Digital Transformation Defined
This post is a walkthrough multiple definitions of digital transformation from multiple sources.
Digital transformation can be elusive if you can’t define it.
Lucky for us, there is no shortage of definitions for digital transformation.
I find that rather than use one single definition for digital transformation, it’s actually more helpful to look at a range of definitions to really internalize what digital transformation means from multiple angles.
Before you walk through the definitions, be sure to review Satya’s pillars for Digital Transformation so you have a simple mental model to work with.
Wikipedia on Digital Transformation
Wikipedia has a simple explanation:
“Digital transformation refers to the changes associated with the application of digital technology in all aspects of human society.”
What I like about that definition is that it goes beyond pure business and includes all impact on society, whether it’s education, government, sports, arts, leisure, etc.
Altimeter on Digital Transformation
Altimeter defined digital transformation from a customer-focused lens in their online report, The 2014 State of Digital Transformation:
“The realignment of, or new investment in, technology and business models to more effectively engage digital customers at every touchpoint in the customer experience lifecycle.”
What I like about Altimeter’s definition is that it’s outside in vs. inside out. The big idea is to leverage technology to adapt to your customer’s changing preferences. So if you “transform”, but there is no visible impact to your customers or to the market, then you didn’t really transform.
Capgemini and MIT Center for Digital Business on Digital Transformation
Capgemini and MIT Center for Digital Business define Digital Transformation in Digital Transformation: A Roadmap for Billion-Dollar Organizations like this:
“Digital transformation – the use of technology to radically improve performance or reach of enterprises.”
While their definition may look simplistic, the power is in the data behind the definition. It’s a global study of how 157 executives in 50 large traditional companies are managing – and benefiting from – digital transformation.
Agile Elephant on Digital Transformation
Agile Elephant defines digital transformation like this:
“Digital transformation is the process of shifting your organisation from a legacy approach to new ways of working and thinking using digital, social, mobile and emerging technologies. It involves a change in leadership, different thinking, the encouragement of innovation and new business models, incorporating digitisation of assets and an increased use of technology to improve the experience of your organisation’s employees, customers, suppliers, partners and stakeholders.”
While this definition may seem more elaborate, I find this elaboration can really help get somebody’s head into the digital transformation game.
MIT Sloan’s 9 Elements of Digital Transformation
In The Nine Elements of Digital Transformation, George Westerman, Didier Bonnet and Andrew McAfee identify the key attributes of digital transformation:
|Transforming Customer Experience||
|Transforming Operational Processes||
|Transforming Business Models||
The nine elements are excerpted from their digital report, Digital Transformation: A Roadmap for Billion-Dollar Organizations. Here are quick summaries of each:
- Customer Understanding – Customer Understanding is where “Companies are starting to take advantage of previous investments in systems to gain an in-depth understanding of specific geographies and market segments.”
- To-Line Growth – Top-Line Growth is where “Companies are using technology to enhance in-person sales conversations.”
- Customer Touch Points – Customer Touch Points are where “Customer service can be enhanced significantly by digital initiatives.”
- Process Digitization – Process Digitization is where “Automation can enable companies to refocus their people on more strategic tasks.”
- Worker Enablement – Worker Enablement is where “Individual-level work has, in essence, been virtualized — separating the work process from the location of the work.”
- Performance Management – Performance Management is where “Transactional systems give executives deeper insights into products, regions and customers, allowing decisions to be made on real data and not on assumptions.”
- Digitally Modified Businesses – Digitally Modified Businesses is “finding ways to augment physical with digital offerings and to use digital to share content across organizational silos.”
- New Digital Businesses – New Digital businesses is where “companies are introducing digital products that complement traditional products.”
- Digital Globalization – Digital Globalization is where “Companies are increasingly transforming from multinational to truly global operations.”
Sidenote – George, Didier, and Andrew sum up the power of digital transformation when they say, “"Whether it is in the way individuals work and collaborate, the way business processes are executed within and across organizational boundaries, or in the way a company understands and serves customers, digital technology provides a wealth of opportunity."
Digital Business Transformation
I think it's worth pointing out the distinction between Digital Transformation and Digital "Business" Transformation.
Digital Business Transformation is specifically about transforming the business with digital technologies.
There are many lenses to look at but in particular it helps to view it through the lens of business model innovation. So you can think of it as innovating in your business models through digital technologies. Your business model is simply the WHO (customers), the WHAT (value prop), the HOW (value chain), and your WHY (profit model.)
An exec from SAP at Davos said it well when he said "new business models are driven by different interactions with companies and their customers."
In pragmatic terms, that means evolving your business model and interaction patterns to meet the changing demands of your customers all along your value chain. For example, consider how millennials want to interact with a business in today's world. They want to learn about a company or brand through their friends and family on social networks and through real stories from authentic people, and they want access to services anytime, anywhere, from any device.
Another way to think about this is how many companies are learning how to wrap their engineering teams around their customer's end-to-end journey to directly address the customer's pains, needs, and desired outcomes.
Hopefully, this helps give you a good enough understanding to get going with your Digital Transformation and to understand the difference between Digital Transformation and Digital Business Transformation so that you can pave your path forward.
If nothing else, go back to the Altimeter Group's definition of Digital Transformation, “The realignment of, or new investment in, technology and business models to more effectively engage digital customers at every touchpoint in the customer experience lifecycle.", and use Satya’s pillars for Digital Transformation as a guide to stay grounded.
Digital Transformation: A Roadmap for Billion-Dollar Organizations, by Capgemini and MIT Center for Digital Business
The 2014 State of Digital Transformation, by Altimeter
The Nine Elements of Digital Transformation, by George Westerman, Didier Bonnet and Andrew McAfee