Digital Transformation 101: How to digitally transform your business

Digital transformation is becoming increasingly unavoidable — and by 2024, it’s expected to reach a market valuation of $2.51 trillion.

Yet for all that money spent, McKinsey research shows the average company only makes a third of its expected revenue benefits from digitalization. Without a solid strategy and the right technology, digital transformation can be a great way to spend a lot of money fast — and have very little to show for it.

In this article, we’ll give you everything you need to know to successfully implement digital transformation in 2024. We’ll break down the basics of what digital transformation really is (when you get away from the hype). And we’ll walk you through a simple four-step process for transforming your business with digital tools.

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What is digital transformation?

Digital transformation is the process of using digital technologies to improve your business — whether by improving your customer or employee experience, making your operations more efficient, or offering new digital products and services.

Digital transformation has changed a bit over recent years. It was previously a term to describe a pretty comprehensive business change — going from paper-based to online banking, for instance.

But these days, the majority of respondents in a survey by Baker McKenzie said that “digital transformation is a tool for improving process efficiency rather than fundamental business change.”

In other words, it’s about using digital tools to make your business better in small, incremental stages — and unlike other types of business transformation which have a beginning and an end, digital transformation is an ongoing, long-term process of using innovation to give you a competitive edge.

Researchers at MIT also found that digital transformation has a new focus in 2023: employee experience. Today’s digitalization projects prioritize how easy it is for employees to use technology to get their work done — often by offering platforms that can handle multiple aspects of their workflow in the same place, or by choosing tools that integrate well with each other.

Examples of digital transformation

Digital transformation can sound like the kind of project only undertaken by massive global enterprises — with a team of consultants, an army of IT pros, and a vast tech budget.

But actually, transforming your company with digital tools can be simple:

• Switching from each employee managing their tasks individually, to using a shared digital project management tool so you can collaborate on projects more easily
• Using an online meeting app that creates AI-generated summaries and next actions after every team meeting, so you never forget a task
• Managing your customer communications with a centralized sales and marketing platform, so you can keep track of your customer relationships and collaborate with your teammates to close more deals

Of course, if you’re curious about more comprehensive digitalization projects, many major brands have undertaken massive transformations in the past few years, taking advantage of new technology:

1. Disney overhauled the customer experience at its parks and resorts with its MagicBand wearable digital wristbands, that let guests open their hotel rooms, pay for meals, and reserve tickets.

2. Domino’s Pizza has become the “poster child for digital transformation”, with digital ordering via mobile app, voice-activated ordering, and a pizza tracker.

3. CVS Health has shifted from a brick-and-mortar pharmacy chain to a digital healthcare company, with telehealth services, mobile prescriptions, and a paid digital wellness subscription model.

While not every business needs to invest in IoT wearable technology or even a mobile app, these three transformations share commonalities that every business can learn from. In particular, Disney, Domino’s, and CVS all focused on using technology to create a better customer experience and secure a competitive advantage.

The four types of digital transformation

There are four different ways that you can transform your business with digital technology:

1. Process transformation

In this method of transformation, you’ll be using tech to improve your processes and make your business more efficient or cost-effective. This might look like:

• Automating a workflow that you do every day
• Reducing the number of steps that it takes to complete a specific task
• Cutting down on the amount of manual data entry that you have to do

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2. Business model transformation

This is a more dramatic overhaul of your business, where you use technology to completely redesign a product or service. For example:

• A clothes store creating an online e-commerce store
• A restaurant building a mobile app so people can order food from their phone
• A gym could offer a digital platform where people can stream workouts from their homes

3. Domain transformation

A domain transformation in this context means that you’re digitalizing to take on a new market or industry. For example, a local specialist bookstore could open up an online digital community to connect with prospective customers in other geographies.

4. Cultural or organizational transformation

In terms of digitalization, a cultural transformation is likely to mean using digital tools to improve elements of how you work together. For instance, shifting from an in-person office to remote working is a major cultural transformation, and will require you to implement new digital tools and ways of working.

Why is digital transformation important?

If you hope to stay competitive and relevant in an increasingly digital and interconnected world, you’ll need to embrace the mentality of ongoing digital transformation. Digital technologies can help your company streamline your operations, offer a better experience to your customers, and adapt to changing market conditions.

Here are just a few of the many benefits of digital transformation:

More profits

The most important driver for digital transformation — it can help you make more money. For instance, a 2022 study by McKinsey found that banks that embraced digital technology dramatically outperformed their competitors across several key financial metrics.

Better customer experience

Software can make it easier to delight your customers. In the same McKinsey banking study, the difference in profitability came down to more contented customers. The banks used personalization to convert more leads. They then kept their new customers happy with faster service by using automations and giving them self-service tools to save them from needing to go into the branch in person.

Improved efficiency and productivity

Using digital tools can make your company run more efficiently. An example: a Deloitte study of call centers found that digital leaders were able to decrease their staffing by 11%, while digital laggards had to increase their staff by 20%.

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What is a digital transformation strategy?

A digital transformation strategy is a plan that outlines how your company is going to use digital technology to level up your operations, processes, or customer relationships.

A well-designed digital transformation strategy should include:

• SMART goals for your transformation project
• Key milestones and deliverables
• Resource allocation
• A project roadmap
• A project team with defined roles and responsibilities

Popular digital transformation frameworks

There are many approaches to digital transformation. Here are three of the most popular options:

• McKinsey’s 7S Framework — Developed by management consulting firm McKinsey, this approach to digital transformation breaks down the process into seven key elements: strategy, structure, systems, shared values, skills, style, and staff.
• Four Pillars of Digital Transformation — Developed by professors at leading business school INSEAD, the four pillars framework proposes that digital transformation can address IT uplift, digitizing operations, digital marketing, and new ventures. Where you start will depend on how digitally mature your organization is and what resources you have available.
• The 5 Stages of Digital Transformation —  This model was developed by digital futurist Brian Solis. It breaks down the digital transformation process into five stages, from adopting a customer-unified mindset to embracing an employee-centered workplace.

The six key elements of a successful digital transformation

Six areas of your business need to be taken into consideration for any digital transformation — whether you’re planning a major, sweeping restructure or a more incremental process overhaul. They are:

1. Choosing the right digital technologies

Finding the right tools for your organization is key to a successful digitalization project. Look for tools that work with how you’re already working, rather than those that mean that you’ll need to start from scratch.

If you’re a small business, you may not need all the bells and whistles of the latest data analytics platform or fancy new AI tool but do prioritize modern software that takes advantage of evolutions in technology, like machine learning and automation, to make your lives easier.

Most importantly, any new digital technology should be easy to use, quick to learn, and easy to integrate with other tools you’re already using.

2. Overhauling your operations

When you’re undergoing any kind of digitalization initiative, consider how you can use technology to make your day-to-day work more productive.

For instance, if you switch to monday work management, it’s much easier to spot bottlenecks, reduce the number of steps it takes to complete tasks, and track your progress on projects at a single glance.

3. Consolidating your data

Your technology can only take you so far if your data is all over the place. When you’re undergoing digital transformation, take the time to make sure that your data is stored centrally and securely, and is easily accessible.

For instance, if your sales reps are all working from their own spreadsheets, now’s the time to unify them in a shared platform so you can get the whole picture of what’s going on with your leads and opportunities.

4. Improving the customer experience

Digital transformations can make your customer experience far better — or far worse! When you’re considering adding a new tool, first start by analyzing what impact it will have on your customers. Will it make it easier for them to interact with your team, or to purchase your products? Or will it add additional complexity to the customer journey?

5. Managing cultural change

No digital transformation initiative will succeed without leadership buy-in and cultural change. When you’re designing your digital transformation strategy, you’ll need to build in time for change management — regular and ongoing communication with stakeholders, opportunities for employee feedback, and staff training in new tools and processes.

6. Developing a business roadmap

Of course, no digitalization project will be successful without a solid project plan. We’ve got a deep-dive guide on project planning for you here, but in summary, you’ll need to kick off your digital transformation project with a budget, a schedule, a task breakdown, an overview of available people and other resources, and a list of milestones and deliverables.