Definition: Digital transformation is the act of revolutionizing business processes to take advantage of digital technologies, with the goal of making them more efficient, accessible, and scalable.
Related: Agile Transformation
What is digital transformation?
Digital transformation is a universal phenomenon where businesses use digital technologies to change, improve, enhance, and replace existing business processes. Some transformations have been ongoing for decades, while others are still in nascent stages.
Digital transformations are often largely focused on improving the customer experience; leveraging digital technologies to change how customers interact with businesses and their products, and improving how businesses serve their clients. The transition from analog to digital data storage and transactions is included, as are iterative and revolutionary transformations beyond the initial transition.
To be clear, digital transformation is not just making minor incremental improvements as new technologies become available, but radically changing how things get done facilitated by new methodologies and the digital technologies making this possible.
Why is digital transformation important?
Digital transformation represents a once-in-a-lifetime opportunity for businesses to help customers and industries revolutionize how they conduct business, learn, shop, and live. There are countless processes and methods all ripe for digital transformation and the subsequent improvements and efficiencies that can follow.
Most companies are typically not in a position to complete a digital transformation independently; they will seek out consultants, service providers, and products to assist them with overhauling long-standing practices and migrating them to a digital environment. This opportunity is driving many solution providers to introduce products and services to fill this need.
Once companies have bought into the idea of a digital transformation, they will usually commit financial resources to these initiatives, creating a one-time revenue opportunity for the initial transformation and recurring revenue possibilities for SaaS solutions supporting the new digital workflow.
Benefits and pitfalls of digital transformation
Digital transformation has the potential to unleash incredible amounts of productivity and help businesses grow at a much faster rate than previously capable. With each technological leap replacing a repetitive, manual process with an automated, digital one, customers can accomplish more with their time and resources.
These technological leaps free up time for growth, creativity and innovation while often reducing ongoing expenses. And in data-rich environments, a digital transformation can unlock entirely new opportunities that were not feasible beforehand.
Change is disruptive, however, and many are resistant to embracing new ways of doing things and the technologies facilitating these changes. There is often a learning curve and retraining involved that some don’t have the willingness, patience or capability to master. This part of it is where change management strategies come into play.
There is also the risk of implementing a digital transformation simply for the sake of doing so without truly improving a process or adding additional value. And there is also a cost some may be unwilling to take on, despite promises of great returns on investment and potential efficiencies to be had.
Transformations can also be rocky, with problems and hiccups creating unhappy customers who didn’t experience any of these issues when they were doing things “the old way.” Far more of these projects fail than succeed, which is a testament to how difficult it can be to implement a significant change to long-standing processes.
Success requires significant paradigm shifts and executive sponsorship to drive company-wide buy-in. Transformations don’t occur in backrooms and dark corners but as a concerted effort with high visibility and broad awareness.
How product managers can leverage digital transformation
There are two types of opportunities where product teams can leverage digital transformation; identifying internal processes ripe for a change and spotting market opportunities where digital transformation can create an opening for products and services.
For internal use cases, product managers can identify tools, solutions and methods to create a more efficient product management organization, whether it’s collecting and synthesizing feedback, communication and collaboration tools or systems for managing requirements and planning roadmaps.
But the far greater opportunity is identifying opportunities to serve a target market by leveraging digital transformation to solve customer problems and create efficiencies. Customer research is the key to locating and quantifying digital transformation opportunities—as a problem-solving outsider, product managers can glean from interviews and surveys what customer pain points exist and then devise digital solutions to mitigate them. If these solutions are compelling enough and have a decent ROI for customers, a new market opportunity exists.
Digital transformation also changes the landscape for customer communication. No longer are customers satisfied with one-way communication and a toll-free number if they run into a problem; they’re looking for a continual dialog with their partners that includes helpful information and responsive enhancements to the products they rely upon.
Digital transformation is difficult and threatens the status quo by its very definition, but it also represents tremendous opportunities in nearly every industry. Customers want solutions that make things easier, cheaper and faster, fueling growth and putting pressure on the competition.
Product leaders are uniquely positioned to lead these efforts, as well as create products and solutions to help others reach their transformational goals. The ability to bridge the gap between what a business needs and what technology can do is an essential role as enterprises and small businesses alike engage in their own transformative initiatives.