What is digital transformation and why it matters?

What is digital transformation and why it matters? image

We hear about digital transformation almost everywhere–from any media source to our boss, Google shows us 507 million results on it, and it seems that no company can do without it. So what is all this hype about? Let’s find out.

Digital transformation is the process of integrating the latest technologies into business models, corporate culture, and customer journey to keep up with the world which is becoming more and more competitive and challenging. 

Digital transformation is important because it helps companies bring customer relations to a new level  ̶ you can quickly satisfy client needs and make their customer experience as easy and pleasurable as possible. Moreover, advanced technologies improve internal processes and workplace which significantly influence the way employees achieve positive business results. Furthermore, digital transformation is vital for harnessing Big Data.

Digitization and digitalization go hand in hand with digital transformation.

In simple terms, digitization is the process of transferring data from analog to digital. Instead of taking handwritten notes and writing down important information into your notepad, you can simply convert it into digital. For example, you scan hard copies and save their digital format on electronic devices. The most important thing in digitization is saving, storing, and using data, for instance, for computation or data analysis. 

With regard to digitalization, it includes digitization, but it is not the same. When we speak about digitalization, we suppose that business processes and the business itself are transformed with the help of technologies. We use digital technologies to analyze and use data effectively to deliver better results. Also, we utilize them to improve relations with the main asset  ̶ clients. For instance, many companies are focused on customer service ̶ they integrate CRM (customer relationship management tools) and PSA (professional services automation tools) to timely respond and act on customer queries and needs. 

Why is digital transformation important for your business? 

Let’s imagine a simple and mundane situation: it’s the heat of summer and you are toiling in a cooling office when suddenly the air conditioner breaks down. You call a repair service company and ask them to come and fix it. But as they conduct their business in an old-fashioned way, the company simply forgets about your request. Consequently, they lose a client, trust, money, and their reputation is ruined once and for good. Unfortunately, this example is not that uncommon. The same goes for all business domains across all markets.

In a highly competitive world where every company is fighting for customer loyalty and revenue, digital transformation is critically important. If it is handled well, it can bring value to your business. Digital transformation helps your company achieve at least three vital things  ̶ customer satisfaction, which leads to customer loyalty, speed in business, and growing profit.

Customer satisfaction

Customers are becoming more and more demanding these days. To satisfy their needs, companies should act on agile and with no hint of delay  ̶ timely delivery of a product, swiftly dealing with complaints and inquiries, alleviating the buying journey of your customers has become a must for all enterprises.  

Many businesses nowadays use different mobile and desktop applications to make purchasing not only easy but also useful and entertaining just to make their clients loyal and satisfied. For example, many big publishers like Time Magazine, The Economist, American Scientist provide digital subscription because they know that it’s easier for some readers to use their devices to look through an article.

Speed in business

Actual speed means everything, especially when it comes to business processes of an organization and its products and services, for instance, how fast decisions are made, time to market of brand-new services and products, how quickly you can analyze your competitors, how rapidly you can handle and address customer queries and issues. 

Companies are constantly trying to survive in a rat race by making all business processes faster and simpler starting from immediate transactions and ending up with drone delivery. Everything should be faster — paying procedures should be simple, like PayPal does, or delivery done by drones as is the case with Amazon. 


Not going here into details, it is quite clear that any digital transformation which is done right leads to customer satisfaction and speed, therefore, the business has all chances to generate substantial revenue and maintain competitive advantages. For example, Netflix quickly understood that video stores, like Blockbuster, would no longer be popular with the audience and widespread use of the internet. In 2007 they transitioned from DVD to online-streaming. Now Netflix operates in 190 countries, has more than 139 million subscribers, and it generated more than $15 billion dollars in 2018.

Digital transformation challenges and opportunities in e-commerce and fintech

In most cases, digital transformation can lead to a completely new, but an advanced way of conducting business that integrates into society like a glove. E-commerce and fintech are the domains that benefit from digital the most as digital technologies allow these industries to conduct business faster and make their customers satisfied.

For instance, brick-and-mortar stores are becoming less popular with people as businesses start to go online. Now companies can sell their products on the Internet not only in their home country but also throughout the world. Let’s take the most successful e-commerce giants in the world ̶ Amazon, Alibaba, eBay, Rakuten, Jingdong, B2W Companhia Digital, Zalando, and Groupon. They all are highly successful and have millions of dollars of revenue, and they are all have digital transformation at their core. These companies foresaw that with the advent of the Internet it would be much easier to shop online and eventually it would also become profitable for companies, for example, to cut significant costs on offline stores and staff.

When it comes to digital transformation in the fintech industry, we cannot but mention SoFi, Xero, YapStone, Coinbase, Avidxchange, and Avant. All fintech companies provide a wide range of services, which are accessible for many people: they can use special mobile and desktop apps for payment transactions like money transfer, or they can take a mortgage and loans online, or even open a bank account using their device. Literally, next-gen software can do everything. 

Still, a lot of businesses can face some challenges, for example, they might not be fast enough to introduce a new digital innovation, or they simply don’t know which innovation to introduce, it’s that simple. For example, without modern anti-theft technologies and sophisticated digital security, it is difficult to save companies and their confidential data from high-profile hits of hackers. Therefore, such attacks can significantly damage fintech organizations costing them significant sums of money and reputation.

Digital transformation success and failures

Companies across all industries have been saving millions by implementing digital transformation timely. Although such a transformation is at the core of e-commerce, it can also help offline retailers. IKEA is, perhaps, the most illustrative example. The retailer of furniture strives to keep up with the pace of technological development to satisfy customers’ needs. That’s why they offer online shopping with several delivery options for clients’ convenience. IKEA also has launched several popular apps:

1.IKEA place app

The augmented reality app helps you to put 3D models IKEA furniture into your place. The only thing you need is your smartphone: scan the place where you want to put a sofa, choose the sofa you want and see if and how it fits your sitting room. The app does not also make shopping easier it also makes it lots of fun.

2. IKEA Catalogue app

The retailer provides a catalog of furniture that you can easily swipe through on your mobile phone. It makes it easier for IKEA customers to choose a piece of furniture they want because it is always at their fingertips. 

3.The IKEA store app

The last but not the least is the IKEA store app. It helps customers plan their shopping like making shopping lists before a customer arrives at an IKEA store, checking the nearest store locations and product availability. Also, it allows you to keep your IKEA Family card in the app, which makes it easier than carrying a piece of plastic around.

Thus, an offline retailer IKEA understands that e-commerce is what people need and so they are trying to keep up with customers’ demands. 

But what happens when companies fail to transform digitally? The answer is simple – they either learn from their mistakes or they just “bring up the rear”. 

Unfortunately, some companies perish for good and some of them could not keep up with competitors anymore. For instance, BBC, which remains to be a market leader on the European media market, failed to handle digital transformation in 2008. The company launched the Digital Media Initiative that aimed to change the way BBC delivers content to users and optimize product at all levels. The former media and technology director, Ashley Highfield, claimed that it would be one of the easiest and most important steps towards providing high-quality on-demand services to BBC users. While all viewers were waiting for the launch of the program, the board of directors failed to manage the change, which led to millions of losses and wasted time. In order not to make new mistakes, it is reasonable to learn on previous ones and stay aware of the primary pitfalls and challenges that hide behind digital transformation.

Pitfalls of digital transformation

Digital transformation can be a difficult task for many companies as they encounter lots of hurdles on their way. Still, businesses can easily overcome them if they know how. In this article, we are going to tell you which pitfalls are awaiting for companies on the way to full-scale digital transformation, what challenges are there for SME enterprises, how to start the transformation, and what aspects to look for in a digital strategy. Moreover, you will get 10 resources that will help you deep dive into the topic. 

It is true that a digital transformation builds the foundation of competitive advantages which give companies an opportunity to stay on top of the business world. With the help of the digital transformation, companies can establish long-standing relationships with clients and employees, and they, in turn, develop strong connections to the brand and company itself. But with so many resources in place, why do so many businesses still fail to transform? There are several reasons behind it. 

  • There is no clear strategy in view

To implement advanced technologies into your business, you need to understand why you need them and for what purposes. Many companies want to have sophisticated CRM, content management tools, e-commerce platforms, mobile, and desktop apps, use artificial intelligence in their products and they have enough resources to “buy it all”. However, they do not understand how these technologies will improve their operations and what results they will yield. Thus, companies can lose tons of money and time on something that might be a complete waste of their capital. 

  • Not understanding your customer needs

It goes without saying that customers are at the core of all businesses. That is why it’s important to understand what your clients want. For instance, due to the lack of time and a hectic lifestyle, buyers are no longer eager to shop offline. As an alternative, they prefer surfing websites to buy products they need. Going online is your best choice, which can easily be done with a convenient e-commerce platform.  Alternatively, you can combine online and offline business models as many world-famous companies do, like Under Armour, IKEA, Walmart, Tommy Hilfiger, and Sephora. 

  • Digital Transformation takes a lot of time and requires you to have multiple decision makers

This is a common reason behind big corporations’ failures. Such companies are very slow in making decisions and have endless approval rounds which involve numerous people. Therefore, it takes a lot of time to make even one minor change. Small companies and startups are more agile in this regard and digital transformation is conducted more smoothly for them. 

  • Setting wrong priorities

Even if you have invested in cutting-edge digital technologies and now you have the most advanced tools ever, it does not always mean that your employees will eagerly use them. They might not realize the importance of the technologies, or they don’t know how to use them. Also, people get used to doing business in familiar ways and any change might be frightening and difficult at the same time. In such a way, resistance is formed. In this case, you should also allocate time and money to educate them and integrate digital transformation into your corporate culture.

  • Working with the wrong vendor 

Unfortunately, cooperation with unreliable partners can cost you a fortune, especially when it comes to digital transformation. When you are working on custom software to meet the needs of your company, it is essential to choose the right service provider. That is why you should pay close attention to contractors, outsourcing and outstaffing companies, freelancers you work with ̶ their experience, talents, successful projects, and the way they communicate and do business with their clients.

Cost and challenges of SME enterprises in digital transformation

The price of digital transformation is a very complicated matter as it involves many factors ̶ company size, scale of transformation, the cost of services provided by third-party companies. It can be different for small, medium and large enterprises across various industries and it depends on what technologies will be involved.

When it comes to challenges, small and medium companies have their advantages. Such companies are more agile, they can quickly adapt to new integrations or adopt technologies. As a result, the process of transformation requires much less time compared to large enterprises. Small and middle-sized companies easily move to cloud services ̶ email providers, platforms, CRM, ERP, and other tools, which can significantly cut marketing costs. Thus, they can invest more money into their products, services, and streamline customer journey using augmented reality or artificial intelligence as an example. 

Large enterprises do not have such agility as they are stuck in the legacy technology which they have been utilizing for many years. It is not so easy for them to switch from, let’s say, an old CRM to a completely new system without disrupting business processes. Moreover, small and medium companies are also much more agile in terms of decision-making as they have fewer people involved in this process. Therefore, the transformation might not take as much time as it takes with large enterprises.

Ok, we are ready. How to start digital transformation process?

To have a clear-cut and successful digital process, one needs to ask himself several questions: Why? What? When? Who? How?

  • Why do you need digital transformation? 

To answer this question you should assess your current state of affairs in the company, understand what gaps you have and what goals you want to reach. Also, you should pay attention to modern trends in digital technology and discover more about other companies and their experience. Define how you can improve your processes and meet the needs of your customers. You should always be under the radar. 

  • What resources do you need to successfully integrate new technologies?

Once you have defined your business needs and priorities, decide what technology you will need to reach them. Analyze your current tools, see if you need to improve them or use new ones. Be ready to spend a lot of time on research and estimate how much money you’ll need.

  • When do you want to transform your business? 

This question is especially tough because no one knows for sure how much time the transformation will take. Usually, companies underestimate this and it takes much longer than they expected. Digital transformation can take months or even years.

  • Who do you need to execute digital transformation?

You have to take a realistic look at the issue and understand what people you need to make the digital transformation possible. Set goals, define resources you need and go for it! You might want to hire new talents or find a reliable outstaffing and/or outsourcing partner or even hire freelancers to work on your digital project. You should weigh up all the pros and cons and choose the option that will fit into your budget and benefit your company. 

  • How are you going to transform your company?

Right after you defined what to do, the next question is how to execute it. Many startups, as well as large corporations, stuck here since they lack an understanding of the processes behind digital transformation. Below, we provide you with top aspects to focus on while developing a strategy for your business  

Main aspects of a digital transformation strategy

It might sound controversial, but a digital transformation strategy is not fully about technology, it is also about customer experience and corporate culture. It can have many aspects, but it should always take into account the following: 

  • Know your customers

You have already read about it in this article, but it is indeed very important and it is worth repeating. Companies need to know their customers inside and out if you want to keep thriving. How do they buy your products and services, how often do they do it, what channels do you use for your communication with them, what devices they use to buy? Knowing your customers perfectly well gives you ample opportunity to use the right digital tool to bring their customer experience to a new level. 

  • Know your products and services

If you know your customers well enough, you can tailor your products and services to their requirements to bring value. Identify what pain points your customers have and what solutions you can provide to solve them. 

The best ways to spot any inefficiencies in products and services is to talk to your customers, research rivals, and employees. Ask your customers what they like about the products you provide and what they would improve in your services. 

Carefully investigate your rivals. See what they offer, how their value is different from yours, and why some clients prefer them over you.

 It would also be wise to solicit advice and feedback from your employees as they work closely with the company’s products and services, and they can have a valuable opinion on how you can upgrade them to satisfy clients.

  • Know your employees

Make your employees an integral part of the digital transformation by involving them in all processes. Define roles within your organization and delegate responsibilities. Focus on people that will be responsible for different aspects of the transformation: what skills you need, what people you require to involve and whether you will need extra help from subcontractors. Keep your stakeholders aware of future changes and stay open to questions and queries from their side to build trust during the transformation. Be ready to spend enough time on their education and support them during the whole journey 

  • Be a leader

To implement a successful digital strategy, a company requires an effective leader, who has a strong vision in mind. This person should manage all resources, set goals and guide workers in the right direction. 

10 useful resources to learn more about digital transformation

Knowledge is power, and we are sure you know it pretty well. There are many resources on the Internet that might be useful for you in your research. Don’t spend hours browsing websites and reading through useless materials, just use the following list that will come in handy when you get down to digital transformation:

  1. Strategy, not technology, drives digital transformation by Deloitte
  2. What is digital transformation? A necessary disruption by CIO
  3. 10 digital transformation success stories by CIO
  4. 5 things to do in 2019 in digital transformation by CIO
  5. To Lead a Digital Transformation, CEOs Must Prioritize by Harvard Business Review
  6. Is Your Digital Transformation Focused on the Wrong Strategy? by Harvard Business Review
  7. Every Organizational Function Needs to Work on Digital Transformation by Harvard Business Review
  8. Accelerating the pace and impact of digital transformation 
  9. Successful Digital Transformation Starts With These Steps by Forbes
  10. A CEO Cheat Sheet For Digital Transformation 2.0 by Forbes

Wrapping up

Sooner or later, digital transformation will become the heart of your business. While you are busy with choosing the tools and technology to implement in your company, encounter the challenges and pitfalls that might “hover over your head”. With the right strategy and analysis of the current state of affairs, it is possible to make this change. Digital transformation helps businesses to stay afloat in the competitive markets and grow beyond the challenges of the modern digital world


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