Guide to Developing a Successful 2022 Digital Transformation Strategy
Digital transformation has been a buzzword for quite some time now due to its ability to make organizations more efficient, customer data driven, and profitable. For these reasons, among others, many organizations had digital transformation on their roadmaps and it formed part of their long-term strategic planning.
Then 2020 happened. The COVID-19 pandemic brought with it the increased need for organizations to use digital channels to reach their audience, market their products, and make more sales. In turn, the pandemic caused a fundamental shift in consumer behavior that will change the way consumers shop for some time to come.
For these reasons, many organizations accelerated their digital transformation efforts. Also based on these reasons, it’s vital that organizations digitally transform their businesses in order to stay competitive and ensure success. For any organization that wants to do this, it’s vital that they develop a successful digital transformation strategy.
With that in mind, we’ll now look at how you can develop a digital transformation strategy for your organization.
- What is Digital Transformation?
- Why is Digital Transformation Important?
- The Impact of the COVID-19 Pandemic
- Digital Transformation in a Post-COVID World
- Challenges in Digital Transformation
- 11 Steps for Developing a Successful Digital Transformation Strategy
- The Benefits of Implementing a Successful Digital Transformation Strategy
- The Bottom Line
What is Digital Transformation?
Before going any further, let’s first recap what digital transformation actually is. When looking online, you’ll find a multitude of definitions. When we want to boil it down to a simple definition, we can use Wikipedia’s version which simply states, “Digital transformation (DX) is the adoption of digital technology by a company.”
This definition might be too simple, so let’s unpack it a bit. With digital transformation, organizations implement digital technologies and processes to create new or improved business operations. This allows the organization to become more efficient, help its employees be more productive, and serve its customers better.
At its core then, digital transformation fundamentally changes the way an organization does business. In turn, this allows it to implement new business models and create new revenue streams around its customers’ needs and expectations.
Digital Transformation vs Digitization
When looking at digital transformation, it’s important to distinguish it from digitization. This distinction is important because these terms are often used interchangeably and many organizations, when talking about their digital transformation efforts, are actually only digitizing their processes. Although close, these concepts do differ.
Digitization involves more modest efforts compared to digital transformation and includes shifting some services to digital or implementing new technologies into legacy systems. Conversely, when considering the definition mentioned earlier, digital transformation changes the way the organization does things and includes everything from migrating to the cloud to implementing new, digital business processes.
The Key Components of Digital Transformation
Now that we’ve recapped what digital transformation is, let’s consider the key components of digital transformation. As mentioned earlier, digital transformation fundamentally changes the way companies do business with the result that it encompasses transformational changes in:
- Architecture. With digital transformation, there’s a shift from running monolithic applications to a distributed (e.g. microservices) architecture. This forms the foundation that accelerates digital transformation, as distributed microservices design patterns allow platforms, services, and applications to be more reliable and adaptable to changing market conditions and evolving customer expectations. In fact, without it, organizations will face substantial challenges and risks which could include a loss of market share, a lack of competitiveness, and possibly even reputational damage.
- Infrastructure. As is the case with architecture, digital transformation generally requires a shift away from physical, on-site infrastructure to a cloud-based environment. Cloud computing is the established enabler to drive application modernization. It effectively facilitates microservices architecture, microservices design patterns, modern development processes like continuous integration and continuous deployment, modern infrastructure like Docker containers and Kubernetes pods, and site reliability engineering.
- Development. In the digital age, agile is the preferred project management methodology because it delivers on customer expectations for new features faster. As such, developers need to innovate more and implement new features and solutions more quickly to satisfy the needs of their customers. Methodologies like agile allow developers to effectively do this by giving them the ability to use customer feedback in every iteration of development and, therefore, innovate continuously.
Why is Digital Transformation Important?
If there’s one thing the COVID-19 pandemic showed, it’s that businesses should be able to adapt and respond to challenges and disruptions more quickly. If they don’t, they face serious risks and a significant negative impact on their bottom line. And it’s here where digital transformation became crucial for businesses to respond to the challenges brought about by the pandemic.
It doesn’t stop there, though. There are several other reasons why digital transformation is important, including:
- Consumers expect more. Think about it. Consumers nowadays have everything they could wish for available on-demand, whether it’s the entertainment they consume or the products they shop for and have delivered in a matter of hours. The problem is that consumer behavior has changed to such an extent that they now demand and expect the same experiences from businesses they do business with. Digital transformation allows businesses to achieve this and, by implication, deliver better customer experiences, giving consumers exactly what they want.
- Competition demands more. In an increasingly competitive market, it’s vital that organizations do everything possible to stand out from the crowd and attract more customers. Digital transformation allows businesses to do this in that it allows them to provide stellar customer experiences, be more efficient, and deliver more innovation and better products. In contrast, businesses who fail to embrace digital transformation will not be able to do this as iteratively, with the result that their customer experience, and bottom line, will suffer.
- Employees need to be more efficient. Digital transformation offers organizations a valuable opportunity to improve their business operations and processes. It does this by allowing them to move away from manual processes and automate key parts of their operations. It also gives their employees the ability to work from anywhere, which is especially relevant considering that remote work is becoming increasingly more prevalent and popular. As a result, organizations are able to make their businesses more efficient and their employees more productive, which translates into an ability to focus on more opportunities for growth and profitability.
- Security needs to improve. One of the most important considerations for organizations nowadays is data privacy and security, especially for legacy applications containing outdated code or integrations that have recently been targeted by cyberattacks. This is, in part, due to the sheer amounts of data businesses need to store and manage but also due to privacy regulations and legislation becoming increasingly prevalent. This concern is even more relevant in the current climate, where many organizations employ completely remote or hybrid workforces. This means companies need to implement the right solutions that take into account every employees’ working environment, circumstances, and the devices they use. In this respect, digital transformation allows organizations to implement security measures consistently across their entire network.
- Companies need to be able to make better decisions. Through digital transformation, organizations can take advantage of the benefits that big data and analytics offer. By analyzing customer and business data, organizations can get deeper insights into their business processes, operations, and new opportunities that might arise. As a result, they’re not only able to innovate more but are able to make better business decisions faster.
The Impact of the COVID-19 Pandemic
Digital transformation was on the roadmap for many organizations even before the COVID-19 pandemic. However, their planning for digital transformation involved implementing the necessary technologies over years, not months.
The pandemic changed all this and accelerated the digital transformation efforts of many companies globally, in respect to both their implementation and the investments necessary to continue to be successful.
For example, according to the KPMG 2020 Global Survey, companies started investing heavily into technology during the pandemic not only to stay competitive and resilient, but also to address challenges like falling revenue and interrupted supply chains.
In fact, according to the survey, 67% of organizations said that they’ve accelerated their digital transformation strategies as a result of the pandemic. Moreover, 63% of these organizations said that they’ve increased their digital transformation budgets.
These numbers are echoed in Dell’s Digital Transformation Index 2020. In terms of it, 80% of organizations accelerated their digital transformation efforts in 2020 and 89% of organizations said that the pandemic highlighted the need for organizations to be more agile and scalable.
Digital Transformation in a Post-COVID World
Simply put, the “new normal” is digital. When the pandemic happened, lockdown regulations and shelter-in-place orders forced consumers online with the effect that more people are now using the internet and social media than ever before.
This has led to significant changes in consumer behavior which are expected to remain. As a result, it’s safe to conclude that the pandemic fundamentally changed the way people work, shop, consume content, and entertain themselves.
For businesses, the situation is no different. Through necessity, businesses had to use digital channels to reach their customers, create awareness about their brands, and sell more products. These businesses have now embraced digital and the way it allows them to run their businesses from anywhere.
Challenges in Digital Transformation
Considering the above, it’s easy to see why digital channels and technologies and, by implication, digital transformation will play a vital role in many organizations’ success for years to come. There are, however, some challenges organizations will need to overcome to fully reap the benefits that digital transformation has to offer.
Here, some of the main challenges organizations face in implementing their digital transformation efforts include:
- Effectively using data. Digital transformation allows organizations to gather far more data than they could previously. The problem is that these organizations can only enjoy the benefits of digital transformation if they use this data effectively. In other words, digital transformation will only have value if an organization can get actionable and valuable insights from its data. For many organizations, this is a significant challenge as they struggle to connect their data across the entire organization. Also, privacy regulations like the GDPR further complicate the availability of data, which directly impacts the organization’s ability to gather valuable insights.
- Creating customer engagement. Apart from the challenge mentioned above, many organizations also struggle with aligning their data and technology with human values and identity. As a result, they struggle to deliver the enhanced customer engagement that digital transformation promises to offer.
- Lack of expertise. Successful digital transformation requires vast amounts of technical skills and expertise. This is something many organizations simply don’t have and is, therefore, a significant stumbling block in their way. Fortunately, there is a solution. Organizations can partner with the right strategic partners with the knowledge and expertise that will allow them to execute their digital transformation efforts more successfully.
- Resistance to change. Resistance to change is often a substantial challenge to overcome when it comes to digital transformation efforts. As will be shown in more detail later, the solution is to get buy-in from across the entire organization early on in the process and involve management, employees, and other stakeholders in the process.
- Organizational capabilities. Organizations often think that digital transformation is that magic bullet that will transform their businesses. However, this is simply not the case. The organization also needs the right culture, capabilities, and skills to make digital transformation a success. At the core of this lies a culture and vision of customer-centricity that allows organizations to build, understand, and maintain the human connection between them and their customers.
- Investment. Simply put, for any digital transformation strategy to be successful, organizations need to make substantial investments into technology, resources, and the time it takes to implement the strategy. Unfortunately, many organizations don’t have the ability or capacity to make these investments.
- Security. Legacy applications are more prone to security vulnerabilities due to outdated APIs, frameworks, and libraries. This makes digital transformation even more urgent, and emphasizes the need to fundamentally change the way an organization does business. This means significant changes in its processes, workflows, and operations. It also means that organizations should transform their security processes to deal with the increased amounts of data they’ll need to store and manage. In fact, security is one of the crucial factors that can influence how successful a digital transformation effort can be.
11 Steps for Developing a Successful Digital Transformation Strategy
Digital transformation is not only about adopting new technologies or upgrading your current systems. As mentioned earlier, it fundamentally changes the way you do business, serve your customers, and generate revenue.
Considering the challenges that companies face when implementing their digital transformation efforts, it’s vital to have a strategy that charts your course and ensures that your efforts are successful. At its core, this strategy will show you:
- Where your organization currently is.
- Where you want your organization to be.
- How you’re going to get there.
With that in mind, let’s look at this step-by-step strategy in more detail.
Step 1: Get Full Buy-In Across Your Organization
The first step in developing a successful digital transformation strategy is getting buy-in from across the entire organization. And when we say buy-in, we mean everyone from management to the employees should be aligned in the pursuit of digital transformation. This is simply because digital transformation involves a massive culture shift in your organization.
Despite needing everyone to be aligned, successful buy-in starts at the top. Thus, your organization’s leadership should share the vision for digital transformation with the rest of the organization. They should ensure that everyone understands the reasons for the digital transformation initiative and be receptive to these changes.
Keep in mind that employees typically have certain ways of doing things and specific tools they use. So, the shift to new technologies and workflows has the ability to cause some disruption.
Getting employees on board means that they’ll be more willing to adopt these new workflows and tools. If not, adoption could be a struggle and employees will, sooner rather than later, fall back into their old habits. Moreover, if they understand the benefits of digital transformation, the effort will more than likely be successful.
Another reason why buy-in from leadership is so important is that they’re the ones that need to decide how much the organization will spend on its digital transformation efforts.
Remember, these initiatives will likely compete with other projects and initiatives across the organization, so ensuring buy-in from leadership will help prioritize digital transformation when it comes to budgeting.
Step 2: Get Executive Sponsorship
Once you have buy-in from across the organization, the next step would be to get executive sponsorship in the form of project funding. So, here it will be necessary to determine the budget for your modernization initiative. This is one of the key components of any successful digital transformation project.
The problem with determining a budget is that budgeting for digital transformation is completely different compared to traditional IT budgeting, especially for those organizations that use monolithic or legacy applications extensively.
The first main difference is that traditional IT budgeting involves amounts that stay relatively consistent. Sure, there might be some variances from year to year but there are, generally, fewer unknowns and more constants. Moreover, with traditional IT budgeting, planning for upgrades and end-of-life replacements happen years in advance.
In contrast, digital transformation aims to introduce new systems, technologies, and workflows, so it involves a fair amount of uncertainty that you’ll need to take into account when determining the budget. There is also the opportunity cost of doing nothing that must be considered. Digital transformation is an ongoing process to change an organization’s technology landscape, which has an impact across the entire organization and its budget.
For this reason, it’s also crucial to demonstrate the return on investment (ROI) of the digital transformation initiative. In other words, it’s important to demonstrate the value the digital transformation project will deliver to the organization. This will go a long way in garnering support from leadership and earning additional funding for the project.
Keep in mind, though, the budget is obviously subject to what the organization can afford. This means that you’ll use the budget to structure the strategy, allocate resources, and identify priorities for the project.
Step 3: Map Current Processes and In-House Expertise
Once you’ve secured buy-in from across the organization (especially from leadership), and you’ve determined your budget for the digital transformation project, it’s time to look at the organization’s current processes. You’ll need to do this as it will show you where you are and what you need to do to get where you want to be.
Yet, despite its importance, many organizations make the mistake of thinking that digital transformation is simply shifting their current technologies to newer platforms or infrastructure like the cloud. In actual fact, it goes far deeper into the application domain level.
What this actually means is that you’ll need to consider the organization’s employees’ current workflows and processes and develop ways in which you can improve them and make your employees more efficient and productive. This process involves:
- Mapping out the organization’s organizational structure, its distinct business operations, processes, and employees’ roles.
- Identifying challenges in these processes and workflows that need to be solved.
- Evaluating in-house abilities and expertise with modernization in mind, and assessing the organization’s culture.
In this way, you’ll be able to identify inefficiencies and bottlenecks in the process and workflows which, in turn, helps you make better decisions to shape your organization’s digital transformation strategy.
Step 4: Consider Current Market Conditions
The next step is to assess and consider market conditions that matter to your users. In the current climate, this will ultimately lead to the conclusion that your digital transformation strategy should be customer-centric. With this in mind, you’ll need to answer questions like:
- How can you provide more personalized experiences to the organization’s customers?
- How can you improve customer service resolution time?
- How can the organization achieve better conversion rates and increase customer satisfaction?
This will allow you to identify gaps and opportunities for improvement, as well as any inefficiencies that exist preventing your company from serving customers better. In turn, this analysis will show you want processes you’ll need to implement and what resources you’ll need.
Step 5: Identify the Right Stakeholders and Their Needs
It’s crucial that you involve all the right stakeholders from early on in the process. This should include all the employees that will need to work with the new systems and technologies as they are most likely to be affected by the implementation of these new tools and workflows. Doing this serves two main purposes.
First, when you involve the right stakeholders in the process, you’ll be able to determine their pain points and the challenges they face. You’ll also be able to get their input into possible solutions that could make them more efficient and productive. In turn, this helps you gather the necessary requirements for your strategy and to evaluate all the possible options.
The second purpose of involving the right stakeholders is that they’ll feel like part of the solution and that their input is valued. This makes it more likely that they’ll embrace the digital transformation initiative, which improves the chances of new systems and technologies being adopted successfully.
Step 6: Set Clear Goals and Objectives
Once you’ve got all the requirements together, you know your budget, and you’re aware of the problems and inefficiencies you’re trying to solve, you’ll be in a perfect position to set clear goals and objectives for the project. Simply put, during this stage of the process, you’ll define what you want to achieve with digital transformation.
One of the best ways to do this is to decide on specific key performance indicators (KPIs) relating to all the operations and processes of the organization. Doing this serves several purposes.
Firstly, by establishing these KPIs, you’ll effectively know where your organization is currently. This, in turn, gives you a benchmark that you’ll want to improve on.
Secondly, by defining these KPIs, you’ll be able to determine where you want your organization to be. And when you know where you want to be, you can use those KPIs as the targets you want to reach.
Finally, these KPIs give you a perfect way to track your organization’s progress towards its goals. Since digital transformation is a process of continuous modernization, you’ll be able to track these KPIs constantly to see how the changes you make to your processes or operations impact your progress.
Step 7: Develop a Digital Transformation Roadmap
Once you’ve outlined the goals you want to achieve and the opportunities you want to take advantage of, you’ll be able to create a digital transformation roadmap that will determine exactly how your organization will get from where it is to where you want it to be.
As such, you’ll need to map out exactly what steps you’ll take during the digital transformation process. This, for instance, includes how your infrastructure will change and should also set out your key priorities and the milestones you want to reach along the way.
The roadmap should also provide detailed information on the relevant role players that will be involved in the process, and the possible technology solutions you would need.
The key benefit of this road map is that you can use it as a guide to show you exactly what needs to be done, by when, and by who. However, it’s important that you keep in mind that your roadmap should be adaptable and you should be able to make changes to it as customer expectations evolve and the business climate changes.
Step 8: Get the Right Team Together
Based on your digital transformation roadmap, the next step is to determine who the execution team will be. In other words, you’ll need to determine the specific roles for who will be responsible for the implementation of the digital transformation strategy.
Here, it’s important to keep in mind that who your execution team is depends on your specific needs and requirements and that there’s no one-size-fits-all approach in finding the right people to be on the team.
For example, some organizations rely on their chief information officer (CIO), chief technical officer (CTO), or their chief operating officer (COO) to lead the digital transformation initiative. In contrast, other organizations have specific digital transformation roles that oversee the process and the implementation of the strategy.
Some other roles that could play a vital part in the implementation of the strategy include:
- Project managers that ensure that the project is properly resourced and completed on time and on budget.
- Security and compliance specialists that are able to identify and resolve any potential security issues.
- Technologists who can advise you on the best applications, services, platforms, and products for your implementation.
- Implementation leads that focus on the new technology stack your organization will use and change management.
- Financial stakeholders that can oversee the project’s financial status and ensure that it stays within budget.
No matter what roles you include on your team, you’ll more than likely need help and resources because your team won’t have the necessary skills or capacity to complete everything related to the strategy.
This is why it’s crucial that you identify strategic partners that will help you make your digital transformation initiative a success. These can include everything from consultancies, system integrators, or application modernization experts.
Step 9: Invest in the Right Technologies
Once you have established your requirements, mapped out the journey, and chosen your strategic partners, you’ll need to choose the right technologies that will help you make your digital transformation successful. To do this, you’ll consider what services, platforms, and tools are available on the market that could meet your specific requirements.
What might be useful here is to compare all the solutions and vendors that could meet your needs. In this way, you’ll be able to see what services they offer and how these services might fit into your organization’s workflows and processes. Based on this, you can then compile a shortlist of vendors based on how well they’re able to meet your needs and comply with your requirements.
Finally, you should use the demos these vendors offer to your advantage. They can show you how the vendor’s solution meets your needs and whether it will be an appropriate solution for your organization. Once you’ve completed this process, you’ll be well-positioned to make the right decisions regarding the technology you’ll use to form the foundation of your digital transformation strategy.
Step 10: Define Implementation Goals and Expectations
As the penultimate step of your digital transformation strategy, you’ll need to plan the implementation of all the technologies, systems, and platforms. This is also where an implementation partner can be invaluable.
Simply put, they’re the experts in the implementation of new systems and technologies, so they’ll be in the best position to advise you on the right courses of action and ensure you make your implementation a success.
In addition to this, there are also some other aspects you’ll need to take into account when it comes to the implementation of your strategy. The first is to take a phased implementation approach. In regards to digital transformation, the saying, “Rome wasn’t built in a day” is especially true.
When taking a phased implementation approach, you’ll be able to test the individual parts of your implementation as they’re implemented. In turn, this makes it easier to identify any issues and solve them before they cause bigger problems and disruptions.
The second thing you should consider is formulating and implementing a change management plan. This plan helps your organization make changes to its systems, processes, and operations with minimal disruptions. The plan also ensures that your organization’s employees actively participate in the process of transformation which, in turn, reduces any resistance to change.
Finally, it’s vital that you create a training plan for your employees. This will help you make your digital transformation a success by enabling and empowering employees to use the new technology and systems.
Moreover, it will also give you valuable insights into your employees’ usage patterns, which will allow you to measure the adoption of your strategy. This makes the training plan a significant part of your overall digital transformation strategy.
Step 11: Measure Your Digital Transformation Strategy
The final part of your strategy is that you consistently measure the implementation of it. Simply put, if you don’t measure something, you won’t know how or where to improve it.
To do this, you’ll use the key performance indicators you determined earlier to track your progress towards the organization’s goals and objectives. This data can give you valuable insights into how effective your digital transformation strategy is and its impact on your organization’s operations and processes. These insights will also allow you to implement the necessary measures to improve your strategy where necessary.
Also, keep in mind that digital transformation is a continuous process–often called Continuous Modernization–and that you’ll need to adapt your strategy to changing market conditions and evolving customer needs. This ensures that your organization stays competitive, relevant, and able to serve its customers better and generate more revenue.
The Benefits of Implementing a Successful Digital Transformation Strategy
An important part of any strategy is to keep your eyes on the prize. In other words, it might be helpful to focus on what you’ll be able to achieve once you’ve implemented your strategy successfully. And here, digital transformation offers several benefits, including:
- Stellar customer experiences. With more data available about your customers, you’ll have greater insights into what they want and expect. As such, you’ll be able to tailor your offering to their expectations which means you’ll deliver better customer experiences.
- More efficiency. Digital transformation will allow you to eliminate inefficiencies in your business processes and operations. Moreover, you’ll also be able to automate many manual, mundane tasks. This contributes to making your organization more efficient.
- Increased productivity. When automating many of the manual tasks as mentioned above and allowing your employees to communicate and collaborate better, you’ll make them more productive.
- Better marketing. As mentioned earlier, digital transformation will allow you to know what your customers want and need. As a result, you’ll be able to adjust your marketing campaigns based on your customers’ preferences. Ultimately, this will allow you to market more effectively and you’ll achieve a higher return on investment on your marketing spend.
- More agility. Simply put, through digital transformation, your organization will be more agile. And when you’re more agile, you’ll be able to respond better and faster to changing market conditions and evolving customer needs.
- Competitive advantage. With all the improvements you’ll be able to make as a result of digital transformation, you’ll have a competitive advantage.
- More revenue. Ultimately, with a competitive advantage, more efficiency, increased productivity, and the ability to attract more customers, you’ll be able to generate more revenue.
The Bottom Line
Digital transformation has the ability to make your organization more efficient and your employees more productive, which in turn will allow you to generate more revenue. This is, of course, dependent on having the right digital transformation strategy.
At the foundation of this strategy lies application modernization. And this is where vFunction comes in. It’s the first and only platform for developers and architects that intelligently and automatically transforms complex monolithic Java applications into microservices, restoring engineering velocity and optimizing the benefits of the cloud.
With vFunction, leading companies around the world are accelerating their journey to cloud-native architecture and gaining a competitive edge in their industries. To learn more about vFunction and how it can help your organization, request a demo today.