What Is Digital Transformation?

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 organization from the word go. 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.

Not so long ago, businesses kept records on paper. Whether handwritten in ledgers or typed into documents, business data was analog. 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 digitization: the process of converting information from analog to digital.

The process of using digitized information to make established ways of working simpler and more efficient is called digitalization. Note the word established in that definition: Digitalization 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 center. Digitalization 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 inquiry, 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.

Digital transformation is changing the way business gets done and, in some cases, creating entirely new classes of businesses. With digital transformation, companies are taking a step back and revisiting everything they do, from internal systems to customer interactions both online and in person. They’re asking big questions like “Can we change our processes in a way that will enable better decision-making, game-changing efficiencies, or a better customer experience with more personalization?”

Now we’re firmly entrenched in the digital age, and businesses of all sorts are creating clever, effective, and disruptive ways of leveraging technology. Netflix is a great example. It started out as a mail order service and disrupted the brick-and-mortar video rental business. Then digital innovations made wide-scale streaming video possible. Today, Netflix takes on traditional broadcast and cable television networks and production studios all at once by offering a growing library of on-demand content at ultracompetitive prices.

Digitization gave Netflix the ability not only to stream video content directly to customers, but also to gain unprecedented insight into viewing habits and preferences. It uses that data to inform everything from the design of its user experience to the development of first-run shows and movies at in-house studios. That’s digital transformation in action: taking advantage of available technologies to inform how a business runs.

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 movies to rent by going to stores 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!