By now, most businesses know the hype around digital transformation. I’m often asked what’s really meant by this term, and how small businesses in particular should go about the transformation.
To answer those questions, we need to start by debunking a few myths. First, digital transformation isn’t about having a website and ordering online, though those capabilities are often crucial components. Digital transformation is really about deploying the latest technologies to simplify processes a business undertakes, improve and expand services and products it provides and rethink every outcome it seeks to achieve.
The second myth — and I hear this one a lot — is that digital transformation is just a marketing slogan invented by technology companies. On the contrary, businesses in every industry are using technology to change how their employees do their jobs and interact with their colleagues, transform customer experiences, upgrade their data management, storage capabilities and reduce their exposure to hackers and other security risks.
Their efforts have tangible effects: According to research by Bain & Company, the revenues of companies considered digital transformation leaders grew 14 percent between 2015 and 2017, “more than doubling the performance of the digital laggards in their industries.” At the same time, Bain added, “profitability followed a similar pattern — 83 percent of the leaders increased margins over that period while less than half of the industry laggards did so.”
The final myth about digital transformation is that it’s for big companies only. In reality, companies of all sizes and in every industry are embracing change. New data from Techaisle sheds light on the extent to which digital transformation has taken hold among small and midsized companies.
Small Businesses Embrace Digital Transformation
The IT research firm’s most recent survey of 1,600 small to midsized businesses found that only 18 percent do not have any form of digital transformation initiative. That means “82 percent of SMBs are already on their digital transformation journey,” according to Techaisle CEO Anurag Agrawal.
Techaisle argues for what it calls the "twin ladder view" of digital transformation. On one ladder are the core networking technologies that make transformation possible, including mobility, converged and hyperconverged infrastructure, virtualization and software-defined networking. On the other ladder are the transformative business outcomes.
“The ‘building block’ technologies at the bottom of the technology ladder are an essential foundation for digital transformation,” Agrawal notes. He adds that 42 percent of SMBs are taking a “holistic view of digital transformation,” meaning they regard the process as impacting “every aspect of the business” and believe it “must become a core part of organizational strategy.”
Pursue a Practical Approach to Digital Transformation
Of course, while many companies think holistically, many others think more discretely, focusing on one digital transformation project at a time. And that’s fine.
To businesses early in their digital transformation journeys, we often recommend focusing on three objectives in particular.
First, collaborate across stakeholders within your organization. It’s crucial to understand that digital transformation isn’t just some IT project, it’s a fundamental transformation of your entire business.
What does that mean in practical terms? Well, for starters, consider your budget. IT leaders consistently say the lack of sufficient budget is one the biggest barriers they face to driving transformation forward.
And suppose a business’s ecommerce platform is cumbersome and confusing to users, prompting too many to abandon online shopping carts before completing a sale. Wouldn’t a transformation of such a platform benefit sales and marketing? And might those departments be willing – eager, even – to contribute to the upfront costs of the project?
IT departments alone can’t often carry the full cost of IT deployments that drive the business forward. It’s incumbent on the leaders of those departments to build relationships throughout their organizations and to reinforce the message that transformation helps the whole business.
Data Is the Key to Business Transformation
Second, organizations must focus on deciphering value from the data digital transformation projects enable. I often use a simple example of new guest Wi-Fi deployment at a coffee shop or a retail store. Customers love it, sure, but when people use that Wi-Fi network, they generate data about how long they stay in the shop, what they browse while shopping or eating and more – and that data can be used to help make decisions about products and experiences that will keep them coming back.
As data sets get larger, managing it becomes a greater challenge — and an even higher priority for businesses. It’s vital to focus on the data you need to better understand what your customers, partners and employees want and need so that you can design products and processes to deliver it.
Finally, it’s crucial to help your business systems communicate with each other through APIs, which MIT’s Michael Schrage explains are “gateways for turning silo-ized processes into interoperable platforms.”
“APIs enable and facilitate interoperability,” Schrage told us last year. “For larger organizations, most coding is stringing together APIs. That’s going to be true for Internet of Things and for a lot of the processes that businesses are managing these days and into the future.”
IT departments undergoing transformation today will need support as they move quickly from their initial wins to their next digital transformation project. One thing that’s clear is the speed of change in business is accelerating — and organizations embracing change through digital transformation have the best chance of long-term success.