Digital Transformation: Definition And Essense
The fourth industrial revolution is booming. Digital transformation was born, promoting the application of digital technology in all aspects of social life and production. This process brings enormous benefits to every business. However, digital transformation is not a simple story. Proper awareness of digital transformation’s definition and essence is the challenge; it is the first door that needs to be opened to success for businesses.
89% of businesses failed
According to the 2016 Forrester survey, only 11% of the surveyed businesses had succeeded in digital transformation. Thus, up to 89% of businesses failed while transforming. 89% was a startling statistic, but not surprising. Digital transformation is not applying technology to businesses. Not misunderstanding the definition and essence, the main point of digital transformation is the main reason why many leaders lose their way and fail from the first steps in the digital era.
What is digital transformation?
Digital transformation is integrating digital technology into all areas of a business, fundamentally changing how you operate and deliver value to customers.
From the above definitions, three basic ideas can be drawn:
- Digital transformation is an overall and comprehensive transformation process.
- Digital transformation changes the way of working in all aspects of the economy, and society to adapt to the digital environment.
- The change in digital transformation is based on digital technologies.
For businesses, in the simplest way, digital transformation is the application of technology to all business activities. When effectively implemented, digital transformation will help businesses completely change how they operate, improve efficiency, enhance the customer experience, and increase profits.
The three levels of digital transformation
Digital transformation is a long-term, complex process often viewed at three levels: digitization, digitalization; and digital transformation.
About 25 years ago, most businesses kept documents and records on paper. You have to handle hard documents, papers, stamps, printers, fax machines, etc. if you want to collect or share data.
After that, the fourth industrial revolution and the appearance of computers became popular. All businesses started to convert all the documents on paper into digital computer files. This is called digitization: the process of converting information from the physical (analog) form into the digital form.
To be usable on a computer, everything must be in digital form. Therefore, digitization's essence is converting and creating the digital version of analog entities.
Digitalization is the process of applying digital information to the operational processes of organizations and businesses. It is also known by other familiar names such as “digitalization of processes," “digitalization of organizations,” or “digitalization of businesses."
The essence of this level is adaptation. Organizations or businesses always need to innovate and create their operating or business models to digitalize effectively.
Digital transformation is a system-level transformation that aims to change behavior comprehensively and on a large scale. After effective digitalization, digital business models and processes will restructure the economy. From there, society will change as people integrate digital technology into their lives.
The essence of digital transformation is creativity.
Misunderstandings about digital transformation
In the current digital age, technology is likened to the hand of King Midas. Technology brings enormous advantages to those who own and master it. Businesses of all sizes are well aware of that and have made strides in digital transformation. However, the racers who really understand this track have the best chance of succeeding in this game.
Currently, there is a lot of misunderstanding about the definition and essence of digital transformation. The most common misunderstanding is about the essence of digital transformation. When it comes to digital transformation, people often only pay attention to the "digital" and completely forget the "transformation." They think just buying and applying technology will immediately improve the business’ productivity.
This is a disastrous misunderstanding that can greatly impact a business. Digital transformation is more than simply applying technology to get things done. It is a process of using technology to create or change business processes in response to changing market conditions.
The second misunderstanding is that just applying technology will be successful. Technology is just a tool. Technology is not the key to ensuring business results. A company without a digital mindset, a culture that doesn't foster innovation, also doesn't have a single technology to save the business. To achieve that, it is required that business leaders have a long-term and consistent transformation strategy.
Another misunderstanding is about the application of technology in digital transformation. Please note that we apply technology, not simply administer it. To succeed in digital transformation, it is necessary to have a digital mindset in approaching and solving problems. The right digital transformation strategy must utilize the potential and opportunities of technology to do things faster, better, and more creatively.
Digital transformation must start and end with the customer
The 4th Industrial Revolution is putting businesses in a life-or-death race. The origin of that race begins with the needs of customers.
Customers want to pay and transfer money anywhere, anytime, without having to go to the bank. Immediately, digital banking was born. Customers are interested in health and want to check the origin of the products they buy. The food industry uses logistics and production management software. Customers want to stay updated on the news but don't have enough time to read newspapers or watch TV. Newspaper offices immediately developed podcast channels on all platforms. Thanks to that, customers could take advantage of the news while driving or doing housework.
It is easy to see that the common driving force behind all these transformations comes from customers. Businesses cannot survive without customers. Enhancing the customer experience must be the guideline for businesses' successful digital transformation. If the business is slow and does not transform in time, it will put an end to its development in the future.
Digital transformation with BHSoft
In short, digital transformation is an irreversible trend in the current era. Hopefully, this article has helped you understand the definition and essence of digital transformation and helped you avoid misunderstandings about it.
If you are struggling with business digitization, BHSoft is a reliable partner on your digital transformation journey. With many years of experience and a team of experienced experts in consulting and implementing digital transformation for multi-industry businesses, we understand the industry-specific problems you are facing and, at the same time, offer solutions that best fit your business. Proud to be Vietnam's leading digital transformation consulting company, BHSoft pioneers digitalization services and optimal digital transformation solutions consulting for multi-industry SMEs.
Contact us today to start digitalizing your business.