What is Digital Transformation?
Digital transformation is often confused with two similar concepts: digitization and digitalization. The simplest of these, digitization, is the process of transforming information from analog or manual form into digital form—for example, converting handwritten records into computerized records. Digitalization is the process of applying digital technology and capabilities to do many of the things you regularly do, but in new and better ways that drive improved outcomes.
Digitalization is the foundation for digital transformation. And digital transformation makes it possible to reimagine how you use your technology, people, and processes to move your business forward in new ways.
Today, digital transformation has come to mean the conversion from manual and analog processes to digitized processes in every aspect of business—including supply chain, ERP, operations, customer service, and more. Essentially, digital transformation helps businesses and other entities create better outcomes by connecting people, places, and things.
Each company has its own reason for digital transformation. Some may be spurred by growth opportunities or increased competitive pressure, while for others it’s changing regulatory standards. Whatever the reason a company starts on this path, the results can include superior goods, services, and experiences that meet or exceed customer expectations. Greater efficiencies and other business benefits can boost profitability and enhance innovation. In the public sector, digital transformation is driven by the desire to conserve resources while helping to create a better quality of life for citizens.
Digital transformation technologies
The umbrella of digital transformation encompasses a wide variety of technologies, including applications and software, networking capabilities, AI, machine learning, augmented and virtual reality, the Internet of Things (IoT), sensing technology, video-based analytics, the cloud, and beyond.
The important thing to remember about digital transformation is that it’s less about choosing a specific technology and more about choosing the right technology to achieve your desired outcomes.
The history of digital transformation
The long history of digital transformation begins with the first computers, which transformed handwritten notes into computerized information that could be processed, analyzed, and shared. With the advent of networking and the internet, these capabilities advanced and datasets grew extremely large. Big data required more robust digital data management and analysis processes, supported by data centers, data warehouses, and now, data lakes.
The development of the cloud was in part a response to increasingly vast amounts of data and the need for ever-expanding capabilities to manage, analyze, and process that data. IoT, AI, and machine learning have since offered even more sophisticated technology options for organizations seeking to transform their operations to create better outcomes. Virtual and augmented reality, along with video analytics-based technologies, are part of the mix of innovative capabilities contributing to widespread digital transformation.
Three key elements in digital transformation
Digital transformation is much more than simply plugging in new technology. It requires a strategic approach that addresses three foundational elements.
Physical
Digital transformation is physical in that it involves employing technology to migrate the business away from manual and toward digitized processes. The transition from paper-based recordkeeping to computerized data collection; the implementation of robotics, AI, and machine learning; and the installation of data sensors that transmit information are all examples of physical transformation.
Cognitive
Digital transformation is cognitive in that digitalization, including AI and machine learning, is enabling sophisticated data analysis where machines are doing advanced analysis that resembles thinking. These capabilities are changing the roles of data scientists and analysts and driving the need for expert-level knowledge workers.
Cultural
Digital transformation is cultural because it involves human beings who are used to acting and reacting in a certain way in their environment (work or home, for example). In the digital world, workers work alongside “smart” machines. Workers’ roles change to accommodate new technology-enabled processes and capabilities. Ensuring that everyone understands the value of transformation and is equipped to make the change helps create a strong foundation for success.
The benefits of digital transformation
Almost any business in any market can benefit from digital-driven operational improvements that create greater value for customers, employees, and partners. Some of the benefits that digital transformation can deliver include:
- Deeper analytics-based actionable insights
- Faster and more efficient processes
- Increased capacity
- Reduced costs
- Improved safety, quality, and productivity
The opportunity to blend business process change with next-generation automation can deliver greater value and meet changing expectations. Successful companies have transformed to focus on relationship selling over lead generation; on simplifying the purchase process instead of engaging in lengthy negotiations over terms and conditions; and on collaborative success by running technology on behalf of customers instead of licensing technology that customers take in-house to implement and integrate to drive their own success.
Examples of digital transformation
The following are some examples of how digital transformation leads to better outcomes across industries and other entities.
Manufacturing
In manufacturing, IoT can improve efficiency and profitability by enabling predictive maintenance and process improvements that reduce downtime and scrap while ensuring the production of high-quality goods. Augmented reality solutions enable superior and less-costly training and can bring expertise from afar directly into the factory, without so much as a plane ticket.
Take a look at a digitally transformed “smart factory”
Retail
In the retail environment, digitalization leverages devices, channels, and platforms to create seamless customer experiences tailored to specific customer needs. Chatbots, AI, and sophisticated data analytics are helping retailers develop and deliver personalized recommendations to successfully appeal to an audience of one. Digitalization is transforming the in-store experience as well, creating an engaging interactive environment and more convenient customer service processes.
Find out how digitalization is empowering retail customers
Healthcare
The healthcare industry is leveraging a variety of digital capabilities to create patient-centric and value-based outcomes that benefit patients, providers, and payers―while reducing costs at the same time. Virtual doctor visits and networked electronic medical records are just two modes of digitalization that are transforming healthcare.
Smart cities
Digital-enabled “smart cities” that blend existing physical infrastructures with cutting-edge digital technologies are becoming more efficient while providing a safer and better quality of life for their citizens. From utility monitoring to public safety to environmental sustainability, technologies such as sensors, AI, and video analytics are helping the public sector transform the way it provides essential services to achieve greater efficiency, lower costs, and a higher level of citizen engagement.
The role of the cloud in digital transformation
Disruptive digital engagement requires agility. Cloud computing technology plays a valuable role in providing this type of agility and can go a long way toward addressing some of the common challenges of digital transformation―including infrastructure integration and cost factors. The cloud can deliver the speed and flexibility you need to accelerate your transformation and outpace the competition, while staying within scope and budget.
Explore four benefits of digital transformation with Oracle Cloud for small to medium businesses
Six steps to digital transformation
You have many things to consider when you’re about to embark on a digital transformation. Success depends on a solid strategic plan. With the right plan, customers and employees will benefit when you streamline and simplify processes: empower them to complete steps autonomously; delight them with positive experiences; and automate as much as possible to free them from tasks. The following steps can help you develop such a plan:
Define your digital vision
Your first step is discovery, in which you identify why you’re transforming and what you hope to achieve. This is the foundational element that will direct the rest of your steps.
Map your digital journey
Whether you’re transforming manufacturing operations or seeking to create a better experience for customers, you must develop a vision of how digitalization relates to your processes and where it will make a difference in achieving your desired outcomes.
Determine your digital maturity
By performing a digital maturity assessment, you’ll be able to see how far along your business already is in leveraging digital capabilities and where you need improvements in technology and processes. This assessment will also help you set the pace for your transformation.
Review your digital capabilities
This is the point where you identify any current gaps in your digital infrastructure so you can choose technology that fills those gaps. Your goal is to develop a model where people, processes, data, and tools work on one integrated platform that enables everyone to execute toward outcomes with speed and agility.
Build your transformation roadmap
Steps 1 through 4 create the foundation for a roadmap to achieving your transformation. This roadmap should be clear and actionable and define the architecture you need to maximize value while minimizing risk and cost for any of your transformational initiatives. It must also allow for the flexibility to adapt to changing priorities and new technology as it emerges.
Use cloud applications to expedite your digital vision
To help you outpace change, use cloud applications with future-ready, built-in, end-to-end business processes that define for you complete transformative processes and help you accelerate business growth.
Secrets of the digital transformation stars
Successful digital transformation is based on a deep understanding of customer and user needs. That understanding informs what should be transformed and how. Follow these tips from those who have successfully made the journey to help ensure that you’re making the right changes to meet those needs.
- Solicit feedback from your employees and customers. Continuous engagement with customers and employees is the only way to understand how you can meet their needs.
- Based on that feedback, define problems to be solved. Once you understand your customers’ and employees’ expectations, you can assess what you need to do differently.
- Design a strategy that transforms problems into exceptional experiences. Once you’ve identified your challenges, develop a strategy that streamlines the experiences you deliver, empowers your customers and employees, and delights those you serve.
- Leverage cloud technology to keep pace with changing customer and employee wants and needs. Look for technology that enables you to not only reimagine your business from end to end but also to outpace change. With cloud technology, you can stay ahead of customer and employee needs and leverage cutting-edge technology as it’s introduced.
What the digital transformation stars have in common
Ultimately, achieving your objectives depends on four elements:
- A solid, consistent, and ongoing CEO mandate for transformation.
- A unified and uncompromising focus on the organizational endgame that replaces the siloed mindset.
- An unrelenting sense of urgency that drives an accelerated pace of change.
- Executive stewardship by a visionary senior leader who is not tethered to a specific business or function.
How Oracle sees the transformation process
Oracle put its expertise with cloud technologies and digital transformation to work and completely transformed its own internal operations. By implementing Oracle Cloud across Oracle, the company became an end-to-end cloud provider and an end-to-end cloud enterprise.
The company is sharing its experiences for the benefit of others. Oracle implemented the following four building blocks of experience design across the business:
Streamline Customer Experience
Reduce, remove, and simplify steps across the customer and employee experience.
Empower personalized experiences
Enable customers and employees to complete their experiences autonomously.
Delight customers
Design a positive experience that customers and employees love and that makes them want to come back.
Automate engagement
Use Oracle Cloud to power the end-to-end experience by automating as much as possible.
The future of digital transformation
Digital transformation is changing how people work, play, and live, and there is no indication that this transformative process is slowing. Innovations in digitized technology continue to reveal opportunities for businesses to create new value for customers and improve people’s lives. Innovative technologies that can further support transformational objectives will undoubtedly continue to appear on the horizon.
Implementing a digital transformation that targets current business challenges and addresses strategic objectives will be crucial to your success. Every enterprise and organization must eventually make digitalization a strategic cornerstone if they want to remain competitive and better serve their constituents.
In this effort, the most important thing to remember is that the power of digital transformation comes from identifying your use cases, then choosing the technology, path, and partners that can transform those use cases into seamless, interconnected experiences that propel your business forward.