What is digital transformation?
Digital transformation is a topic that has been a hot buzzword in recent years, but this was also the case in the late 1990s and also in the mid-2000s. Over 30 years ago, we initiated computerized procedures, and companies have already integrated many automated operations.
Then, the Internet digitally connected businesses to their customers via websites. Online systems later evolved to help with customer support.
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As the digital aspirations of businesses expanded rapidly, technology departments quickly needed to manage the newest social and web platforms. This encouraged companies to use digital information for unique organizational events and experiences. Companies now recognize that they work in networks linked to consumers, vendors, and other participants.
Businesses also began to link all their functions and devices into these networks to leverage the immense volume of data more efficiently. With this new capacity for collaboration, companies relied on digital platforms to connect all network participants instead of using the conventional business model through layered systems. Organizations have started trying different digital approaches, hoping to use data better, develop more flexibility, and remain competitive.
5 Examples of Digital Transformation
Very little has been debated more in business circles than the topic of digital transformation in the last five years. Even searches for “digital transformation courses” have increased by 5000%. Understandably, company executives are trying to improve their skills and prepare their vast staff to attain changing business goals. Here are 5 examples of how companies think about transforming their businesses with digital transformation as the focus.
Automation and Digital Transformation
Automation is an essential part of digital transformation and has the potential to revolutionize a business’s operations and streamline processes. Automating tasks like customer support, finance functions like invoicing and payroll, or even marketing activities can create more efficient workflows with improved accuracy. AI-driven automation technology can automate process steps and replace manual labor, thus freeing up employees so they can focus on more value-added work. Automation also helps reduce costs by reducing the need for human resources in certain areas.
AI: Artificial Intelligence (AI) and Digital Transformation
AI is the heart of digital transformation and has become increasingly important in recent years. AI is being used to automate complex activities like customer service, marketing, and sales, as well as financial operations such as invoicing and payroll. AI can quickly analyze large amounts of data and identify patterns, which helps companies make more informed decisions. For example, automated chatbots can give customers instant answers to their queries or help them make purchases.
Business Intelligence and Digital Transformation
Business intelligence is a critical element of digital transformation and helps companies gain insights from large volumes of data. It uses data analytics technologies such as machine learning, predictive analytics, and natural language processing to generate meaningful insights. These insights can guide marketing, product development, customer segmentation, and more decisions. Companies can also use business intelligence to identify growth opportunities or improvement areas and make informed business decisions.
Digital Transformation and Cloud Computing
Cloud computing is another critical technology that helps companies leverage digital transformation and develop their operations. It provides secure access to data from anywhere with an internet connection and increases the scalability of applications. Organizations can store, process, and analyze large datasets in the cloud. Additionally, it allows for improved collaboration between departments and remote teams, enabling them to work together efficiently in real-time.
Cybersecurity and Digital transformation
Cybersecurity is one of the oft-overlooked pillars of digital transformation. They truly go hand-in-hand. Companies must be able to protect their data as they adopt new technologies and processes. AI-driven cybersecurity solutions can help protect an organization’s systems from malicious attacks and threats. AI technology also predicts potential cyber threats, helping businesses stay one step ahead of hackers. Additionally, AI can detect security breaches or data leaks in real-time.
What drives digital transformation?
In 2013, the business world started to define the meaning of digital transformation. Opinion pieces often claimed it was a “passing phenomenon” but influenced business practices and networks. It was viewed as a response to changing times.
Still, many companies announced they were embarking on various digital transformation projects. They were organized by taking smaller but more actionable steps, affecting bigger company changes.
A practical digital transformation project involves working together in a collaborative community rather than as a standalone pioneer of deploying advancing technologies.
Gartner predicts that our world will be further driven by digital technology. In 2021, Gartner expected the physical, financial, and healthcare worlds to be digitized so that at least one of seven technology empires will participate in 20% of all our activities. Mobile apps, payments, and digital environments are already part of our daily lives.
Yet, there is just one term that can encompass it all: transition. Digitization ensures we have more choices than we’ve ever had before. However, it includes new thinking and a willingness to accept innovation.
All businesses and individuals must embrace the new paradigm of rapid change to secure their place in the evolving digital world.
5 Top Examples of Companies that Underwent Digital Transformation
Companies that have transformed to meet the expectations of a digital world understand that change is a process. In some cases, it can take decades. It’s easy to lose sight of the goal when the journey takes years. However, companies with successful digital transformations have a plan and digital advocates that keep the process moving forward.
The following five companies began digital transformation long before it was guaranteed to provide positive outcomes. Yet, the technology investment enabled them to pivot quickly when the business landscape changed overnight.
Pfizer has been working on its digital transformation for more than ten years. When the company started its journey, its 42 manufacturing sites were disconnected, and data sharing was impossible. The sites didn’t even use the same legacy systems. Today, Pfizer has replaced those systems with a unified enterprise system.
Deploying automation technologies enabled Pfizer to transform its manufacturing operations into a seamless data-driven engine. The system delivers insights into Pfizer’s supply chain to improve operations and reliability. A Pfizer-developed technology provides visual management and action-tracking capabilities across its sites. The solution facilitates collaboration through augmented reality technologies and mobile phones.
Pfizer’s digital transformation enables the manufacture of three million additional doses of its COVID-19 vaccine than initially planned. The company’s next digital project is building a strong cybersecurity infrastructure across all manufacturing sites. The goal is to allow insights into shop floor data from remote locations while protecting digital assets.
In 2004, Lego was close to declaring bankruptcy. It needed to transform if it was to survive. In 2005, the company digitized its supply chain processes to provide more precise insights into production delays and manufacturing costs. In 2008, Lego moved its human resources applications to a centralized, enterprise-wide system. In 2009, they moved the shop floor to a digitized system that gave them better insight into factors impacting productivity. By 2011, they had implemented an enterprise-level product lifecycle management solution.
In 2016, Lego’s management team felt that the company had not completed its transformation. It had built an enterprise infrastructure to support digital solutions, but the company had yet to transform into a digital-first organization. One of its first steps was to streamline decision-making processes by eliminating silos and reducing the number of oversight boards. The executives then looked at IT.
They wanted to identify technologies that could facilitate collaboration and improve engagement. The company also looked at technology as a way to deliver digitized products to complement their traditional Lego blocks. As part of that effort, they created a customer portal where customers could suggest product ideas. Minecraft is one of the customer-suggested ideas that has been highly successful.
Like Pfizer and Lego, Home Depot was moving towards digital transformation for years. It built a cloud-based infrastructure to support an increasing volume of online sales. The flexibility allowed the company to address recent logistical challenges and realign warehouses to support online sales. The quick pivot was a result of its transformational journey.
In 2016, Home Depot recognized that the original business model did not address the growing “do-it-for-me” consumer. People were interested in something other than do-it-yourself projects. They wanted someone to install the products they purchased. Home Depot needed a solution allowing consumers to choose products and services online and in-store.
The company’s initiative was called OneHomeDepot. In 2018, Home Depot initiated a plan to transform the retail experience into an interconnected digital solution that worked seamlessly across all eCommerce and in-store platforms. It hired over 1,000 technology professionals to create an integrated digital experience to accomplish its goal. The investment in technology paid off. According to their 2020 annual report, Home Depot’s online digital sales grew 86% over 2019, and overall sales increased 20%.
Schneider Electric recently announced that it had created the first smart factory in the United States. The facility, located in Lexington, Kentucky, modernized a 1950s facility that led to a 90% reduction in paperwork and improved its mean time to repair by 20%.
In the 1990s, the company extended automation to improve the productivity of machining centers. Although the implementation was not fully integrated, it was a starting point for digital transformation. They moved on to automate material handling, which led to data integration for a material-flow-based process.
The facility implemented a centralized system for data sharing. The company built programs to measure the overall equipment effectiveness of its assets and use augmented reality on the factory floor. Employees can access live operational data from any machine with augmented reality capabilities. They scan a QR code with a phone or tablet to see real-time data.
Finally, the ingested data from across the enterprise can be combined with artificial intelligence to build intelligent training algorithms.
IKEA was a pioneer of the clink-and-collect delivery model. Consumers ordered in advance and picked up their purchases at the store. This change to online sales required modifications to its website to support payment processing, eCommerce front-ends, and access to inventory tools. The company had to look to digital technologies to create a seamless experience.
Another step in its transformation is the IKEA Planning Studios. This digital solution is available at IKEA micro-stores, where customers can use a 3D imaging program to try out room designs. Consumers use tablets to add items to their virtual carts. The purchases are delivered to the customer’s home. Those consumers who want to leave IKEA with purchases in hand will have to visit the traditional warehouse-sized stores.
Micro-stores open a sales channel to reach consumers in large cities where a traditional IKEA store does not exist. Placing a warehouse-sized store in cities like New York, Los Angeles, or Chicago is cost-prohibitive. Using digital technology, IKEA is expanding its market into unreachable areas because of cost.
Digital transformation: the bottom line
With digital transformation, Pfizer was able to ramp up its production of vaccines. Lego would have declared bankruptcy, and Home Depot would have experienced less than 20% growth in sales. IKEA would have kept the same sales channel, and Schneider Electric would have closed its aging Kentucky facility.
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