What is digital transformation?

Digital transformation is a fundamental change in how businesses operate and interact with customers, integrating digital technology throughout.

Since even before the industrial revolution, business has been a driver and catalyst for technological improvements. But while advances in factory-floor automation and the proliferation of electrical power allowed companies of the early 19th century to expand their reach well beyond what was previously possible, the relatively recent introduction of digital information technology has created a new kind of revolution. Today, digital technologies play essential roles in every industry and market.

But more than that, businesses are discovering that digital technology holds the key to remaining agile, scalable, and informed in an often-turbulent economic and social era. But to do so, emerging technologies need to be put to work doing more than just building or enhancing products; they need to be applied to help facilitate true, organization-wide digital transformation.

As such, digital transformation is nothing less than the complete reimagining of business in the information age. It demands the integration of reliable digital technology into all areas of business, fundamentally changing or replacing existing processes and creating a new company culture. Perhaps most importantly, it represents a new approach to how organizations deliver value to their customers.

Digital transformation is a reevaluation of how an entire organization operates—from the systems they use, to their approach to marketing, sales, support, etc. But while the technologies themselves may be complex, the motivation for embracing and implementing them generally is not; modern businesses are adopting digital transformation to help ensure their continued survival.

The recent global COVID-19 pandemic created profound, wide-spread turmoil throughout the business world. Disrupted supply chains, the demand for remote-work solutions, pressures to decrease time to market, rapidly shifting customer needs and expectations—enduring these day-to-day fluctuations forced organizations to quickly adapt or fail. And while digital transformation is not a new concept, it took on special significance in 2020 and 2021 to ensure business continuity in an uncertain world.

Because digital transformation is so encompassing, the advantages associated with it are likewise effectively limitless. Digital transformation has the capacity to improve nearly every aspect of business. That said, there are a few primary benefits that tend to stand out from the rest:

Improved resource management

A key aspect of digital transformation is the consolidation of IT tools into a single suit or platform. By centralizing these digital resources, businesses can effectively end the confusion and inefficiency of IT sprawl. Digital transformation integrates software, applications, and databases, allowing them to function more synergistically.

Effective data collection

Modern businesses need to be able to tailor their processes to the state of the market and the needs of their audiences, and that means collecting reliable, relevant information. Digital transformation revamps data collection practices, creating powerful systems for gathering applicable data and fully incorporating it for high-level business intelligence.

More-accurate insights

Simply collecting the right data provides no actual benefit, unless an organization has the capacity to turn it into real, actionable insights. Digital transformation keeps data out of data silos, instead ensuring that collected information is being properly analyzed and acted upon, to drive improved business growth and better customer experiences.

Optimal collaboration

A common focus in digital transformation is in using digital tools to improve internal communications and collaboration. Central access to important databases and essential tools, all managed and maintained in a single digital location, helps eliminate the dangers of misplaced resources. Likewise, businesses can keep a clear record of all interactions and business communications. Digitally enhanced collaboration helps establish a true digital culture.

Better scalability

Digital tools, when managed effectively, allow organizations to do more with less. Automated workflows, machine learning systems, central information access—each contributes to a business’ ability to grow, unrestricted by limitations associated with availability. Digital transformation facilitates easy scalability to match changing business needs.

Increased flexibility

When markets and customer expectations change, businesses are often left behind. Digital transformation not only empowers organizations with improved data analysis, so they can better identify and anticipate changes as they happen, but also gives them the agility they need to respond quickly. Incorporating continuous improvement strategies, digital transformation gives companies a means to adapt to any changes.

Enhanced productivity

At its most basic, technology exists to allow users to do more. Digital-transformation technologies are no different; with the right digital tools—such as automation, and machine learning—businesses can significantly reduce time spent on essential-yet-repetitive tasks. This frees up employees and managers to instead focus on strategy and other concerns.

Although sometimes used synonymously, the term digital transformation is different from digitization and digitalization.

Digitization is simply the process of converting analog information (such as information stored in physical documents) into digital information. Conversely, digitalization is more business-process focused, using digital information to improve work efficiency. Finally, digital transformation takes digitalization to its logical conclusion, applying digital technologies to every aspect of business and extending the associated benefits across the entire organization.

For many businesses, the most difficult aspect of digital transformation has less to do with technology, and everything to do with managing the organization through change. These fundamental changes are called systems of intelligence.

Systems of intelligence are essential aspects of digital transformation, incorporating existing record systems with advanced, real-time data analytics. The four key pillars of systems of intelligence are as follow:

Empowering employees

Even with ongoing advances in digital technology, a company’s employees will always be its most-valuable resource. Information assets must be comprehensive and accessible enough to meet the full range of needs of users within an organization, including data analytics needs. At the same time, digital transformation allows businesses to provide their workers with customized data format options, such as remote-work capabilities and mobile computing. Finally, empowering employees goes further, by promoting a digital culture of high performance.

Engaging customers

Employees may be the heart of a business, but customers are the lifeblood. Digital transformation helps ensure that customer expectations are being met and that data management issues are not negatively impacting the customer experience. With the right innovations and resources in place, organizations can better interact and build relationships with customers in social-media settings, offer real-time engagement across multiple platforms, and personalize the customer experience to the individual.

Optimizing operations

Optimizing operations brings together processes, people, and technology to help reshape an organization from the inside. Digital transformation empowers businesses to develop an accurate understanding of the current processes across every department and function, building comprehensive data repositories that serve as a single view of data that can function as a solid foundation for analytical efforts.

Transforming products

Transforming products is the final pillar in digital transformation. New technologies, properly managed, can innovate products and services well beyond current thresholds. This leads to vast increases in an organization’s value proposition.

Given the scope of digital transformation, it may not be surprising that there are several different hurdles that a business will need to clear to begin reimagining their processes. These include the following challenges:

Lack of leadership buy-in

Digital transformation initiatives may hit a snag with middle management. Often, they see digital transformation as a threat to their positions and the positions of the people who work underneath them. As such, they may—consciously or unconsciously—resist the changes. Adjusting compensation programs, offering retraining and upskilling options, and involving middle management in digital transformation planning can help secure buy-in, so that when it comes time to implement digital improvements, leadership isn’t dragging its feet.

Communication blockages

Poor communication between IT and the rest of the organization is one of the most cited factors in failed digital transformation initiatives. Most often, digital change strategies come from the business side of the organization, rather than from the IT department. Unfortunately, this sometimes means that IT is not included in digital transformation planning. This lack of communication can create several problems, including disrupting access to essential systems and tools. To resolve this issue, IT execs should work alongside business leaders through every step of digital transformation.

Overly ambitious projects

Digital transformation has the capacity and mandate to create change across every part of an organization, but those changes don’t have to all happen at once. Some businesses end up underestimating the complexity of their internal processes. Attempting to revamp a range of complex processes all at once may be too much to handle effectively. Instead, consider transforming a single process or subprocess at a time. This makes it easier to recognize and resolve specific issues as they arise and prevent them from causing problems in other areas

Insufficient employee preparation

Digital transformation doesn’t happen in a vacuum; it depends on support from every level and department. And when employees aren’t properly prepared to accommodate these changes, the transformation initiatives are much more likely to fail. This includes training employees on relevant technologies, but it goes back further than that. Everyone involved should have a clear picture of what digital transformation is and what it entails long before any changes are implemented.

Unclear goals

Digital transformation is a popular topic, and many of the most prominent businesses are whole-heartedly embracing digital centricity. But digital transformation is not, in itself, a goal. Businesses need reasons, supporting data, and objectives in place if they want to see the promised benefits. With a strong, overarching vision, supported by clear goals, organizations can align their digital strategies and motivate everyone involved along a common purpose.

Businesses that embrace digital transformation, support it with clear goals and strategies, and ensure that leadership and employees are involved and dedicated to its success, still need the right tools in place to facilitate positive change. ServiceNow’s Now Platform provides those tools, delivering unmatched experiences through a single, cloud-based system.

Working with the Now Platform, organizations can easily and intuitively integrate users and workflows, collaborating effectively regardless of task. Apply advanced automation technologies and build customized support applications. Break down data silos, including departmental silos, and create a single, centralized source of data truth. Work with machine-learning programs and virtual agents to incorporate context-aware recommendations. Place business performance under a microscope and optimize existing operations while also improving predictive accuracy. The Now Platform makes it all possible.

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