Exactly Why Is Digital Transformation Necessary?

why is digital transformation necessary

Why Is Digital Transformation Necessary?

Even before this pandemic turned the business world on its head, you were already being reminded every day that you had to “adapt or die,” that transformation is “key to survival,” that your company must “evolve or go extinct.”

What did all those warnings really mean, though?

If things were going along just fine and your customers were satisfied, why the big rush?

It’s useful to examine the reasons in a bit more detail, in order to connect them to today’s even more pressing need to transform.

Reason #1: Change

One simple reason is that change is inevitable, and was already well underway before the crisis started.

Which company is going to have better insight into what customers want – the one still doing focus groups, or the one leveraging data from transactions, social media, and IoT sensors?

Which company is going to be more efficient and profitable – the one using spreadsheets for supply chain management, or the one using predictive inventory analytics, real-time logistics performance metrics, and material-sourcing artificial intelligence?

why is digital transformation necessary

Technology has made a whole lot of things obsolete or near-obsolete in just the last 10 years – paper maps, film cameras, landlines, classified ads, DVD players – the list goes on.

It’s done the same to almost all standard business processes as well.

Technology is creating hundreds of new business capabilities, leaving last-century business design unprofitable and unsustainable.

Before COVID-19, a company that didn’t change might have been ok for five or ten years, just like paper maps hung in there as long as they could after GPS came on the scene.

But with the arrival of the pandemic – and the way our lives have changed as a result – the industrial era is virtually over, along with industrial-era ways of thinking and doing business.

Reason #2: Customers Demand It

Again, even before COVID-19, customer expectations were changing drastically and rapidly.

And not simply within your company, or even your industry.

Customer expectations are based not just on their interactions with you, but on all of their digital experiences.

As Nigel Fenwick, VP and Principal Analyst at Forrester put it:

“When I get next-day delivery at home via Amazon, it resets my expectations for delivery from anyone. When my hotel allows me to select my room from a floor plan on my phone and check in before I arrive, my expectations on any self-service have been reset. Each experience resets expectations ever so slightly on what your company should be able to deliver.”

why is digital transformation necessary

“So what happens if your business delivers exactly the same experience today as it did last year – or even last month?” Fenwick asks. “Over time, the perceived value of your product/brand diminishes. And it continues to get lower and lower until at some point, the customer decides to switch to an alternative supplier.”

This is true for all businesses, whether B2C or B2B, in all industries.

In fact, 64% of consumers and 73% of business buyers say their standards for good experiences are higher than ever, according to Salesforce.

Thus, before the pandemic, we already had a view of customers as more connected and more empowered, meaning that they were also more in control of their own customer experiences.

The necessity of moving much of our lives online has exponentially multiplied this control, as companies have quickly responded to customer needs.

This includes moving sales to ecommerce platforms, increasing app features for order and delivery of a range of goods, increasing social media presence and communication, and offering new products for quarantine life.

why is digital transformation necessary

During the pandemic and after, the vast majority of customers are going to choose the experience that best lines up with their ever-evolving digital expectations, all else being equal.

So, “adapt or die,” isn’t a scare tactic, but a simple reality for today’s businesses – now more than ever.

Reason #3: We’re Not Going Back

Many people will continue to work remotely. Even companies who were initially reluctant now see the cost savings and productivity increases that occur with the right systems and processes in place, as well as the talent benefits of being able to hire from around the world. And of course, employees will demand it.

Consumers recently forced into ecommerce now understand its convenience and benefits, further accelerating the growth of online shopping and on-demand delivery.

Telehealth, tele-education – really, tele-anything – will go on as well, due to cost savings and convenience.

Data analytics are even more important in understanding your changing customers and pointing the right way forward.

Data-enabled services will proliferate into almost all aspects of our lives.

And the cloud will continue to be indispensable.

All of these changes were already underway, and would have become part of our day-to-day regardless.

It’s just that the pandemic is dramatically accelerating them all, making them part of our standard reality now, rather than in 10 or 15 years.

why is digital transformation necessary

In fact, this is just the tip of the iceberg. There are industry-specific changes occurring as well.

These include automation in manufacturing, real-time supply chain awareness, and AI-focused digitization of the insurance and mortgage sectors.

The new normal IS digital, and businesses must be digital as well.

We spoke with Michael Gale (CEO of Inc.Digital, Forbes contributor, and WSJ bestselling author of The Digital Helix), who describes this ideal scenario:

“The Nirvana is what I call ‘digital platforming,’ where everything you do has an interconnectedness. This lets you respond, react, and deliver at speeds exponentially better than ever before.

So if you have a problem with a product, you can instantly relay that problem straight back to product design, marketing, sales, and even supply chain.

Take Zara, for example, the world’s most successful clothing retailer. They get feedback on the shop floor from customers that instantly goes to other departments.

So they may say, ‘We don’t have the right color or size in the Barcelona store,’ and the supply chain is instantly alerted.

Or, ‘Customers say this item is too small around the arms,’ feedback that instantly gets delivered to product design.”

Gale goes on to say, “It’s this sort of adaptability and transformation at the core that will define the new business normal.”

Conclusion

Undertaking significant change is often stressful, especially when so much rides on its success.

But the silver lining to COVID, if there is one, is that businesses can take the opportunity to catapult themselves into the new normal, as well as set themselves up to withstand future shocks.

Do you believe digital solutions are necessary for your company, but aren’t sure about the smartest and most cost-effective ways to get started?

Learn about our Innovation Lifeguard program, an award-winning approach to digital transformation with low risk and high ROI.