Digital transformation is imperative for all businesses, from small businesses to enterprises. That message comes out loud and clear from every keynote, panel discussion, article, or study about how businesses can remain competitive as the world becomes increasingly digital.
The specific steps organizations should take toward digital transformation vary depending on their specific goals, challenges, and resources. However, many experts agree that digital transformation should not be considered a one-time project but rather an ongoing change process.
A well-defined strategy is essential to this process, one that encompasses all aspects of your organization – from its leadership structure to its organizational culture. A strategy will help you make the most out of changes in your industry. Keep on reading to learn what digital transformation strategy is all about and how to get started.
Table of contents:
- What is a digital transformation strategy?
- Why create a digital transformation strategy?
- How to build a digital transformation strategy?
- 4 main principles of a successful digital transformation strategy
- Wrap up
What is a digital transformation strategy?
A digital transformation strategy is an approach to remodeling an enterprise by digitizing business practices, strategies, and operations. Digital transformation can mean anything from IT modernization to inventing new digital business models.
But as important as it is to rapidly innovate and deliver in this digital landscape, digitizing the enterprise involves more than implementing new technologies, launching digital products, or moving systems to the cloud. It involves a significant shift in culture, processes, and workflows.
Digital transformation moves organizations from a project-based structure to one focused on outcomes, with cross-functional teams collaborating to produce incremental value through Agile practices. Implementing this shift can be daunting, but it's definitely worth it considering benefits such as:
- increased productivity,
- higher quality,
- greater collaboration
- faster responsiveness and time-to-market,
- lower risk,
- greater agility to compete in a constantly changing economy.
Why does digital transformation matter?
Businesses take on digital transformation for many reasons, but the most common one is increased customer demand. In the wake of the pandemic, business leaders have seen that their ability to adapt quickly to supply chain disruptions, time-to-market pressures, and rapidly changing customer expectations has become critical in order to stay competitive.
Consumer behavior has shifted dramatically since the start of the pandemic, and it's too early to guess which long-term consumer behavior changes will stick. An important factor to watch will be how the stay-in-place regulations may affect forced change — three out of four Americans tried a new shopping behavior, for example — and whether or not it will revert when possible.
McKinsey data shows that streaming and online fitness are likely to stay permanently popular with consumers. However, home cooking and online grocery shopping – a category that has generally been resistant to the online transition – will probably stay more popular with consumers than in the past. Cashless transactions are also gaining steam. On the B2B side, McKinsey data shows that remote selling is working.
Why create a digital transformation strategy?
A digital strategy is key before attempting to drive a change in the organization.
The most innovative and renowned companies don't see digital as just another project to finish or product to create but as core to their identity.
Think Amazon, Tesla, or Spotify. These are giant companies with what looks like limitless resources and a powerful "why not?" culture that fosters figuring out the "how" as they go.
As the world becomes more digital, companies large and small must follow. The pandemic significantly sped up the organization's digital transformation pace across many industries.
It's not about developing digital products only. It's about leveraging new digital technologies (from data analytics and digital marketing tools to AI-powered ERP or CMS systems). The goal here is to discover challenges and opportunities and deliver digital solutions at scale. Companies must rethink their operating models and business strategies to succeed in the digital economy.
Luckily, technology allows enterprises to develop digital transformation strategies and execute them efficiently by uncovering customer pain points and desires – even predicting future ones. Internal or external customers can be targeted here, but the mission is constant: solve the customers' problems through innovation.
How to build a digital transformation strategy?
A transformation strategy is a plan of how an organization plans to roll out the transformation plans. The idea here is to avoid getting stuck in the "discussion" trap that is more theoretical than strategic.
Start by understanding your current state through an Agile lens to establish your desired end state. The next step is to identify potential roadblocks and opportunities in your niche and among your competition. Clearly define the purpose, vision, and priorities of your digital transformation process. Finally, establish a plan of action.
Include specifics about digital technology, people, teams, and the business strategy (budgeting) required to enable such transformation. But avoid fixating on the minute details. Agile is about being flexible and respecting the unknown while looking at the big picture.
It's smart to grant teams autonomy to determine the fine points while keeping an eye on overarching goals. The strategy breaks down large-scale digital initiatives into smaller pieces that cross-functional teams can complete. The teams will then test the solutions, solicit feedback and continue iterating until the initiative is no longer able to provide value.
4 main principles of a successful digital transformation strategy
Increasingly, organizations are using a digital-first approach to solve even their biggest challenges. The goal of a transformation strategy is to build an accelerated path to delivering on strategic initiatives and enabling teams to thrive.
Companies need to be able to adapt to market disruptions, shifting consumer habits, and changing competitive landscapes. Many business leaders imagine adopting Agile at scale and building a culture of innovation. But where do you get started or continue from your current state?
Taking care of the following four strategic areas is a good start:
Changes in the work methodology
Your company may promote a preferred work methodology, but it is important that teams get the autonomy to use the best method for the job to accelerate strategic delivery. One size does not fit all when it comes to working methodology, so you need to adjust your approach to changing requirements and priorities.
Implementing new work management solutions will help your organization to support different types of work across the enterprise, as well as unify leadership and teams with a single line of sight.
Building an innovation culture
Innovation is a prerequisite to responding to market opportunities and challenges, but it takes an entire enterprise, not just a few people at the top. It can come from anywhere, so encouraging employees to take risks and solve problems reaps the rewards for both employer and employee.
Nothing will take a company further than a culture of innovation. It's an atmosphere that inspires employees every hour they're at work to search for innovative opportunities.
Creating an innovation culture is more than slides and presentations. It's about tapping into collective intelligence at the workplace and giving everyone equal opportunity to present ideas. Innovation software solutions are powerful crowdsourcing tools that provides one consolidated platform for sharing insights, collaborating on ideas, and establishing a continual source of innovation.
Implementing Agile at scale
Agile became popular in software development and has since been adopted by many organizations. When scaling Agile across an organization, it can be discouraging. However, when successful, every team is connected and works independently to deliver on strategy and ensure business resilience.
Agile leaders set the path to success by practicing Agile thinking and encouraging creativity and collaboration to solve issues. They enable their teams to deliver the highest value work first, measure their work, and improve accordingly.
Software solutions empower companies to link strategic objectives with Agile team delivery, optimizing workflows, processes, visualization, planning, and funding. These solutions also allow users to transform on their own terms – an approach that can help people buy into a digital transformation strategy.
Focus on ongoing business outcomes
In today's business environment, it is absolutely essential for companies to adapt to the changing market. To meet this demand, many firms are turning to agile development methods to increase delivery speed, reduce costs, and deliver on business priorities.
However, value realization isn't guaranteed unless structures, processes, and mindsets evolve as well. The product shift that needs to occur is focusing on the ongoing delivery of real business outcomes instead of one-time project deliverables. Faster time-to-market, increased revenue, innovation, and customer satisfaction are just as valuable as increased sales volume.
Software technology has the ability to support organizations to orchestrate transformation by taking a modern approach to Agile delivery. It can support efforts to deliver products and solutions efficiently while improving business outcomes and supporting strategic objectives.
The financial services, technology, and healthcare industries are in most need of successful digital transformation strategies. These industries are among the fastest evolving markets, and for companies without a strategy, the status quo remains. Relying on manual spreadsheets, multi-level bureaucracies, and inflexible work methodologies will sooner or later become an innovation killer.
Competitive companies pursuing digital transformation leverage new technology to access comprehensive and reliable data to fuel decisions and speed delivery. They connect data, processes, and technologies across their business. Achieving this without a strategy is next to impossible.
A digital transformation strategy as part of the overarching business strategy provides a roadmap that keeps everyone on the same page, ensuring that all teams are delivering what matters most to the business and its customers.
To improve your existing digital transformation initiatives, take a look at it from an agile perspective: if something isn't working, try again by assessing the current and future desired state, identifying roadblocks and opportunities, defining purpose, vision, and prioritized goals, and establishing an action plan.
If you need a hand, don't hesitate to reach out to our IT consultants. We'll be happy to discuss the best solutions for your business and assist you with creating and implementing a successful digital transformation strategy.