What is Digital Transformation Strategy?

Full-Service Digital
What is Digital Transformation Strategy?
Article by Jelena Relić
Last Updated: March 11, 2023

By 2025, US businesses will spend $2.8 trillion on digital transformation technologies and services.

And if that figure doesn’t knock the breath out of you, get ready for this one: as much as 89% of companies have adopted or are planning to adopt a digital-first business strategy.

This article takes a thorough look into digital transformation strategy: what it is, what drives the need for it and how to plan a digital business transformation strategy that will improve your efficiency, streamline your processes and upgrade your customer satisfaction.

What Is a Digital Transformation Strategy?

Digital transformation is the implementation of digital technology and solutions into various business aspects to improve operational processes, efficiency, collaboration and customer satisfaction.

A digital transformation strategy is a blueprint containing specific steps a company should take to use digital technologies to that end. It is the basis of restructuring a business to utilize digital solutions to achieve its bottom line and desired results.

Enterprises can apply this strategy to

  • Introduce changes to their business models
  • Develop new value chains to meet their customers’ needs
  • Make their products and services more innovative
  • Modernize their IT infrastructure
  • Optimize their digital presence etc.

Crafting an effective digital transformation strategy involves leveraging innovative technologies and incorporating tailored enterprise application development services to drive operational efficiency and business growth. Many IT solutions companies specialize in aiding businesses to create and implement a robust digital transformation strategy.

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Why Is Digital Transformation Important?

The most common reasons why companies turn to digital transformation are as follows.

  1. Employee Performance and Satisfaction
  2. Customer Experience
  3. Competitive Advantage
  4. Data Analysis and Business Understanding
  5. Why Does Digital Business Transformation Strategy Matter?

1. Employee Performance and Satisfaction

Digital transformation is about looking inward as much as it is about looking outside the company. Providing your employees with a digital basis for communicating, collaborating and connecting can address and enhance facets of a business such as employee satisfaction and performance and acquisition of new skills. The result is greater productivity, revenue generation and faster output.

2. Customer Experience

The success of any business depends on the customers’ satisfaction levels. By using cutting-edge digital solutions like omnichannel marketing, support chatbots and others, companies enhance their offering and customer experience and inspire their loyalty and retention.

3. Competitive Advantage

As customers’ expectations change and they become more demanding, businesses that utilize outdated legacy technology are at risk of becoming less competitive. The systemic evolution that digital transformation provides allows businesses to operate efficiently, find new business opportunities and implement innovation that gives them an upper hand on the market.

4. Data Analysis and Business Understanding

Another powerful driver behind the need for a digital transformation is the necessity to understand your own business and its environment. Businesses that underwent digital transformation can analyze multiple data sources to gain insights and make better-informed decisions about the company’s future objectives, products and services.

5. Why Does Digital Business Transformation Strategy Matter?

Forward-thinking businesses that aim to make their processes and deliverables future-proof can benefit from adopting and launching their digital initiatives.

Digital business transformations allow companies to provide personalized customer experiences that nurture relationships with their target audience and facilitate brand advocacy through a unique brand voice, messaging and visuals.

This, in turn, leads to better brand identity, loyalty, customer retention/acquisition and more significant revenue.

Internally, it creates a more agile and flexible culture, leading to greater efficiency and employee satisfaction.

3 Pillars Of Digital Transformation Strategies

A digital-first approach solves challenges for a rising number of organizations of all profiles, making it a central part of many business models. According to a Gartner research, digital transformation changes the product, service and business models while new digital capabilities that support this become companies’ core competencies in business.

The following digital transformation strategy areas are the most common starting points and points of focus for most organizations.

  1. Adjusting to Different Work Methods
  2. Managing Disruptions
  3. Scaling an Agile Workplace

1. Adjusting to Different Work Methods

In today’s business and workplace climate, teams are given the freedom to figure out and use the best working method to improve their deliverables. Aligning your work with the most suitable methodology – iterative, waterfall, Lean-Agile or collaborative – is a vital part of adjusting to changing requirements and priorities.

Implementing digital technologies into your workplace management enables your company to support various work scenarios. Digital solutions provide greater company agility, essential to adapt to the changing world of work.

2. Managing Disruptions

The innovation that digital transformation introduces into organizations is instrumental in quickly responding to market opportunities and challenges. The innovation culture comes from employees who experiment and taking new routes to solve their day-to-day problems.

Both a prerequisite and outcome of digital transformation, the culture of innovation that manages disruptions is about allowing the entire team to present their insights to solve issues that hinder the company’s strategic goals.

3. Scaling an Agile Workplace

The Agile methodology has sprouted from services a software development services usually provides, but its principles are widely applicable across any enterprise, even on an organizational level. One of the side effects of digital adoption is that this methodology is easier to adopt and scale across an established organization, connecting all teams that work in their way to deliver results.

Digital solutions can empower decision-makers within these organizations to tie their objectives with Agile team delivery and optimize workflows, processes and planning. They also let users take charge of their timeline and schedule, an argument that entices people to embrace digital transformation.

Have a look at some best rebranding examples that showcase the power of digital transformation.

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How To Develop a Digital Transformation Strategy in 7 Steps

An efficient digital transformation begins with a carefully devised strategy that

  • Sets objectives
  • Prioritizes certain initiatives
  • Identifies success criteria

A digital transformation strategy is a document outlining a series of steps that define digital initiatives, and evaluating business goals. When developing your digital business transformation strategy, refer to the following steps.

  1. Assess Your Business
  2. Analyze Your Industry and Competitors
  3. Make Digital Initiatives Your Priority
  4. Formulate Delivery, Budget and Resource Plans
  5. Institute a Digital Leadership and Get Your Team on Board
  6. Invest in Your Employees to Retain Them
  7. Nurture a Culture of Innovation and Make Data-Based Decisions

Step #1: Assess Your Business

The direction of your digital transformation will largely depend on the state of your business and your plans for it.

Make a very granular evaluation of your current business practices, processes and workflows and be very detailed about it. This assessment should touch upon your

  • Long-term objectives and bottom line
  • Key performance indicators (KPIs)
  • Growth opportunities
  • Market threats and organizational weaknesses

Resources and assets you have at your disposal (in terms of equipment and infrastructure as well as employees and their skills)

Step #2: Analyze Your Industry and Competitors

Having estimated your business, it is also critical to assess your market, industry and niche – with a particular emphasis on how your competitors are doing. To do so, ask yourself these questions:

  • What are the current trends popular with my target audience?
  • What type of relations and messaging do my customers expect?
  • What new technologies and solutions are being implemented in my industry?
  • Have our competitors completed their digital transformation? If so, what has changed and what are the results?
  • What digital solutions are they using, and how?

Knowing what your audience expects and what your competitors are doing will give you a sense of direction and help you identify steps to be taken and those you should avoid.

Step #3: Make Digital Initiatives Your Priority

Digital initiatives differ in scope, resources and ROI. Prioritize each according to:

  • The Value (in terms of what they bring short-term and long-term to your business)
  • The impact they have on your processes and organization
  • The estimated effort it takes to implement and maintain them
  • It is advisable to begin with more straightforward digital initiatives to test the overall viability of digital solutions.

Step #4: Formulate Delivery, Budget and Resource Plans

A digital transformation delivery plan consists of a detailed roadmap for every digital initiative, the resources it requires and results measuring criteria.

A budget plan is essential so that your digital transformation efforts do not fail because of a poor financial estimate. When setting your digital transformation budget, factor in delays and potential roadblocks and plan for future technology that will make these investments outdated.

A resource plan takes into account more than just the necessary technology to complete your digital transformation. It’s also about ensuring you assemble a team of specialists with the mindset and know-how to execute your digital transformation. This plan should outline which experts you already have and which ones you need to achieve this.

Step #5: Institute a Digital Leadership and Get Your Team on Board

To properly adapt and monitor your digital transformation, you should appoint a person in charge of these initiatives. This can be someone from your team, via internal promotion, or an outside expert with experience in leading digital transformation for businesses.

This step often involves introducing a new role into the company hierarchy, like a Chief Digital Officer (CDO).

Aside from appointing a CDO to run and regulate the adoption of digital solutions, your employees in each department need to understand the cause, impact and significance behind your digital transformation.

Educating your team on pending changes in workflows and processes will instill a digital culture within the organization. Include your employees in this process by asking for their input to better define your future digital initiatives.

When your entire team, top to bottom, is onboard with your pending digital transformation, you should focus on enhancing solutions, products and services that will benefit your customers.

Step #6: Invest in Your Employees to Retain Them

When radical organizational changes like digital transformation happen, employees may feel discomfort because of how this will affect their positions and day-to-day operations.

To help them acclimatize to their new and changed responsibilities and earn their support in the process, provide training and education opportunities to alleviate their concerns. This may result not only in higher retention rates but also in improved consistency, business efficiency and team satisfaction.

Step #7: Nurture a Culture of Innovation and Make Data-Based Decisions

After getting your employees on board and providing them with proper education on digital processes, it is vital not to hinder their creativity and to give them the freedom to offer feedback and input. Encourage your team to try various digital technologies in their day-to-day workflow to see what drives the best results and greater efficiency.

Finally, the adopting of digital processes opens a new world of acquiring valuable data and analytics. Every digital transformation and subsequent digital process should begin with data to help your decision-making and validate experimentation in a creatively-infused environment.

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4 Technologies for Digital Transformation

  1. Artificial Intelligence (AI)
  2. Internet of Things (IoT)
  3. Cloud Computing
  4. AR and VR

Advancements in software, computing and IT services have made it possible for any business to adopt digital solutions, no matter how big or small.

These businesses rely on the following technologies to drive digital transformation, from improved employee performance to better customer experience.

1. Artificial Intelligence (AI)

Numerous systems that utilize AI, from chatbots to predictive text, have become part and parcel of business growth for multiple enterprises. They provide a more personalized experience, predictive maintenance, process automation and numerous other benefits.

2. Internet of Things (IoT)

Internet of Things systems, such as widely-used Amazon Alexa, apply internet connectivity to many devices and equipment, connecting them with people to enable process automation. IoT companies provide businesses with a chance to improve their existing products and streamline workflows.

3. Cloud Computing

Cloud-based hosting and cloud-based apps – such as Google Drive, Office 365 and Slack - offer scalability and flexibility with which companies can achieve their short-term and long-term business goals.

4. AR and VR

Augmented reality (AR) and virtual reality (VR), which are the foundation of immersive experiences, are technologies that a VR & augmented reality company can leverage to provide cutting-edge solutions to their customers. 360-degree walkthroughs, training simulations, customer engagement, and collaboration tools all rely on VR and AR as their underlying technological basis. By immersing users in real-life-like experiences, these tools generate much better results than legacy systems, showcasing the immense potential of AR and VR in various industries.

Outsourcing the services of some of the best digital agencies and digital strategy companies can help you with this.

Digital Transformation Strategy FAQs

What Are the 4 Main Areas of Digital Transformation?  

Businesses should consider why is digital transformation important for their company, what digital transformation benefits are, and how they can integrate new technologies and services into their current business model. 

Digital transformation is critical for businesses today because it can help improve their operational efficiencies, reduce costs, and create a more customer-centric experience. 

To achieve these benefits as a business owner, you need to know how to develop a digital transformation strategy that includes four primary areas of focus: process transformation, business model transformation, domain transformation, and cultural transformation.  

1. Process Transformation  

Process transformation encompasses all processes that occur within a business. 

It involves identifying and understanding the existing business process, the roles and responsibilities of stakeholders, the technology requirements, and the data needs for improvement. 

However, process transformation is not always an easy process. It requires careful planning, implementation, and stakeholder support to ensure successful execution.   

When considering process transformation, understand why digital transformation is essential and how to develop a digital transformation strategy that works for your business.  

2. Business Model Transformation  

Business model transformation involves rethinking the way a business operates and generates revenue, which may involve incorporating new technologies for digital transformation, like finding new ways to reach customers. This can help enterprises stay competitive in the evolving market.   

To develop a business model transformation strategy, you should identify new technologies to help innovate your current business model and analyze the costs and benefits of different models.  

3. Domain Transformation  

Domain transformation involves expanding a business's reach into new markets or areas. This can include entering new geographic markets or expanding into new product lines.  

Leveraging digital technologies allow businesses to reach new customers and increase their revenue streams  

4. Cultural Digital Transformation  

Cultural transformation involves changing the mindset and behaviors of employees to embrace digital transformation.  

This may involve investing in training and development programs or restructuring the organization to be more agile and responsive to market changes.  

Fostering a culture of innovation and digital transformation lets businesses stay ahead of the curve and continue to improve their performance. 

What Is an Example of a Digital Transformation Strategy?  

Strategies for digital transformation benefit businesses that want to stay competitive in today's rapidly changing business environment.  

Here are examples of digital transformation strategies that include four main areas of focus: 

Process Transformation 

  • Implementing robotic process automation (RPA) to automate repetitive tasks in finance, HR, or customer service departments. 
  • Adopting cloud-based tools for collaboration and project management, such as Microsoft Teams, Google Drive, or Trello. 
  • Using analytics tools to track key performance indicators (KPIs) and identify areas for improvement in production, logistics, or quality control. 

Business Model Transformation   

  • Launching an e-commerce platform to sell products or services online, such as Amazon or Zara. 
  • Providing subscription-based services, such as Netflix or Spotify, instead of selling products individually. 
  • Creating a shared economy model, such as Uber or Airbnb, where individuals can monetize their assets or skills.  

Domain Transformation   

  • Entering new markets through partnerships, mergers, or acquisitions, such as Amazon's acquisition of Whole Foods or Google's investment in JD.com. 
  • Developing new products or services that leverage digital technologies, such as Apple's iPhone or Tesla's electric cars. 
  • Expanding the value chain by integrating with suppliers or distributors, such as Starbucks' Farmer Support Centers or Toyota's Kanban system.  

Cultural Transformation 

  • Providing digital training and development programs for employees to improve their skills and adapt to new technologies, such as Walmart's Academy or Siemens' Digital Academy. 
  • Encouraging a culture of experimentation and innovation by allowing employees to work on pet projects or internal startups, such as Google's 20%-time policy or Adobe's Kickbox program. 
  • Aligning the organization's vision, mission, and values with digital transformation goals, such as GE's digital industrial strategy or Delta Air Lines' customer experience strategy. 
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