levels. Certain aspects of business operations, particularly microservices, often need more attention, and inefficiencies in these segments eventually have multiplier effects on the overall product/service line.

By using advanced digital tools and processes, organizations can better manage this aspect of their business. 

Competitive advantage

Many businesses are now leveraging digital transformation to improve their profitability. Unless you’re in an industry with a rare market monopoly, at least one of your direct competitors will be using digital measures to improve their operations.

To keep up, you must also take advantage. Deloitte reported that 30% of organizations assessed their digital capabilities as being ahead of their peers in the public sector. So, you may already be lagging behind your competition.

In the rare instance that none of your direct competitors are currently leveraging digitization, you have a great opportunity to get ahead. 

Improved customer experience

Digital transformations should always start and end with the customer in mind. While the process does entail moving operations from analog to digital, the primary goal is to achieve a better service for them.

Digitization forces you to ask questions like, “How can we change our processes to offer more to customers?” Research into their preferences and habits will allow you to answer these questions. 

Today’s customers will be using apps, email, and social media every day. Adopting the latest digital innovations for your business will help you satisfy them using digital services they’re familiar with. 

 

Customer support staff helping a customer with a query

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Five stages of a digital transformation framework

A framework will help ensure less complexity in digital transformation than if you went in unprepared. 

Digital transformation should happen in the following successive stages, so make sure you include each one within your framework.  

1. Goal alignment


Digital transformation is a revolutionary change, involving a comprehensive reinvention of processes, operations, and components. 

You can liken it to a major building renovation, which will have separate successive undertakings. For example, you might want to change the windows and doors, install new hardwood floors, change the fittings, and repaint the house. You’ll finish with a house that looks nothing like it did when you began working on it. 

Just like in our house-building example, it’s difficult to reverse digital transformation once it’s done. That’s why you need to be sure of what you intend to build before you start.

The best digital transformation processes align with pre-set business outcomes. Once you identify the problems you’re trying to solve with your overhaul, you can ensure that your intended solution fits these. 

2. Business-IT collaboration


Digital transformation entails bringing your enterprise online, so you can’t do it without IT support. As such, a crucial element of your digital transformation framework involves creating a synergy between business and IT.

You may assemble an in-house IT team or employ an independent agency to handle the project. 

The best option is for your business and IT team to co-create digital solutions that meet your goals, project scale, and budget. 

3. Strategic partnership establishment


You will need external support from strategic and technology partners to effect the changes necessary to digitize your operations. 

When choosing partners, be futuristic in your approach. These are some good questions to ask:

  • Do the potential partner and the entity they represent share a similar vision for digital transformation?
  • What kind of partnership relationship do you intend to develop with them?
  • Will the partner be willing to collaborate for the long term?
  • Do they provide some level of strategic expertise that you currently lack?
  • How will the partnership integrate with existing systems?

These questions will help you identify the best partnerships for your digital transformation goals. Collaborations can make or break your vision, so you must be strategic with who you pick.

Strategic enterprise partners displaying a symbol of togetherness

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4. Business transformation


The next stage is to reinvent your business model. This entails fundamentally changing how your organization runs specific business operations. 

Primarily, you will be changing your enterprise and implementing new digital technology to boost operational efficiency. For instance, you might adopt cloud software for customer support operations. 

This step may involve redesigning processes and training personnel. Essentially, you’re upgrading an aspect of your business to accommodate your digital transformation vision.

5. Digital training


All the technology in the world is pointless without the personnel to use it efficiently. 

Your current staff may be under-prepared to help meet your digital transformation goals. As such, training employees is the final stage in any effective business overhaul.

Onboard your employees afresh, teaching them how to use your new digital tools. Once your existing staff are upskilled, they can perform innovative functions and satisfy customer preferences. 

Industry examples of digital transformation

In 2023, many brands have successfully migrated their businesses from analog to digital. A good example is digital transformation in financial services, which is often facilitated through microservices. 

This cost-effective approach involves designing new features as microservices and deploying them in a running environment that can communicate with legacy systems. This saves businesses the cost of replacing existing systems while simultaneously digitizing their functionality. 

Fidor took this approach when designing FinanceBay, an open platform where financial enterprises can pick and choose banking products to fit different business outcomes. 

FinanceBay offers various digital transformation solutions, such as insurance, person-to-person payment, and currency trading products. 

Digital transformation in healthcare is also expanding. Researchers at MIT, for example, used big data to train a new AI model to contribute to their research. Digitally transforming this process led to the discovery of halicin—a new antibiotic form capable of fighting antibiotic-resistant infections. 

The evolution of digital transformation in healthcare is now at the point where healthcare providers are also increasingly leveraging virtual reality, which is well-suited to training and education. 

Similarly, a growing number of consultants are using this to educate patients on treatment results for various conditions. For instance, VR-powered CGI models enable visualization of the effects of treatment methods on patients' bodies.

 

Children using VR technology in healthcare settings

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Leverage digital transformation to adapt to an ever-changing business landscape

Digital transformation is about adopting new digital technology, such as cloud processes, to enhance specific business operations, with a focus on improving customer outcomes. 

The transformation framework is a complex one, beginning with goal alignment and ending with employee training. 

Interestingly, digital transformation doesn’t have to be large-scale or capital-intensive. For example, you can leverage cost-effective options like microservice-based APIs to adapt to the digital landscape. 

OpenLegacy allows you to translate different components of your legacy systems through APIs with the help of an underlying connecting code. 

With our products, fast and seamless integration of digital products within your business operations is made possible for companies of all sizes.

Why not begin your transformation today?  

 


 

FAQs about digital transformation

What are the main areas of digital transformation?

Digital transformation has four main areas. These are:

  • Customer experience
  • Data and analytics
  • Business model transformation
  • Digital operations.

What are the four Cs of digital transformation?

The four Cs of digital transformation are:

  • Change
  • Culture
  • Collaboration
  • Celebration. 

Each of these signifies a path to achieving comprehensive digitization of a business’s operations.

What are the three main components of digital transformation?

The three primary components of digital transformation are:

  • Process reinvention
  • Operations transformation
  • User experience modification.

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