Digital Transformation of Business — one of the most discussed terms in recent years. The inevitable shift towards high technology was evident half a century ago when concepts like automation of production and digitization first entered the lexicon. However, when it comes to transformation, many questions arise—what does this concept mean, how will it affect the future of business, technological processes, and societal relations? In this article, we’ll explore what digital transformation is, the current trends to watch, and how challenging the implementation of modern technologies can be.
The Essence of Digital Transformation
The idea of automating business processes was first introduced back in 1983, when the American company Novell presented an operating system based on IBM computers—a platform specifically developed for remote client work. This system laid the foundation for the further development of corporate programs, which over the years have included:
- Database spreadsheets
- ERP — Enterprise Resource Planning systems
- ECM — Enterprise Content Management systems
- HR programs — remote personnel management
- CRM systems — platforms for managing customer relations
These examples are just a fraction of the multi-tiered organization of business processes in modern society. From these developments, cutting-edge concepts have emerged, such as:
- Industry 4.0 — today’s trend of automated production, where humans primarily monitor processes and service equipment.
- Internet of Things (IoT) — the integration of high-tech devices into a unified network, controlled with a single button press. Examples include smart homes, iOS ecosystems, etc.
So, what is digital transformation based on what we’ve discussed? Firstly, it’s the process of adapting a business to a new technological cycle. Secondly, it’s a group of strategic, cross-cutting changes within a company. Thirdly, it’s the integration of all automated processes that can work towards maximizing profit growth.
Goals of Digital Transformation in Modern Business
Since transformation is defined primarily as a process and a group of strategic initiatives, any work begins with the formulation of initial goals:
- Maximizing cost reduction in business management — including labor, time, and financial expenses. This will require implementing automation at all production stages, even in areas that previously needed direct intervention.
- Prioritizing business processes — Ideally, all short-term actions should be fully digitized by the time a global project is launched. An example would be instant payments that significantly speed up purchases.
- Entering fundamentally new markets with innovative services and the highest level of customer service — It’s essential to identify only those areas that can bring real profit to the company.
Key Directions for Digital Transformation
Based on these goals, several promising areas of activity that should be represented in varying degrees within a company can be formulated:
- Digitizing the business model and managing based on constantly updated databases — This requires continuous market analysis, studying focus groups of the target audience, their search queries, purchasing power, etc.
- Customer-centricity — Building a new market segment around the needs of each individual customer. For example, if you sell modern gadgets, be prepared to offer customers a full range of accessories, such as wireless headsets, cases, screen protectors, etc. This builds an end-to-end interaction chain, where customers are likely to return for more purchases.
- Value management — Continuously improve the quality of services provided by expanding service packages. Create a sense of exclusivity among customers—offer personalized deals, private sales, 24/7 support, and remote problem-solving for any issues.
- Creating a digital partner network — While collaborations on open-source software are no longer surprising, many companies are going further. A different level of work involves producing a sought-after joint product and developing further infrastructure to promote it on both platforms.
- Innovative collaboration — The next step in developing the partner ecosystem involves attracting startups, as successfully demonstrated by the Chinese giant AliExpress. This also includes open user testing of new services and interfaces with the ability to leave feedback.
- Digital culture within the team — A company’s readiness to transition to high-tech production is largely determined by the level of staff preparedness. Not all departments will be ready to switch to a new mode immediately, so internal training and retraining are essential.
The last point is particularly important for organizations, as it marks the beginning of staff competency development. Positions such as Chief Digital Transformation Officers are increasingly common, tasked with overseeing the efficiency of each direction.
Necessary Competencies for Digital Transformation
Digital transformation competencies involve new work formats and levels of employee involvement in creating, promoting, and supporting content. This shift is driven by the target audience spending more time online, requiring companies to adapt to user demands and purchasing capabilities.
In English-language literature, two terms are commonly used—Hard Skills and Soft Skills—which are translated into Russian as technical and creative competencies.
Hard Skills
The first group, Hard Skills, is predictably larger and requires a high level of preparation in the following areas:
- Continuous development and technical support of new business models, including platforms, ecosystems, neural networks, etc.
- Data science — the composition and processing of databases.
- Maximum integration with partner companies at the Open API level through applications, widgets, and one-click synchronization.
- User security — customers must understand at the interface level that their personal data is safe and securely stored.
- Implementing at least one breakthrough technology that can attract investment—blockchain, virtual assistants, augmented reality, etc.
- E-management involving all available platforms.
Soft Skills
Creative competencies include:
- Design thinking in visual content development, focusing on user requests for specific products and services.
- Digital psychology of perception — a novel field of behavioral economics based on sales data.
- Emotional intelligence — the ability to manage customer emotions, creating demand for specific market directions.
- Constant consumer contact at all levels — from email newsletters to direct responses to questions in real-time.
Challenges and Pitfalls
Managing digital transformation at various stages can encounter certain difficulties that should be studied well in advance, with all risks calculated:
- Lack of competent staff — Unfortunately, the number of qualified employees trained to work on digital projects is currently very low. As for Russian businesses, large state-owned companies only began recognizing the inevitability of digital transformations a few years ago, leaving many companies to rely solely on their resources without any “top-down” support.
- Forced slowdown in adopting modern technologies — Some areas born in the classic “analog” format are not easily transitioned to digital platforms, necessitating the development of strategies in the field. Responsibility, including financial security, often falls on regular employees, and minimizing risks requires a detailed plan with mandatory division of duties and phased internal reforms.
- Conservative leadership — Not all directors are ready to fully transition their life’s work to digital, due to caution and distrust of modern systems. This often leads to internal conflicts within teams and intentional delays in transformation. A wise and forward-thinking leader’s task is to surround themselves with employees who are genuinely interested in development and possess the necessary competencies to achieve the set goals in the shortest time.
Conclusion
In conclusion, what does digital transformation entail?
- It’s a comprehensive process of adapting a business to modern realities, where automation is just one of many tools.
- Transitioning to the digital space opens vast growth opportunities for any organization, including in entirely new market sectors.
- Employees must develop the necessary digital competencies and grow alongside the company.
- Mutually beneficial partnerships with other companies are key to a successful future for all parties involved.
- Using future technologies, such as blockchain or augmented reality, will inevitably attract investment.
- Working on customer perception psychology is a crucial competency that will significantly expand the customer base.
- The complete transition of business to digital spaces is only possible with continuous development and analysis of the current market situation.