What is Digital Transformation? A Complete Guide

Digital transformation is the process of using digital technologies to create new — or modify existing — business processes, culture and customer experiences to meet changing business and market requirements. This reimagining of business in the digital age is digital transformation.

It transcends traditional roles like sales, marketing and customer service. Instead, digital transformation begins and ends with how you think about and engage with, customers.  As we move from paper to spreadsheets to smart applications for managing our business, we have the chance to reimagine how we do business — how we engage our customers — with digital technology on our side.

For small businesses just getting started, there’s no need to set up your business processes and transform them later. You can future-proof your organisation from the word go with an application development platform. Building a 21st-century business on stickies and handwritten ledgers just isn’t sustainable. Thinking, planning and building digitally sets you up to be agile, flexible and ready to grow.

As they embark on digital transformation, many companies are taking a step back to ask whether they are really doing the right things. Read on for answers.

“Every digital transformation is going to begin and end with the customer and I can see that in the minds of every CEO I talk to.”
- Marc Benioff, Chairman and Co-CEO, Salesforce

Before looking at the hows and what's of transforming your business, we first need to answer a fundamental question: How did we get from paper and pencil record-keeping to world-changing businesses built on the backs of digital technologies?

Not so long ago, businesses kept records on paper. Whether handwritten in ledgers or typed into documents, business data was analogue. If you wanted to gather or share information, you dealt with physical documents — papers and binders, xeroxes and faxes.

Then computers went mainstream and most businesses started converting all of those ink-on-paper records to digital computer files. This is called digitisation: the process of converting information from analogue to digital.

Finding and sharing information became much easier once it had been digitised, but the ways in which businesses used their new digital records largely mimicked the old analogue methods. Computer operating systems were even designed around icons of file folders to feel familiar and less intimidating to new users. Digital data was exponentially more efficient for businesses than analogue had been, but business systems and processes were still largely designed around analogue-era ideas about how to find, share and use information.

The process of using digitised information to make established ways of working simpler and more efficient is called digitalisation. Note the word established in that definition: Digitalisation isn’t about changing how you do business or creating new types of businesses. It’s about keeping on keeping on, but faster and better now that your data is instantly accessible and not trapped in a file cabinet somewhere in a dusty archive.

Think of customer service, whether in retail, field ops or a call centre. Digitalisation changed service forever by making customer records easily and quickly retrievable via computer. The basic methodology of customer service didn’t change, but the process of fielding an enquiry, looking up the relevant data and offering a resolution became much more efficient when searching paper ledgers was replaced by entering a few keystrokes on a computer screen or mobile device.

As digital technology evolved, people started generating ideas for using business technology in new ways and not just to do the old things faster. This is when the idea of digital transformation began to take shape. With new technologies, new things — and new ways of doing them — were suddenly possible.

A key element of digital transformation is understanding the potential of your technology. Again, that doesn’t mean asking “How much faster can we do things the same way?” It means asking “What is our technology really capable of, and how can we adapt our business and processes to make the most of our technology investments?”

Before Netflix, people chose films to rent by going to shops and combing through shelves of tapes and discs in search of something that looked good. Now, libraries of digital content are served up on personal devices, complete with recommendations and reviews based on user preferences.

Streaming subscription-based content directly to people’s TVs, computers and mobile devices was an obvious disruption to the brick-and-mortar video rental business. Embracing streaming also led to Netflix looking at what else it could do with the available technology. That led to innovations like a content recommendation system driven by artificial intelligence. Talk about making the most out of your IT department!

Similarly, digital transformations have reshaped how companies approach customer service. The old model was to wait for customers to come find you, whether in person or by calling an 800 number. But the rise of social media has changed service much like it’s changed advertising, marketing and even sales and customer service. Progressive companies embrace social media as a chance to extend their service offerings by meeting customers on their platforms of choice.

Making call centres and in-store service desks run more efficiently with digital technology is of course great. But real transformation comes when you look at all available technologies and consider how adapting your business to them can give customers a better experience. Social media wasn’t invented to take the place of call centres, but it’s become an additional channel (and opportunity) to offer better customer service. Adapting your service offerings to embrace social media is another good example of a digital transformation.

But why stop there? As we mentioned earlier, digital transformation encourages businesses to reconsider everything, including traditional ideas of teams and departments. That doesn’t necessarily mean tapping your service reps to run marketing campaigns, but it can mean knocking down walls between departments. Your social media presence can encompass service and marketing, tied together by a digital platform that captures customer information, creates personalised journeys and routes customer queries to your service agents.

As digital technology advances and plays an ever-bigger part in our daily lives, businesses have to keep up with the times. From a broad perspective, it’s simple: Keep up or fall behind. Understanding what digital transformation means to your business requires a bit more exploration, however.

The root of any change in business starts with customers. It has to: Customer happiness is how you win in business.

Modern customer expectations are being driven by largely digital technology and digital innovations. The always-connected customer is always seeing new possibilities. When they see new things elsewhere, they want them from you, too. And if you can’t offer them, they’ll find someone else who can. The digitally connected world makes it easier than ever for customers to comparison shop and move from one brand to another, often with minimal effort required.

Digital transformation affects every industry. Whether your business generates revenue through client services, digital media or physical goods, technological innovations can transform your means of production, distribution and customer service.

Depending on your business, your customer could be a consumer or a business-to-business (B2B) client. Let’s extend our perspective to also include your employees. As we’ll talk about in a moment, employee expectations are being driven by their own consumer experiences, particularly when it comes to digital innovation in the workplace.

Today’s customers are connected and empowered by the digital era. They’re connected 24/7 and increasingly want and expect that same around-the-clock access to the companies they do business with. The key drivers behind this change in consumer behaviour? Mobile devices and social media.

Over half of customers surveyed for Salesforce’s report “State of the Connected Customer” (first edition) said that technology has significantly changed their expectations of how companies should interact with them. More specifically, 73% of customers prefer to do business with brands that personalise their shopping experience, according to the Harvard Business Review.

Salesforce’s research also reports that 57% of consumers said it’s absolutely critical or very important for companies they purchase from to be innovative. Otherwise, they might just look for new companies to buy from: 70% of respondents said new technologies have made it easier for them to take their business elsewhere.

The Apple iPhone is often mentioned as a key driver in the adoption of consumer technology in the workplace. The iPhone wasn’t originally marketed to businesses, but it quickly became popular, to the point that corporate IT departments had to accommodate employees wanting to use iPhones in lieu of other devices. Once a few big employers opened their doors, acceptance of iPhones in the enterprise spread quickly.

The iPhone disrupted the status quo for technology adoption in the workplace. Instead of IT leaders telling employees which approved devices to use, enough workers asked for iPhones that IT departments eventually acquiesced. This trend continues today, with more “consumer-grade” technologies making their way into the workplace. Maybe even more noteworthy is the flip side of the trend: Enterprise app development software has started taking design and functionality cues from the consumer world. Long live ease of use!

Millennials — more than any other subset of the workforce — are proponents of the digital-first mentality. Having come of age on PCs, consumer electronics and phone apps, millennials expect to enjoy the same powerful, easy-to-use digital tools in the workplace as they do in the rest of their lives.

Digital transformations apply this digital-first state of mind to empower all your employees. In the same way that consumers look for businesses ready and willing to connect with them 24/7 via social media and other digital channels, today’s employees thrive in environments that make it easy to collaborate, access information and work any time and from anywhere. Digitalisation is a powerful ally of the empowered employee.

For small businesses, the upside to building a digital business can be game-changing. Not only is digitalisation key to meeting customer expectations and empowering employees, but it can also help small businesses do more with less. The efficiencies afforded by going digital — having one comprehensive database shared across your entire business, leveraging customer data to create personalised messaging and service strategies, enabling employee connectivity from mobile devices, for example — can free small teams up to spend more time winning and keeping new customers.

Bonus: When you build digitally from the beginning, it’s much easier to scale systems as your business grows.

Employees aren’t the only ones benefiting from easy-to-use, always-on access to information in the workplace. Machines themselves are getting smarter, too. Artificial intelligence (AI), the Internet of Things (IoT), cloud analytics and sensors of all sizes and capabilities are transforming manufacturing, production, research — virtually all facets of business across all industries.

The examples are never ending. Digital innovations like AI and the IoT are driving all manner of advancements in the production of everything from consumer goods to cars and trucks. Optimised manufacturing processes adapt to changing consumer demand. Cloud-based software affords real-time visibility into supply chain logistics. Customer experience mapping powered by machine learning surfaces key insights to help product planners, marketers and budget makers alike do their jobs better. Together, these and many more innovations like them are changing the way we do business, from every conceivable angle.

Digital transformation is business transformation. It’s a transformation that’s being driven by the basic desire to make work better for everyone, from employees to customers. The drivers we just walked though are some of the biggest reasons behind the massive changes rippling through the business world right now. Add to that the need every business has to compete for — and win — customers. If your competitors are leveraging digital transformation to streamline production, expand distribution, build a better workplace for employees and improve the overall customer experience, you’d better up your game, too.

But how are these changes taking shape? What does digital transformation look like in practice, across different parts of an organisation? Let’s take a look at some examples.

What does digital transformation look like in practice and how has it already changed the way we do business? Let’s take a look at examples of digital innovations in marketing, sales and service that build closer customer relationships and empower employees across all industries.

At a high level, the goal of digital transformation in marketing is to find more customers while spending less money. More specifically, amazing digital marketing generates more quality leads and helps you to get closer to all of your customers, whether they’re new to your brand or longtime loyalists.

The shift from analogue to digital marketing materials helps these efforts in two key ways. First, digital materials are generally cheaper to produce and distribute than analogue media. Email, in particular, is far less expensive than print-and-mail campaigns. Second, digital marketing opens the door to marketing automation, analytics tracking and dialogue with customers in ways that analogue never could.

Instead of planning a one-size-fits-all trip down the funnel, marketers can build 1-to-1 journeys that observe customer behaviours and shape the experience along the way to best suit each individual buyer. And instead of going on instinct and gut feelings alone, marketers now have data-driven insights at hand to help craft those journeys.

In “Welcome to Marketing in the Age of the Customer,” we take a close look at the most popular digital tools and how marketers can leverage them across the entire customer lifecycle. The entire post is well worth a read and serves as a great primer on how technologies — ranging from cloud computing to artificial intelligence — can help you to get closer to customers.

Let’s look at some examples from that article that detail how digitally transforming your messaging strategy can increase customer engagement and reduce your costs.

There’s a good reason that the traditional roles of marketing and sales are being redefined in the digital age. It’s all about the data.

The ability to collect large amounts of precise data on consumer behaviour lets marketing and sales teams, in particular, approach their work in ways never before possible. Looking at consumers as individuals and studying their behaviour from the first touchpoint all the way through the buying journey, brings to light the natural bond between marketing and sales. Nurture that bond and magic happens when these historically separate groups work together.

Salespeople particularly benefit from access to more and better data. When marketing and sales teams share information across a CRM and individual sales reps enter sales activity and keep their pipelines up to date on the platform, information flows freely throughout an entire organisation.

From there, two big things happen. First, more eyes on the same information means more opportunities to share intelligence across your entire business. Maybe someone from marketing ops sees a sales rep’s note about a prospect in the CRM and shares marketing campaign activities related to the prospect that helps move the deal along.

Second, as information flows and gathers within your company, you set yourself up to leverage cutting-edge digital innovations like artificial intelligence.

Artificial intelligence systems can be incredibly helpful in their ability to comb through vast amounts of data in search of useful patterns and other insights. As AI services evolve, they’re studying sales and marketing data not only from the end-consumer standpoint, but also to determine the effectiveness of sales techniques and strategies themselves. In addition to surfacing insights around, say, which demographics are more likely to buy at what times of the year, AI can shed light on which sales strategies have proven most effective over time or what promotions and product bundles bucked long-term trends to move the revenue needle.

With more and more datasets available from external sources, AI systems can mine marketplace information as well as your own sales history. From there, the systems look for correlations, patterns and even anomalies to give your teams a competitive edge when going after accounts. Combining AI-driven insights with the tribal knowledge of your teams is perhaps the ultimate realisation of digital transformation for sales.

Social media is everywhere, mashing up news, entertainment and brand interactions with interpersonal connections. PricewaterhouseCoopers recently found that 78% of consumers were in some way influenced by social media during their buying process. And nearly half of consumers said their buying behaviour was directly affected by reviews and comments they came across on social.

Consumer participation in social media has changed the buying process, so any successful digital transformation needs to incorporate a social selling strategy. This uniquely digital medium is full of opportunity for the savvy salesperson to connect and build relationships with prospects and longtime customers. As the Digital Marketing Institute aptly said, “Successful social sellers can be regarded as thought leaders or even trusted consultants, by prospective customers as they provide value through industry insights, sharing expertise and offering solutions to common consumer questions through creating or sharing insightful content.”

Customer service and our ideas around where service begins and ends, are being upended by the digital era as much as any other part of business. Maybe more so.

The “on-demand economy” has quickly grown from a few upstart apps that hire errand runners and hail cars for busy urbanites to a global movement to, as Forbes put it, “Uberise the entire economy.” A combination of smartphone ubiquity, electronic payment systems and apps designed to match demand (consumers) to supply (gig workers) in real time has created a world in which nearly anything you might want is just a swipe and tap away, around the clock.

Talk about digital transformation! With everything from pizza delivery to child care now available at their fingertips, customers are expecting more and more companies and industries to embrace digital as their primary means of doing business. For service departments, that means greater expectations for 24/7 problem-solving on the customer’s channel of choice. But it also means greater opportunities to delight buyers and win more business.

Listening and responding to customers across all social media channels sounds pretty daunting if you’re just getting started with the Twitter and LinkedIn apps on your own phone. But a host of tools designed for social service makes it easy to highlight customer needs, integrate social channels into your service workflows and start measuring brand sentiment and activity across social media.

Meeting your customers where they already are is a big part of winning business in our digital world. Approaching social service with a digital transformation mindset can really spell the difference between struggling to keep up with customer needs and turning service calls into opportunities to grow your brand.

Collaboration across the different parts of your business is key. The Salesforce “State of the Connected Customer” report made that clear: 84% of high-performing marketing leaders say that service collaborates with marketing to manage and respond to social enquiries and issues, while just 37% of underperformers say the same. When information is freed from silos, teams collaborate more and businesses perform better.

Remember the days when everything from canned goods to kitchen appliances came with a toll-free customer service number and that 800 number was your only avenue for everything from product questions to warranty claims? Call centres aren’t quite a thing of the past, but the digital age brings so much more flexibility when it comes to finding the right medium for serving customers in different ways.

The self-service portal is a great example. These user-facing tools offer features like password reset, self-logging of incidents, service requests and knowledge base searches. They can also include more interactive services like collaborative spaces, chat services and embedded social media feeds that are relevant to service issues.

User-friendly design, including search fields that offer suggestions and user profiles that leverage customers’ purchase and service histories, can go a long way toward personalising self-service for your customers. A good self-service portal can reduce the demands on your service agents. And customers like self-service: 59% of consumers and 71% of business buyers say self-service availability affects their loyalty, according to our research.

Bringing artificial intelligence into your service organisation is a prime example of the power of digital transformation. AI-powered chatbots that answer simple customer enquiries serve as a welcoming presence on your website, reducing the time customers have to wait to reach an agent.

Deploying chatbots to handle level one enquiries also frees up service personnel to spend time on more sensitive cases. AI-powered bots can serve as the entry point into intelligent case routeing systems. When a customer’s query is too complex for the chatbot to handle, natural language processing helps map the question to the best available expert to resolve the situation.

We’ve talked a lot in this chapter about specific examples of digital transformation in marketing, sales and service. All digital transformations start with the move from analogue to digital — that is, taking information off of paper and putting it into the digital realm. From there, these basic ideas apply to all businesses and industries:

• Meet customers in the digital channels they already frequent
• Leverage data to better understand your customers and the marketplace as a whole
• Free your data and share intelligence across your entire business
• Encourage once-separate groups like marketing, sales and service to collaborate

Digital transformation is helping many industries. Let’s look at how these ideas are being applied in a few specific ones.

Banking has been radically transformed by digital technologies in ways that have greatly benefited many consumers. Not so long ago, the majority of transactions were handled in person by bank tellers. Automated teller machines (ATMs) came along and streamlined the basic transaction process, extending business hours and reducing wait times and dependencies on human employees for cash withdrawals and other popular transactions. Over time, ATM technology has evolved to accommodate cash and check deposits, more secure transactions and support for multiple accounts, including credit cards and mortgages.

More recently, PCs and mobile devices have given way to online and mobile banking and cashless payment systems. Consumers now conduct more and more bank business via the web, including paying bills and sending funds directly to friends and family. Mobile banking apps let users take snapshots of paper checks to make remote deposits and a new wave of payment systems, including PayPal and Apple Pay, let consumers pay for everyday purchases with accounts linked directly to their phones, no cash or plastic card required.

Retail has also been radically transformed in the digital era. Digital transformation has both affected the in-store retail experience and ushered in the age of ecommerce.

Digital technologies have improved the retail experience for consumers and proprietors alike, enabling everything from loyalty cards and e-coupons to automated inventory and retail analytics systems. Shoppers who used to clip coupons from newspapers and magazines now just show their phones at checkout to access in-store discounts and deals. When they do this, their purchases are tallied by digital systems that track consumer behaviour trends, tie into inventory and purchasing systems and trigger individualised customer journey events like email and SMS messaging. Additional personalisation of the in-store experience can be enabled by digital beacons that link to customised mobile apps to sense when particular shoppers enter the shop. From there, anything from a phone alert to a personal concierge can be deployed to enhance the retail experience.

Retailers are now even experimenting with subscription-style sales using Internet of Things technology. Amazon, for example, has Dash Buttons: IoT-enabled devices with buttons that trigger automated reordering of an item. Branded Dash Buttons are available for a growing number of household goods and other items regularly in need of replenishment. Just click the button when you’re running low and a refill — billed to your Amazon Prime account, naturally — will be dispatched straightaway, just like that.

The impact of digital transformation in the insurance industry is similar to our other examples in that consumer expectations are driving change. Web- and app-based self-service portals make it easy for consumers to comparison shop, enrol in coverage, use multiple agents and carriers for different types of insurance (home, car, life and so on) and file claims. In fact, much of this is now possible without the need to actually speak to an agent, which saves time for consumers and money for the insurance companies.

What’s notable about digital transformation in insurance is the role the Internet of Things is playing in revamping the industry. Inexpensive, IoT-enabled sensors are giving insurers access to a wealth of data that’s informing industry forecasting and claim reviews alike. Take auto insurance as an example: In-vehicle sensors monitor actual driving habits, rewarding consumers who routinely drive safely under the speed limit or log fewer-than-average miles. Sensors connected to phones could also be used to deter texting while driving by disabling a driver’s messaging apps while their car is in motion. Connecting vehicles to wearable devices with blood alcohol measurement capabilities could help to prevent drink driving by temporarily disabling the engine, cutting risk for insurance carriers while also making roads safer for everyone.

A digital transformation is a complete business transformation. It’s crucial to keep this in mind if you’re seriously considering transforming your business. It’s not just about updating IT systems and apps. It’s a cultural shift and a reimagining of all of your company’s processes and ways of doing things.

As we said previously, small businesses — even those just getting off the ground — can leverage a digital transformation mindset to build digital first into their company culture. What better way to imagine how digital innovation can benefit customers than by being a digital native yourself in all aspects of growing and running a business?

Before we get into how to build a framework for your digital transformation, let’s first go through some of the signs that your business is, in fact, in need of transforming.

Signs that your business is in need of a digital transformation can appear across different parts of your organisation. They may not scream “It’s time to go digital!” or “Why aren’t you on Instagram?” Instead, they could manifest as a diverse set of business problems.

If one or more of the items on our checklist rings true, it might be time to think seriously about developing a digital transformation strategy.

• You’re not getting the referrals that you used to get. More and more referrals are now shared online, via social media, apps, email and messaging. If your business doesn’t have a strong, easy-to-share digital presence, you could be missing out on referrals.
• Repeat business isn’t repeating like it used to. Customers not coming back to do business with you again isn’t necessarily a sign that your products and services aren’t measuring up. Losing repeat business could be due to competitors’ promotions, lack of follow-up communication on your part or any number of other reasons. A digital transformation of your messaging strategy could shed light on why your repeats have been dwindling.
• Tried-and-true promotions are no longer generating leads. Why aren’t your killer promotions effective any more? Are you measuring their impact? It’s hard to pinpoint the impact of print campaigns and even last year’s best digital strategies may no longer be effective. If your promotions aren’t bringing in leads, it may be time for a new, bottom-up approach to marketing.
• Cross-departmental complaints are mounting about a lack of collaboration and information sharing, teams operating in silos and so on. The idea that sales and marketing just don’t get along has gone the way of the dinosaurs. Collaboration is the operative word in today’s progressive business cultures and getting your data out of silos and in front of whoever needs it is key. At the core of every digital foundation is a plan to make business data accessible and useful across departments.
• Your technology systems feel old — employees are asking for features they’re used to from consumer apps. Spreadsheets are great, but you shouldn’t be using them for everything. Modern business apps that serve specific needs, integrate with one another for data sharing and offer user-friendly experiences across desktop and mobile are where it’s at. If your current technology doesn’t offer employees most, if not all, of the above, maybe it’s time to look at a technology platform that can.

Digging past the surface to understand the root causes of these problems often leads to the realisation that you don’t have the proper visibility into business data necessary to make good decisions. Many SMBs are built on a patchwork of applications that don’t talk to each other. Fixing your technology infrastructure to facilitate sharing and analysing data across your business is a key step toward better, more informed decision-making.

Remember that just as digital transformations are about business first and digital second, problems with your business data may be signals to look more closely at how your company is doing business generally. Laurie McCabe, Co-Founder and Partner at SMB Group, said it well: “In fact, it's usually situations like these that make you realise you haven't got great visibility into your own business data or, even worse, have lost touch with what your customers want and need.”

If you’re seeing red flags and realising that your business data isn’t centralised, accessible and working for you, what’s next? It’s time to craft a digital transformation strategy.

Start with an internal assessment to identify gaps, problems and areas where you may experience difficulties. What’s your biggest problem? What’s the key to your survival? For very small and very new businesses, the answers may be short and sweet: We need customers and sales. We need a few key processes and systems we can run with. It’s important to involve everyone at your company. All will be part of your digital transformation over time and you may have more stakeholders than you think.

Even if your company is small and new and the path to digital transformation seems clear now, remember that you’re building for the future. And future you will be bigger. Whether that means more employees, more revenue or both, your business will grow. Flexibility and the ability to stay nimble as your business evolves should be built right into your digital transformation strategy. Connecting with a Salesforce MVP online or in person can be a great — and free — resource as you start thinking about your small business digital transformation strategy.

Working with consultants, partners and tech vendors can be great for SMBs because they have the depth of experience and knowledge to help you figure out the best paths to success. Experienced partners have likely helped other companies in similar situations and so can help you to find the most direct paths to meaningful transformation. A great place to look for consulting partners is the consultants directory on the Salesforce AppExchange.

Many small business leaders hear the word “consultant” and instinctively flinch while reaching a hand to guard their wallets. Don’t assume that getting help is always too expensive — that’s simply not true. Many large companies offer free advice or trainings for SMBs, like Salesforce Trailhead. Beyond free offerings, there are all sorts of ways to get advice without spending a lot.

Remember that the point of hiring or partnering with an external group to craft your digital transformation strategy is to draw upon their expertise. They bring something to the table that you don’t have — experience and industry expertise across many different clients — and can provide value and best practices. Your short-term investment in their time is designed to help your business reap bigger benefits over the long haul.

Tapping the right partner to consult on your transformation strategy lets you come up with a better plan than you could on your own, while also letting you stay focused on your core business. It will also help you to avoid some of the rookie mistakes that inevitably happen when you go it alone.

If you’re leading a digital transformation in your organisation, keep this rule of thumb in mind as you consider decisions and investments: Be collaborative. If you have 10 employees, all 10 will be affected by the change, so you need to get them on board.

Don’t make decisions in a vacuum. The changes brought by digital transformation will affect everyone’s daily workflow and are meant to empower employees. Get everyone involved early and solicit ideas. Not only will you get better buy-in, you’ll get a better outcome, too.

Technology integration is key. It’s perhaps the number one area SMBs should be investing in.

One of the biggest, easiest-to-make mistakes that businesses make is investing in a bunch of different technologies that don’t integrate. Unfortunately, it’s hard to unwind the resultant snarl of information when your platforms and apps don’t work together.

SMBs need to stay focused on getting the capabilities they need now in a way that will scale as their businesses grow. Today’s business ecosystems and platforms make it easy for vendors and developers to build apps tailored to helping SMBs grow. Adopting a scalable platform will help to ensure that the processes and information in your company can flow as easily as possible. That’s the foundation upon which everything else can be built.