What is digital transformation?

This blog has been expertly reviewed by Sean Morris, Chief Technology Officer at Nasstar.

Some might think that ‘digital transformation’ is just another buzzword. But it’s much more than just another catch-all term. In fact, the global digital transformation market is expected to grow to $1,009.8 billion by 2025, up from $469.8 billion in 2020.

Digital transformation is the integration of digital technology into all areas of a business, reimagining how it functions, interacts and succeeds. It fundamentally changes business culture, how you operate, and how you deliver value to customers.

Why digital transformation matters

Since the Digital Revolution began in the 21st Century, digital transformation has always played a role. However, the COVID-19 pandemic accelerated the urgency and need for change across all industries. It has become the central focus for CIOs when considering operational efficiency, innovation, and the need to adapt quickly to market forces.

Sean Morris, CTO at Nasstar, said: “Previously, digital transformation would have centred around the customer experience, improving processes to develop a better customer journey. But now, digital transformation must be a key part of every business department. It’s no longer a ‘nice to have’, it’s the only way to get work done efficiently.
“For example, with more employees working remotely than ever before, organisations need to provide a good digital experience for staff. The risk of not providing this is that employees can move to companies where innovation and digital transformation are at the heart of their operations. There is also an efficiency gain as staff can be more productive if processes are automated and “busy work” is reduced.
“Organisations should also be placing their efforts into technology for customer support, automation for resilience and cloud technologies that reduce redundant or conflicting systems while creating operational efficiencies.”

Embarking on a digital transformation journey is a means for survival in the digital age. CEOs are, and should be, prioritising accelerated digital transformation to ensure their business outpaces competitors and invests in growth. Leading companies in enterprise technology are already growing faster than companies yet to start their digital transformation journey.

Benefits of digital transformation

There are several benefits that organisations can experience when they embark on a digital transformation journey.

Increased revenue

An SAP digital transformation study found that 80% of businesses have seen increased profitability from their digital transformation efforts. They also expect to see further revenue growth as their digital transformation continues and evolves.

Greater cost-efficiencies

With digital transformation, businesses can streamline operations, automate manual tasks, and optimise workflows to deliver cost savings. For example, cloud technologies can be adopted to store and share data, reducing physical storage space and associated costs. Businesses can also use digital transformation to increase staff efficiency and save costs that way.

Increased data collection

Digital transformation enables businesses to implement tooling and processes that improve data collection and analysis for greater business intelligence and insights.

With the right tools and processes, every business function can benefit from data. By translating raw data into insights from various touch points, businesses can create a single view of the customer journey, operations, finance, and production. The result of these insights may lead to discovery of business opportunities and the chance to make improvements to process, products, and services.

Improved resource management

System sprawl is often a by-product of many companies, especially those involved in doing M&A activity. It’s also common for businesses to struggle with a single source of truth as data moves around the business and its underlying systems.

A digital transformation strategy will drive the need to rationalise information and resources into a consolidated set of applications, databases, and software which can be integrated into a central repository for improved business intelligence. The net result of this consolidation will be fewer dispersed applications and databases, leading to easier management and reduced operating and maintenance costs.

Better customer insights

In line with data and resource management, a digital transformation focus will allow businesses to glean data-driven customer insights. Data is key to understanding customer needs so their journey can be improved, optimised and personalised. With greater customer insights, you can create a customer-centric strategy that drives business growth.

Enhanced digital culture

Digital transformation requires a culture shift within the organisation. This transformation needs to be planned, managed, and led by key business stakeholders and skilled business change professionals. When done correctly, this change programme can enhance both the culture and the digital experience your employees have. Businesses should tailor their tools and processes to the environment, enabling employees to do their jobs efficiently and allowing the automation of repetitive non-productive activities.

By enhancing the digital culture, organisations can improve collaboration and move the whole business ahead. The culture shift also supports sustainability by creating a workplace where people want to work and have the right tools to do so. Additionally, it forces upskilling and digital learning for employees, supporting both their professional development and the business’ needs.

Improved customer experience

Just like digital transformation improves the experience for your employees, it can also unlock efficiencies for your customers. Truly embracing the concept of a digital experience for customers will lead to the transformation and improvement of every element of the business. This can lead to more seamless and intuitive interactions with customers. From user portals to customer communications, digital transformation is key for improving how customers interact with your brand.

This is especially important in an age where consumers have endless choices and high expectations for digital experiences. Today, the customer experience has become a place for businesses to compete, with those offering greater digital customer journeys coming out on top. Gartner reported that over two thirds of organisations are competing mostly on customer experience.

Greater agility

A digital transformation strategy will lead businesses to deploy technology that will help them adapt quickly to changing markets and customer needs. By improving digital processes through software and tools, you can enhance your speed-to-market, adopt continuous improvement strategies, and innovate faster than ever before.

Challenges of digital transformation

Like any major change, there are challenges too. With a big upheaval in terms of culture, processes and operations, businesses can experience several challenges when embarking on a digital transformation journey.

Security concerns

With cloud computing and remote working capabilities featuring heavily in many digital transformation strategies, there is an increased level of security risk. However, this can be successfully managed by implementing higher security measures, leveraging the vast set of public cloud native security tools and working with a trusted cyber security partner to ensure any technology adoption or migration is carefully executed.

Resistance to change

When implementing change, many businesses will come up against resistance from employees – unless they’ve got ahead of the game with a robust adoption and change management strategy. By nature, humans fear change and when a substantial change like digital transformation is on the horizon, we can dig our heels in.

Getting your employees on board before any change is key to successful digital transformation. Keep your employees engaged throughout the entire process, seek out business champions to advocate for the change, and be transparent on what is happening and why. Putting together an adoption and change management strategy can help you ensure your digital transformation is successful.

Budget constraints

Inevitably, digital transformation requires financial investment. The process can be expensive so it’s important to carefully plan the budget and establish a strategy that addresses all the business needs. Remember, digital transformation is a continual process and won’t happen overnight. Determine your key priorities and gather their costs to help you better manage the process.

Inadequate expertise

Another potential blocker to digital transformation is the lack of in-house expertise for managing the process. This type of transformation is complex and requires a certain level of skill and expertise to execute efficiently. It’s a big ask, and you need personnel with expertise in several areas including digital transformation procedures, application architecture, cloud technology and cyber security - at minimum. If you don’t have that talent already, or you’re hesitant to recruit for these skills, you could have a problem.

Organisations have reported talent gap issues that threaten to slow down digital transformation according to KPMG, with 44% of businesses citing a shortage of experts hindering the progress. To combat this challenge, businesses can do a few things. Firstly, you can educate and train employees ahead of your digital transformation.

Secondly, you can work with a trusted IT provider with experience in managing digital transformation. They can help you put together a robust strategy, as well as implement and integrate the tools and technology you need. At Nasstar, our experts can even help to educate your internal staff on processes so they can manage and maintain the transformation moving forward.

Evolving customer needs

As we’ve already discussed, evolving customer needs and expectations have been a driver for digital transformation in many businesses. But these needs are continuing to evolve and change, which can make it challenging for organisations to create a future-proof strategy. It’s vital that your digital transformation strategy covers any potential future changes that can be foreseen (within reason) so you can adapt quickly to customer requirements.

What does a digital transformation framework look like?

A digital transformation framework is a set of guidelines that a business uses to help guide it through the process. Essentially, it’s a blueprint for managing the transition, ensuring everything gets ticked off and handled as it should. The framework should include the goals of the digital transformation and details about how the company will get there.

There is no single digital transformation framework that all businesses use. It is tailored to the needs of your business. Some consulting companies have created framework templates for use, while other businesses make up their own or work with IT providers to establish one. However, several elements are usually common in most frameworks including customer experience, culture and leadership, workforce enablement, operational agility, and digital technology integration.

As an example, we can look at McKinsey’s digital transformation framework - 4Ds. The company based the framework on the premise that each step should maintain the ultimate goal front of mind. In their case, this was to increase the value the company provides to its customers. The framework’s focal point is customer experience, underlined by the importance of interconnecting each stage.

Nasstar’s digital transformation framework

At Nasstar, we have a tried-and-tested methodology, particularly in cloud adoption and maturity, that can be tailored to a customer’s unique requirements. We are aligned with the major vendor cloud adoption frameworks and can act as a bridge between the business drivers and the underlying technology transformation required to realise these business goals.

When a client comes to us for digital transformation, we first aim to understand the change drivers and the current operating model of the technology estate. This helps us establish a business’s challenges and threats so we can map those alongside viable technology solutions.

Following this, we support our clients to create a business case or strategy, defining their needs and how the suggested solutions will benefit them. For example, if a customer is facing a recruitment challenge, we will outline what technology could help them to improve, and what the benefits of this will be.

We also understand that digital transformation is a continuous process that doesn’t necessarily have a defined start and finish. We like to use the analogy of a bus, where our customers can get on and off at different stops depending on their needs and where they are on their digital transformation journey.

Digital transformation technologies

As digital transformation encompasses a range of different processes and changes, there are several technologies a business might implement. Some of the most used technologies in a digital transformation include:

Public cloud – Leveraging public cloud capabilities is often a key component in a digital transformation, enabling greater flexibility and agility, as well as cost savings and the ability to scale quickly.
Mobile – Optimising your business processes and technology for mobile is essential in a world that’s always on. With mobile technology, businesses can increase the speed and frequency of customer interactions, enabling them to gather real-time data to inform business decisions.
Internet of Things (IoT) - Through a network of connected systems, IoT can help businesses collect and share information without manual input. It can also identify patterns, suggest solutions, and forecast potential problems.
Artificial intelligence (AI) and machine learning (ML) – AI and ML are fast becoming essential components in digital transformation, enabling businesses to automate tasks, make quicker decisions and engage with customers. These technologies also support data analysis, helping businesses to quickly learn complex patterns and make predictions without human input.
Low code-no code – These platforms are increasingly being used in digital transformation projects, allowing all employees in an organisation to develop software that supports and transforms business processes.

Of course, these are just some of the technologies available to organisations on a digital transformation journey. You could utilise any number of them throughout your process, as well as others including blockchain, automation, business intelligence, augmented reality, digital twin and robotics. As a continually moving project, we expect digital transformation projects to encompass quantum computing and quantum cloud in the future too.

Digital transformation strategy

A digital transformation is only as good as the strategy that underpins it. To succeed, businesses must create a vision for what they want to achieve, establishing the required processes and the technologies that will support the transition.

When creating the strategy, digital transformation isn’t something that will sit solely with the senior leadership team. You should develop the strategy alongside key stakeholders in the business, including those closest to your customers. After all, they understand your customers’ needs better than anyone. Likewise, a collaborative effort will encourage buy-in for the change, helping to avoid resistance.

Here are a few basic steps you should take when forming your own digital transformation strategy:

Identify potential challenges or blockers in your market and amongst the competition
Identify opportunities within the market that would set you apart from your competitors
Clearly define the vision and end goal for your transformation
Asses your current technological position to inform your desired end state and highlight areas of focus
Establish and prioritise a set of goals
Create a plan of action with clear, defined steps that include information about technology, teams, people and the budget required for every stage

Your digital transformation strategy should break down your initiative into smaller chunks to be actioned across different business functions and teams. These teams will be responsible for developing and testing the solutions, seeking feedback and continually improving.

Digital transformation examples

As a general example, we can look at Domino’s Pizza. Although it is one of the world’s largest food delivery companies, it still needed to keep pace with the advances in technology and changing customer requirements. To do this, it transitioned away from legacy processes and technologies to reinvent how it engages with customers and streamline its operations.

Domino’s fully embraced data analytics, AI, and a modernised tech stack to improve delivery tracking and implement personalised marketing campaigns. This has enabled them to successfully compete with digital-native food delivery platforms.

Future trends in digital transformation

As technology continues to evolve, so too do digital transformation trends. We expect to see the following trends continue to evolve over the coming year and beyond.

Cloud-native technologies

Cloud technology has become a strategic essential. We expect to see more businesses realising the benefits of cloud in terms of greater scalability, agility, and cost-efficiency. Additionally, cloud technology lends itself well to other advancements such as AI, where tools can be successfully integrated for a more streamlined and efficient tech stack that future-proofs your operations.

AI

Of course, artificial intelligence is going to continue gaining momentum over the next year or so, especially for businesses keen to leverage data. From predictive analytics to personalised customer experiences, AI has a crucial role to play in streamlining operations and improving experiences.

Data privacy

We expect to see data privacy taking centre stage as the digital landscape rapidly evolves. With technology advancing, so too do cyber threats, making it more important than ever for businesses to implement robust measures that protect them and their customers’ data. Data privacy should be a key consideration in any digital transformation strategy.

Blockchain

If your business handles online transactions, blockchain might feature in your digital transformation. While industries such as finance and healthcare are already seeing the benefits of blockchain for traceability, fraud reduction and data integrity, we expect other industries to start utilising it too.

Edge computing

As flexibility and efficiency become cornerstones of a digital transformation strategy, we’re going to start seeing more edge computing. Creating a bridge between centralised cloud resources and geographically dispersed end-users, edge computing enables seamless connections to increase agility. With this technology, businesses can tailor their technology deployments to suit their unique needs, fostering innovation and collaboration.

Nasstar digital transformation services

To ensure your digital transformation gets off to the best start, you should work with a provider that ensures you have the right technology and processes in place. Our team of professional services experts can support you with your entire digital transformation journey, no matter how far along you are.

Book a meeting today to discuss your needs today.

FAQs

How can digital transformation transform the sales process?

Digital transformation can help to transform your sales process by improving efficiency. For example, using AI can help to automate admin-heavy tasks that free-up your sales team to focus on making money for your business. Data can also be leveraged in digital transformation to help your sales team better understand your customers, so conversations and pitches can be tailored to their needs.

How is digital transformation driving customer experience?

One of the key drivers of digital transformation is improving the customer experience. This is largely because customer needs have changed, and businesses need to enhance their processes and technology to keep up. Many digital transformation strategies include using technology to provide self-service options, personalised experiences, and easier ways to analyse customer data. This supports businesses in enhancing the customer experience.