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Digital Transformation: Definition and Challenges

Definition, origins and challenges of digital transformation (also known as digitalization)
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Over the last two decades, the way companies operate has been completely flipped upside down—mainly due to the integration of multiple digital tools and associated processes. However, this digital transformation is not linear. It has gone through several phases. According to a study by the publisher Pegasystems, Inc., the COVID-19 pandemic has led 74% of business leaders to accelerate their digital transformation plan. This article explains why.

To fully understand the stakes of the digital transformation (also called digitalization) of companies, let’s first come back to some elements of definition.

1) How to define digital transformation?

Origins 

Contrary to what some people might think, the concept of digital transformation isn’t new. The origins of the digital transformation go back three decades:

  • In the 90s, the progressive omnipresence of personal computers and growing access to the Internet gave rise to the digital transformation within companies.
  • The 2000s marked an acceleration of this process with the emergence of new tools such as smartphones and mobile Internet, facilitating communication and information sharing.
  • Following the global recession and from 2010 onward, digital transformation has become an obvious performance lever and means of ensuring sustainability. Nearly all organizations (companies, institutions, and associations) are becoming aware of the importance of this challenge. 
  • From 2015 onwards, the SaaS software boom has multiplied and will continue to multiply the integration of technology in virtually all areas of business operations. The explosion of collaborative tools enable teamwork (team communication, project management, co-editing of documents, electronic signatures, etc.).

Definition

Let’s start by putting an end to a preconceived idea: Digital transformation is not limited to the integration of technologies into organizations. Incorporating new technologies into your organization is simply a modernization process. Digital transformation is much more than mere modernization.

In short, modernizing is not transforming.

Digital transformation is a global process aiming to integrate new skills, help processes evolve, and often, modify a company’s entire business model. It’s an in-depth reinvention of the company, so that it corresponds to the new aspirations of its employees, customers and shareholders. We can also talk about a real rupture within the organization, but one that’s becoming necessary since a BpiFrance/LeLab study in September 2017 stated that “one company in five will disappear if it doesn’t respond to the challenges of the digital world within three years.”

Stakeholders

In a process of digital transformation, we typically find several stakeholders who’ll either be actors (employees and companies), or inspirers (customers)—and sometimes both at the same time. All of these stakeholders will inspire and embody change.

Transformation can be instilled internally by employees who want to put an end to sometimes complex and unnecessarily slow processes that are not in line with their expectations but also with modern working methods. Employees must play an important role in the digital transformation of the company. They must be involved in the transformation but also guided in this change.

In an open market context and with competition intensifying in all areas, customers find themselves choosing from a multitude of players offering a wide range of products and services. With customers increasingly looking for innovative products and ever more personalized services, there is a need for companies to adapt. 

Concrete example of a customer-influenced digital transformation

In 2007, Netflix chose to change its business model from remote DVD rental exclusively to a video-on-demand platform. This was a crucial turning point for Netflix, which helped it rise from a stagnant role and become the world’s leading video-on-demand service, with 200 million subscribers worldwide (including 7 million in France). 

Also read: Merete Buljo’s “To Succeed at Digital Transmutation, Be Ready to Question from the Foundation Up.”

2) The main challenges of the digital transformation 

As we began explaining earlier, digital transformation addresses several key issues, among the most decisive of which are a company’s ability to compete within its market, sustainability of its activities, and job preservation.

Here is a global overview of the main challenges of the digital transformation:

  • Accelerate and fluidify internal communication through the implementation of instant communication tools (chat or videoconferencing). Numerous studies have shown that instant messaging is processed faster than email and helps speed up decision-making (whether internally or with partners or customers). 
  • Improve the employee experience by adopting innovative solutions such as an ESN (enterprise social network). These tools make exchanges between employees less formal and strengthen the sense of belonging. 
  • Intensify the customer relationship by chatting live with them or by inviting them on your collaborative platform to work on their project. Tools such as chat feeds and collaborative platforms allow you to offer personalized and unique customer experiences.
  • Enhance the image of your company by using different communication channels to communicate with your customers, but also to attract new talent. Demonstrate the dynamism of the company, its capacity for innovation and adaptation.
  • Pivot towards a more profitable and sustainable business model: Such is the example of Netflix, cited above. There are many more. In France, La Redoute has completely changed its business model, making it a digital success story today, while the company was still stalling in 2013.
  • Digitize payments by choosing adapted solutions such as direct debit to avoid cash flow problems. In addition, the automated follow-up of unpaid and late payments frees up your time for other activities. It is estimated that late digitalization of payments causes French SMEs to lose a potential 1.5 million customers.
  • Simplify human resources with software that allow you to manage tasks like pay stubs and vacation time, freeing up employee time so they can concentrate on tasks with higher added value like recruitment and talent management.
  • Modernize legal activities by opting for electronic signatures, thus putting an end to time-consuming and logistically complex round trips for signing contracts. Gain speed, fluidity, and efficiency in your exchanges with your clients.

This list is obviously not exhaustive. The implementation of new tools and processes can improve the overall functioning of your organization and its performance. Consult the internet and the media for examples of successful digital transformations for inspiration.


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Interested in learning about Covid’s impact on digital transformation? Check out our summary of Stormshield’s latest study, “Corporate digital transformation: putting maturity to the test?”

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In this summary of Stormshield’s 2020 barometer, you will discover how the Covid-19 crisis has accelerated the digital transformation of companies, and what solutions have been deployed by the IT department to secure these digital projects.


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Authors: David Everaert, Benoît Renoul


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