What is digital transformation?

While waiting for a colleague in a quiet Makati restaurant, I overheard a conversation between a technology vendor and a senior executive of a consumer goods firm. The latter was obviously pitching its products and services to the business executive for the prospective customer’s company to achieve “digital transformation.” The executive insisted that he has already implemented digital transformation by putting up his company’s e-commerce site. Unable to rebut, the vendor shifted the conversation to some pleasantries.

Discourses about digital transformation have been peaking the last couple of years. A perfunctory search in Google reveals more than 10 million entries about this matter.

What is digital transformation, exactly? 

Is your organization embracing it? Does putting up an ecommerce site constitute it?

Organizations need to adapt and evolve due to the mounting complexities of issues. In fact, in the 2016 CEO Global Study of KPMG, close to 9 out of 10 CEOs are concerned about responding to forces of disruption and innovation, the loyalty of their customers, and the impact of the global economy. Hence, organizations need to innovate, evolve, and transform to address these external forces and remain relevant to all stakeholders.

Enter digital transformation. A succinct definition from CIO Magazine says it is“the acceleration of business activities, processes, competencies and models to fully leverage the changes and opportunities of digital technologies and their impact in a strategic and prioritized way.”

But what are these business activities, processes, and competencies that organizations need to accelerate? Microsoft clearly outlines these in four pillars of activities such as “engaging your customers, empowering your employees, optimizing your operations, and transforming your products.” Digital transformation is about orchestrating and nicely weaving the acceleration of these activities through a system of intelligence from digital technologies that involve business analytics to better understand customers, collaboration tools that allow employees to engage among themselves, automation tools that streamline operational processes, and platforms that allow faster time-to-market.

Examples of digital transformation initiatives, as cites by Microsoft, is “how Virgin Atlantic is deepening its relationship with customers by using analytics to get a 360-degree view of a customer and turn those insights into predictive power to deliver personalization at scale; and how Ecolabs, a $14- billion global provider of water, hygiene and energy technologies and services, is using a combination of sensors and data to predict the flow of business and automate decisions.”

Clearly, digital transformation brings value to organizations and its stakeholders. A Forrester Consulting research study commissioned by Accenture Interactive found that the key drivers of digital transformation are profitability, customer satisfaction, and increased speed-to-market.

As the regional economy opens, and the political and economic forces in the US and Europe are strengthening, there is greater and more urgent need for Philippine organizations to undergo digital transformation. As I have witnessed over the past couple of years, only a handful private firms are at the tail-end of the digital transformation journey, and a few are in the middle of it.

But what’s glaring is that majority of large and medium enterprises are now talking about it and planning for digital transformation initiatives, albeit in pockets of activities, such as putting up an e-commerce site, automating some of the processes, and so on. To ensure optimal benefits from digital transformation initiative, business executives should create the its organization-wide blueprint, and have roadmap for the execution of each pillar of activities, i.e. engaging your customers, empowering your employees, and so on.

But digital transformation is not without its challenges. The ultimate challenge is making sure employees, suppliers, and even customers adapt to the transformational changes, as they impact industry and organizational structures, reporting lines, and potentially job descriptions. Failure to adapt will mean potential employee turnover, customer dissatisfaction, and ultimately financial losses.

That’s why business leaders, when undergoing digital transformation, should carefully manage change and transitions among employees. This is where the role of human resources and organization development (OD) experts become critical. I will discuss in the next article the fusion between OD and technology in making sure digital transformation initiatives are successfully implemented.

The opinions expressed here are the views of the writer and do not necessarily reflect the views and opinions of FINEX.The author may be emailed at reylugtu@reylugtu.com.