Digital transformation is the integration of digital technologies across the entire organization to create a fundamental change in the way the business operates. It is a chance to define new ways of working, optimize processes, introduce new business models, and reimagine the customer experience. For digital transformations to be successful, they require a shift in organizational culture. Employees should be empowered to develop fresh ways of solving problems and given the freedom to allow innovation to flourish.
When successful, digital transformation has the power to significantly increase efficiency, reduce costs, enhance customer experience, and create a sustainable competitive advantage. Businesses can also take advantage of opportunities that exist in the market with the creation of new business models and through digital disruption.
Digital transformation can be a complex process, but if done well, it can give companies a huge advantage over their competition. Take these transformation initiatives for example:
Keller Williams (KW) is the world’s largest real estate franchise. The company’s sales results and the number of units sold make it the no. 1 real estate franchise in the USA. Keller Williams’ digital transformation journey started in 2015. That was when KW decided to build proprietary software on their own, which diminished the need of depending on third-party solutions. As a result of this decision, an innovation hub – KW Labs – was launched in 2017. It was dedicated to transforming Keller Williams into a tech company.
KW owns a huge collection of data and the company uses it to help agents all around the world make informed decisions by empowering them with AI-powered apps like a virtual assistant (a Siri for real estate agents), CRM system, or brilliant property search engine. These solutions support agents in their daily work and enable them to do their job the best they can by providing hyper-local market analysis, suggesting right offer parameters, or estimating the probability of closing a deal.
Unilever is one of the biggest providers of household goods and groceries has 2.5 billion daily customers. Unilever employs 161,000 people, runs 300 factories in 190 different countries, and owns 400-plus household brands. Their digital transformation started when the company realized their customers become more and more tech-savvy, and they expected the brand to meet their expectations by moving presence, attention, and communication into digitized channels.
Unilever decided to build data analytics infrastructure and an advanced platform to facilitate communication with its consumers and make it easier to build connections and relationships by conversations. To make sure this process was effective and efficient, the company needed to gather a vast collection of data – in 2019 it amassed 900 million individual consumer records, up from 200 million the year before.
Then, Unilever leveraged machine learning technologies to segment consumers based on their preferences and use programmatic, data-driven marketing to target them with a relevant message in digital channels.
The Home Depot – In 2017, the largest home improvement retailer in the United States committed to a bold digital transformation strategy. It planned to optimize its in-store and online shopping experiences, creating a seamless experience for customers across all channels. The company employed 1,000 new IT professionals to complete the transformation and leveraged data analytics to gain greater customer insights.
In two years, Home Depot’s revenue grew by over $17 billion, and the company was able to make cost savings by analyzing local trends and optimizing inventory levels.
Microsoft – Increasingly aware of the competitive pressure from its rivals, Apple and Amazon, Microsoft transformed its business from the ground up. The company implemented a customized data analytics solution, Microsoft Sales Experience (MSX), to help sales representatives calculate the probability of winning or losing an account. This allowed employees to tailor their offers more effectively and focus on the most promising accounts. The data from MSX was also integrated with the company’s CRM system, providing insights to departments across the business.
Nike – When the sports giant felt it was losing its competitive edge, Nike implemented a range of transformation initiatives. The company made changes to enhance its supply chain, improve its brand, understand its customers better, and strengthen its company culture. Data analytics provided the insights that led to the opening of concept stores, improvement in customer experience, and the creation of more membership opportunities. In two years, Nike’s stock price had risen from $52 to $88. Over the same period, the company’s revenue increased from $33.5 billion to $39.1 billion.
Developing a digital transformation strategy is a vital and basic step to take before any decisions can be turned into reality. However, business leaders may find it difficult to know what to focus on.
To create an effective digital transformation strategy, a company needs to find answers to the essential questions of Why, What, and Who. That’s what enables creating a compelling vision and plan for change.
As McKinsey’s data indicates, a well-planned digital strategy and a good change story make transformation efforts more than three times as likely to be successful. Illustrating the vision helps present three most frequent reasons for a digital transformation failure: failing at employee engagement, having too many priorities, and losing clarity.
- The Why presents all reasons in favor of digital transformation and reveals the stakes – is it an opportunity to grow and develop the business or a threat looming over its existence?
- The What gives the object of change a clear meaning – digital is full of buzzwords or terms like machine learning, AI, robotics, cloud, or mobile, which, in reality, are understandable only to a few. What’s crucial for getting an organization-wide buy-in is relating to the everyday employee experience and presenting how it can be improved by digital solutions.
- The Who means decision-makers responsible for driving the effort and having the authority to make quick decisions as strong leadership. Answering this question is the key to the success of a digital transformation.
A digital transformation strategy should also answer the questions of Where, When, How, and How Much. This should be done at the execution level, creating a plan for successful execution.
- The Where focuses on business areas the change will impact the most – is it several separate experiments or a single company-spanning project? Where should the need for cooperation across silos of departments and suppliers be emphasized the most?
- The When sets the timeline of planned changes – it indicates when results should become visible and aligns the transformation with business objectives and goals.
- The How describes the way the change will be delivered and implemented. This answer should cover a number of aspects – from technology and methodology to covering skill gaps and adapting culture. The right answer to the How should address employees' fears and explain any doubts.
- The How Much covers the extent of costs the company is willing to bear. It means not only financial expenses but also the inconvenience people will need to live with until the change settles in and new ways become business as usual.
Developing a digital transformation strategy is an exercise in bridge-building. The authors of change should know how to “sell” this vision internally and present the desired outcomes honestly, but also in a positive light.
The story for change links the current state with the desired long-term vision of the company – it also connects the current employees’ fears with their ambition.
The answer to this question depends on whether you have the necessary skills, expertise, and experience in-house. If not, engaging a digital transformation partner is a valuable investment in the success of your project. A good partner will be able to provide support in these areas:
- Finding opportunities within your organization and market, and developing a digital transformation strategy to exploit them. This will be based around the individual needs and goals of your business.
- Implementing new technologies to automate and streamline manual processes.
- Building bespoke software products that enable digital disruption through new business models and the opportunity to reimagine processes.
- Identifying and promoting the cultural changes needed to embed and sustain new ways of working.
Partnering with experts who have successfully facilitated numerous digital transformations can add immeasurable value to your transformation initiatives.
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