Everywhere you look, people are talking about digital transformation — but how much is really left to transform? We all use email, depend on software to keep our financials clean, and keep our Twitter accounts active. Surely, digital transformation is just a fancy term that bloggers use to fill pages?
Not quite. Digital transformation refers to the digitizing of all the data, processes, and activities within an organization. All those stacks of paper that used to keep organizations running are quickly turning into ones and zeroes in computer databases. Now, rather than hope someone knows the location of a document or file from the past, we can transfer information from system to system in the blink of an eye. We can also analyze and process that information using AI and machine learning, providing insights we never would have discovered on our own.
Companies around the world are buying into digital transformation at unprecedented levels. From IoT devices to cloud tech to big data, the world will spend more than $7 trillion on digital transformation by 2021.
What will that digital transformation mean for you? Whether you run a Fortune 500 company or a startup, if you want to compete in the marketplace of the future, you need to know the answer.
Exploring the Digital Gap
The debate over automation is split into two camps. On one side, naysayers claim that robots will take over the world and kill all the jobs. Those on the other side believe flying cars are just around the corner and robots will make our lives easier.
In business, however, automation is not so dramatic. The new movement seeks to digitize existing processes to create more efficient organizations and empower them to compete in a global market. People used to write things by hand before taking their work to a typewriter. Today, we collaborate in real time using Google Docs and pay almost nothing for the privilege.
Despite the obvious advancement of digital business, many companies continue to sit on the sidelines out of fear. Machine learning, blockchain, augmented reality, and other digital trends are not going away, though. That’s why the conversation around digital transformation is heating up: The more aspects of business feel the effects of digitization, the wider the gap between the advanced and the non-advanced becomes.
The Benefits of a Digitized Future
Recent research suggests that different disciplines are at different stages of transformation. IT management is 79 percent digital, while business process management is only 60 percent digital. Those gaps won’t last long, though. By the time the digital transformation is complete, those percentages will be close to 100 across the board.
Unfortunately, companies cannot wait until this technology is compulsory before they learn how to use it. They must navigate a digital world now. Digital transformation will provide not only new tools, but entirely new business processes. Only companies that understand how to leverage their human and automated capital can hope to compete in a market where everyone enjoys a technological advantage.
According to research from MIT and AlixPartners, only about 23 percent of the 400 companies evaluated in the study had digitized their customer interfaces and business operations. However, that 23 percent enjoyed margins that were, on average, 16 percent higher than the industry average.
The future is clear: Companies that embrace the digital transformation will win. What does that embrace look like, though, and how can companies today prepare for the changes?
The Components of Digital Transformation
Digital transformation typically refers to two distinct components: digital process automation and robotic process automation. DPA is digital transformation applied to the core processes of a business. This is the easier element to implement because companies can switch to digital processes without investing large amounts of money.
RPA, meanwhile, is mostly reserved for companies with hundreds of humans performing the same tasks. Large manufacturers, data entry centers, and comparable industries can receive tremendous return on investment from RPA purchases, but for most small- and medium-sized businesses, RPA remains a bit excessive.
Many people believe these concepts simply refer to the digitization of current work, but they are much more than that. DPA and RPA are not end goals but pieces of a larger whole. A company that buys an expensive new platform hasn’t undergone a digital transformation — its employees just spend more time in front of screens.
Process Automation in Practice
Consider an update to a bank’s customer experience, from in-store to online visits and every touchpoint in between. Digital transformation in the context of customer experience isn’t about moving everything online; it’s about identifying areas to improve the experience: What does online banking need to do better? What about the physical experience with the tellers? Where can digitization help people on both sides engage in more efficient, intuitive interactions?
For back-end processes at larger organizations, RPA is usually the answer. The name might sound complicated, but robotic process automation is a straightforward concept. Robots scrape data from one system and pass it to another, eliminating the human in the middle in order to streamline operations.
Imagine next that you have an ordering system in Salesforce but that you use an enterprise resource planning system from SAP for most other processes. Today, most companies use humans to verify and transfer data from one system to the other. With RPA, you could optimize data transfers between applications without human intervention.
In some industries such as manufacturing, organizations tend to hold back when new technology hits. The original digital transformation (pre-SaaS) required major investments for uncertain payoffs, but today’s subscription-based models allow everyone to take part in the revolution.
In manufacturing specifically, only 15 percent of manufacturers implement digital supply chains, but 80 percent struggle to collect and analyze the data necessary to optimize their supply chains. The challenges and the answers are right there. Companies need only invest in the solution.
Preparing for Change
Even with all the chatter and questions surrounding it, this new digital transformation is accessible, effective, and necessary for companies in nearly every industry. If organizations want to survive the next decade, they must take advantage of new tools — and simply using online software isn’t enough. Businesses need to consider how they generate data and where they have opportunities to use and share that information.
This is more than an improvement to work life: This is an entirely new paradigm. Just as we made the leap from typewriters to Google Docs, we are on the verge of an entirely new way of thinking. By embracing digital transformation and seeking ways to implement digital and robotic process automation, you can ensure your company remains ahead of the digital curve.