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.
Unfortunately, this proliferation of digital tools and systems has created a major disconnect in terms of information exchange. Siloed, ad-hoc tools are found on laptops, personal devices and closed networks, unable to ‘talk’ to each other or share vital data in real time. As such, businesses are discovering that the key to remaining agile, scalable and informed, 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 organisation-wide digital transformation by breaking down the silos and other barriers that hinder effective digital collaboration.
Digital transformation is nothing less than the complete reimagining of how businesses operate in the information age. It demands the full integration of reliable digital technology into all areas of business, fundamentally changing or replacing existing processes and creating a new company culture of connectivity—and a new approach to how organisations deliver value to their customers.
Customer expectations have skyrocketed in the digital age, and organisations must prioritise enhancing their customer experience. This area of digital transformation involves leveraging technology to create seamless and personalised interactions at every touchpoint, from pre-purchase to post-purchase stages. By implementing robust customer relationship management systems, data analytics, artificial intelligence and other digital tools, businesses can gain deep insights into customer behaviour, preferences and needs. This understanding allows them to deliver tailored experiences, improve customer satisfaction and foster long-term loyalty.
To achieve operational excellence, organisations must optimise and streamline their internal processes through digital transformation. This involves identifying areas of inefficiency and automating these tasks wherever possible using robotic process automation (RPA), machine learning and other automation technologies. By digitising manual workflows, organisations can enhance productivity, reduce costs, minimise errors and accelerate time-to-market. Additionally, implementing collaborative platforms and communication tools enables cross-functional teams to work seamlessly, driving agility and innovation while tearing down silos throughout the organisation.
Digital transformation presents an opportunity for organisations to redefine their business models and create new revenue streams. The Internet of Things (IoT), blockchain, cloud computing and other emerging technologies present opportunities for businesses to reimagine their value proposition. This may involve shifting from traditional product-centric models to subscription- or outcome-based models or leveraging data to offer personalised solutions. Some organisations may choose to take this area of digital transformation even further, venturing into entirely new markets through digital platforms.
A healthy and agile IT infrastructure forms the backbone of digital transformation. By adopting cloud computing, virtualisation and other agile technology solutions, organisations are able to modernise their legacy systems and create a flexible and scalable technology ecosystem. This allows for the rapid deployment of new digital services, facilitates collaboration across departments and locations, and ensures resilience and security in the face of cyber threats. Furthermore, leveraging edge computing and 5G technologies can enable real-time data processing and support emerging applications like Internet of Things (IoT) devices and artificial intelligence (AI) systems.
Data has become the lifeblood of modern organisations, and leveraging it effectively is critical for digital transformation success. But this area of digital transformation extends well beyond simply using the right tools; along with implementing robust information management systems, data governance frameworks and advanced analytics solutions, digital transformation means facilitating a cultural shift, where essentially every decision is backed by insights obtained through reliable data analysis.
Digital transformation is a complex journey that requires a strategic and comprehensive approach. To successfully navigate this process, organisations rely on four key pillars. Applied correctly, these pillars provide a solid foundation for their digital initiatives.
Digitising operations within the organisation entails automating manual processes, streamlining workflows and integrating digital automation tools and systems across departments. Digitising operations also involves implementing shared platforms and communication tools to enable seamless collaboration and knowledge sharing among employees, regardless of their physical location.
As customer behaviour and preferences increasingly shift towards digital channels, organisations must adapt their marketing efforts accordingly. This means creating a strong online presence—utilising social media platforms, optimising websites for search engines, and leveraging data analytics to understand customer behaviour and preferences. By implementing targeted and personalised digital marketing campaigns, organisations can reach their target audience more effectively, build brand loyalty and drive revenue growth.
Finally, the fourth pillar of digital transformation involves exploring new business ventures and opportunities. This pillar encourages organisations to embrace innovation and think outside the standard revenue 'box'. Through experimentation and entrepreneurial thinking, businesses can locate new opportunities within emerging technologies, market trends and customer needs. Organisations may choose to invest in startups, establish strategic partnerships or create internal innovation labs to foster creativity and collaboration.
Digital transformation is a reevaluation of how an entire organisation operates—from the systems they use, to their approach to marketing, sales and 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, widespread 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 organisations 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. Today, organisations around the world are more committed than ever in supporting the realisation of a global digital economy.
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:
A key aspect of digital transformation is the consolidation of IT tools into a single suite or platform. By centralising these digital resources, businesses can effectively end the confusion and inefficiency of IT sprawl, reducing operational costs in the process. Digital transformation integrates software, applications and databases, allowing them to function more synergistically.
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 in real-time, and fully incorporating it for high-level business intelligence. This means constant access to always-up-to-date information, which empowers decision makers with the insights they need to take action with confidence.
Simply collecting the right data provides no actual benefit, unless an organisation 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 analysed and acted upon, to drive improved business growth and better customer experiences.
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.
Digital tools, when managed effectively, allow organisations 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.
When markets and customer expectations change, businesses are often left behind. Digital transformation not only empowers organisations 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.
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 digitisation and digitalisation.
Digitisation is simply the process of converting analogue information (such as information stored in physical documents) into digital information. Conversely, digitalisation is more business-process focused, using digital information to improve work efficiency. Finally, digital transformation takes digitalisation to its logical conclusion, applying digital technologies to every aspect of business and extending the associated benefits across the entire organisation.
In digital transformation, a framework serves as a strategic blueprint that guides organisations through their journey of digital change. This digital transformation framework is a structured approach that outlines the key components, methodologies and stages involved in achieving successful digital transformation. It provides organisations with a roadmap to navigate the complexities of the transformation process and ensures that efforts are aligned with established business goals.
In many organisations, it's common for employees to hear the word 'digital' and simply assume that it's something for IT to worry about. But digital transformation is not solely the responsibility of any single department or team; it requires a cultural shift that permeates every level and function of the organisation. Digital transformation has the potential to refine, optimise, and enhance essentially every aspect of how employees interact, communicate and perform day-to-day tasks. As such, digital transformation is the responsibility of everyone involved.
However, it is important to acknowledge that not everyone in the organisation will respond to the same messaging or approach when it comes to digital transformation. To effectively drive digital transformation, organisations must recognise that different groups within the organisation may have different starting points and expectations. Some individuals may be eager to embrace new technologies and ways of working, while others may be more resistant to change. Crafting tailored messaging, programmes and environments becomes essential in order to address the diverse needs and attitudes within the organisation.
Additionally, fostering a culture of continuous learning and adaptability plays a major role in successful digital transformation. This is an ongoing process that requires individuals to be open to new ideas, willing to embrace innovation and committed to continuously enhancing their digital skills. Organisations should encourage collaboration, knowledge sharing and the celebration of small wins to create a positive and supportive environment for digital transformation.
For many businesses, the most difficult aspect of digital transformation has less to do with technology, and everything to do with managing the organisation 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 follows:
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 organisation, including data analytics needs. At the same time, digital transformation allows businesses to provide their workers with customised data format options, such as remote-work capabilities and mobile computing. Finally, empowering employees goes further, by promoting a digital culture of high performance.
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, organisations can better interact and build relationships with customers in social-media settings, offer real-time engagement across multiple platforms and personalise the customer experience to the individual. This allows for a seamless, highly customised customer experience.
Optimising operations brings together processes, people and technology to help reshape an organisation 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 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 organisation’s value proposition.
Although digital transformation as an ideal is almost always viewed as a positive goal for businesses, not every digital transformation initiative is a success. Measuring ROI of digital transformation initiatives makes it possible for organisations to assess the effectiveness and value generated by their transformation efforts. While quantifying the ROI of digital transformation can be complex due to its wide-ranging impact on various aspects of the organisation, there are several key metrics and approaches that can help gauge the success of the transformation.
The most direct approach to measuring ROI is through financial metrics, such as revenue growth, cost savings and increased profitability. Organisations can track changes in revenue streams, customer acquisition and retention rates, and operational efficiencies resulting from digital transformation initiatives. By comparing these metrics to the pre-transformation baseline, organisations gain a clearer picture of the financial impact and can more easily calculate the ROI.
Non-financial metrics should be considered as well. These include customer satisfaction, employee engagement, process cycle times and innovation levels. Surveys, feedback mechanisms and qualitative assessments can provide insights into the intangible benefits and improvements brought about by digital transformation.
Enabling digital transformation requires a deliberate, holistic approach that aligns with the business' goals, structure and place within the market. Here are several best practices to consider to help ensure successful digital transformation:
Before embarking on digital transformation, the first step is to gain a deep understanding of the industry landscape and where the organisation stands within it. Assessing market trends, competitors and customer expectations provides valuable insights for shaping the digital transformation strategy.
Digital transformation is about preparing for the future. Organisations need to analyse the market situation—past and present—to create an informed set of predictions about possible future circumstances. This includes identifying emerging technologies and trends, and anticipating how these changes will impact their industry.
Internally, organisations should evaluate their current capabilities, processes and systems to identify areas of improvement. Externally, organisations need to conduct research to understand customer needs, preferences and behaviours. Together, these two approaches serve as the foundation for crafting a targeted digital transformation strategy.
Organisations should view digital transformation as an opportunity to rethink their entire business model, all of their processes and how they approach customer interactions. This mindset shift ensures that digital transformation is embedded deeply into the organisation's DNA.
Clearly articulating their vision, setting specific goals and outlining the initiatives and milestones required to achieve them are all key elements of an effective digital transformation roadmap. When built on well-defined information, the roadmap provides a structured approach to prioritise and execute digital transformation initiatives.
Digital transformation often faces resistance in the form of internal barriers. Simply put, not every element in an organisation is enthusiastic about change. It is essential to identify and address these elements positively and proactively. This will likely involve clear internal communication and a focus on fostering a culture that embraces innovation and continuous learning. These must also be supported by the right change management initiatives.
Organisations dedicated to achieving digital transformation should recognise that they don't have to take the journey alone. Building a robust partner ecosystem can provide access to expertise, technologies and resources that accelerate the transformation journey. Partnerships can range from technology vendors to startups, industry experts and even customers. The value of partnerships and collaboration in digital transformation should not be underestimated.
Digital transformation requires agility and adaptability. Organisations should embrace an agile mindset to respond to changing market dynamics and evolving customer needs. Agile methodologies enable rapid experimentation, iterative development and continuous improvement—all elements that are central to digital transformation.
At the end of the day, digital transformation is an investment, not simply a cost. Organisations need to treat it as such, allocating sufficient resources, both financial and human, to support the transformation initiatives. This mindset shift ensures long-term sustainability and commitment to the digital transformation journey.
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
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 programmes, 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.
As previously addressed, digital transformation requires a cultural shift. Resistance to change and lack of employee engagement can hinder the progress of digital initiatives. To foster the sense of ownership and enthusiasm that is so crucial to the digital transformation efforts, prioritise communication, education and engagement. Make sure that the benefits of digital transformation are highlighted, provide training and support, and involve employees in the decision-making process to help employees recognise their own stake in the transformation.
Digital transformation requires collaboration across different departments and functions. However, data silos can hinder the integration of digital initiatives. Organisations should promote a culture of collaboration, break down the barriers preventing the flow of relevant information, and establish clear communication channels to ensure seamless cross-functional coordination throughout the transformation process.
As organisations progress along their digital journey their need for data privacy and cybersecurity grows. Prioritising data security and implementing robust cybersecurity measures while making sure that they comply with regulatory laws not only ensures the integrity of their digital transformation efforts; it also helps build trust among customers whose data may otherwise be at risk.
Digital transformation requires financial investment, and budgetary constraints can pose a challenge. Securing adequate funding for digital initiatives may require organisations to reallocate resources, seek external funding or prioritise projects based on their strategic value. Effective financial planning and resource allocation are critical to ensure that digital transformation initiatives are adequately supported.
Digital transformation often operates within a complex regulatory environment—one that can evolve rapidly. To ensure regulatory compliance, organisations must stay up to date on any relevant regulations and legislative changes. Adapting to new regulations and ensuring that digital initiatives align with legal requirements can be challenging, but it is essential to avoid certain legal and reputational risks.
A lack of an existing digital culture within an organisation can impede the progress of digital transformation. Organisations may face challenges in cultivating this culture, especially if they have a long-established history and their employees rely on traditional methodologies. Breaking these habits and promoting a mindset of innovation and agility requires investing in training and leadership support and creating an environment of continuous learning.
Poor communication between IT and the rest of the organisation is one of the most cited factors in failed digital transformation initiatives. Most often, digital change strategies come from the business side of the organisation, 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.
Digital transformation has the capacity and mandate to create change across every part of an organisation, 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 recognise and resolve specific issues as they arise and prevent them from causing problems in other areas.
Digital transformation poses a challenge in transforming operational processes, requiring organisations to move away from individual hard drives and adopt shared tools, systems and databases. Training and change management are vital to guide employees through this transition, emphasising the benefits of collaboration and maintaining data integrity. By streamlining operational processes and fostering a culture that embraces shared digital solutions, organisations ensure that everyone is working with the same single source of truth when it comes to their data.
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, organisations can align their digital strategies and motivate everyone involved along a common purpose.
Digital transformation is driven by a number of advancements, each designed to help organisations innovate, automate and enhance their operations. The key technologies that play a significant role in this transformation include:
AI and automation technologies make it possible to optimise processes, enable predictive analytics and enhance decision-making, empowering organisations with a more streamlined approach to their operations while allowing them to personalise their customer experiences.
In place of locally stored hard drives that require the user to be physically present, cloud computing enables organisations to access and utilise computing resources, such as storage, processing and software solutions entirely over the internet. This allows for increased scalability, cost efficiency and flexibility, empowering organisations to leverage advanced technologies without extensive in-house infrastructure investments.
Hybrid cloud combines public and private cloud environments, allowing organisations to leverage the scalability and cost-effectiveness of public clouds while maintaining control over sensitive data and applications in private clouds.
Microservices architecture breaks down applications into smaller, independent services, enabling flexibility, scalability and agility in software development. This approach allows organisations to quickly ideate, create and deploy applications, facilitating faster time-to-market without sacrificing quality.
Blockchain provides decentralised and secure data storage, authentication and transaction capabilities. It enables organisations to establish trust, enhance transparency and streamline processes across a range of industries. Although this technology is still relatively new, the potential it represents for data security makes it a major technology supporting modern digital transformation.
For digital transformation to progress, important information and data within the organisation must be formatted to interact within the new digital systems. Digitisation involves converting analogue information into digital formats, allowing organisations to store, access and analyse data more efficiently, and facilitating improved decision making, data-driven insights and enhanced customer experiences.
Machine learning algorithms enable systems to learn from data and make accurate predictions without explicit programming or direct human interaction. This technology creates a more effective approach to automation, personalised recommendations, predictive analytics and more, driving digital transformation in the process.
Where internet connectivity has long been the exclusive domain of traditional computers and mobile smart devices, the internet of things (IoT) is bringing real-time information exchange to many every-day objects. IoT connects many physical devices directly to the internet, facilitating data collection, communication and automation. This enables organisations to monitor, control and optimise their physical assets, processes and environments in real time, leading to improved efficiency and new business opportunities.
As more systems and processes go digital, the dangers of latency become more prominent. Edge computing brings computing power closer to the data source, reducing latency and enhancing real-time processing capabilities.
SPM manages goals and strategies to enable or jumpstart your digital transformation journey, but to do so it requires support from the right tools and resources. ServiceNow’s ServiceNow AI Platform provides those tools, delivering unmatched experiences through a single, cloud-based system.
Built on the ServiceNow AI Platform, ServiceNow Strategic Portfolio Management empowers organisations to easily and intuitively integrate users and workflows, collaborating effectively regardless of task. Apply advanced automation technologies and build customised support applications. Break down data silos, including departmental silos, and create a single, centralised source of data truth. Work with machine-learning programs and virtual agents to incorporate context-aware recommendations. Place business performance under a microscope and optimise existing operations while also improving predictive accuracy. The ServiceNow AI Platform makes it all possible.
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