In today’s world, technology is the determining factor of success for any business in any part of the world. Once seen as an enabler, technology is now a critical driver for businesses large and small, and a necessary element for them to survive. Businesses that fail to adopt the use of technology will die out soon, with many of them already shut down after Covid-19 grappled the world.
In this highly tech-dependent era where everything and anything around us is fast becoming digital, ‘innovation’ is the key if businesses have to sustain and grow. However, for innovation to take place in its true sense and at a scale, organisations must step towards “digital transformation”. Gone are the days when companies could rely on one-off tech project implementation to cater to a business need; today, they must take technological advancements and business development in parallel.
What is Digital Transformation?
Before we move on to understanding the concept of digital transformation and how businesses across the globe are adopting it, it’s important that we understand the basic difference between the three terminologies that people often tend to confuse as interchangeable terms - digitization, digitalization and digital transformation.
Digitization, simply put, is converting analogue information into digital format. For example, scanning documents or entering data into spreadsheets is digitization as digital tools are used to save data in a digital format. Digitalization, on the other hand, is a layer on top of that and involves the streamlining of business processes through automation using the power of technology. For example, using ERP (Enterprise Resource Planning) and CRM (Customer Relationship Management) software to make core business functions more efficient and effective falls under digitalization.
As opposed to both of the above, digital transformation is an overarching, all encompassing, broader concept that calls for changes at an organisational level with technology at the root of it. Rather than removing complexities at a project or process level, digital transformation takes a leap forward and calls for changing things at an organisational level - from structure to culture to operations and processes. It happens when companies embed technology across all horizontal functions and verticals of their businesses, and often results in them building new capabilities and creating new business models.
Why should businesses go for digital transformation? Why is it important?
Efficiency, agility, growth, fast responsiveness to change and above all, customer satisfaction.
Before the Covid-19 hit, digital transformation was largely centred around enhancing customer experience. However, the pandemic pushed organisations across industries and sectors to accelerate change. This resulted in digital transformation becoming the nexus of operational efficiency and innovation.
The next natural question is, if there are so many advantages of digital transformation, then why are a large number of businesses still not adopting it? What is holding them back?
Bringing a digital overhaul at an organisational level comes with its share of challenges not just at processes level but at a human level. Efforts to digitally transform an organisation in its true sense cannot be accomplished without a well-planned implementation strategy. The core of digital transformation lies in unlearning and relearning, that is, taking a new approach and changing the way of doing things with technology as an enabler. Be it creating new business processes, developing team culture with new values & norms, or finding out new ways of enhancing customer experience.
If we take a look at the developed part of the world, large companies are injecting millions of dollars in bringing digital transformation, however, a large percentage of them fail in doing so. That’s mainly because companies focus on a specific technological change rather than bringing about an overall change in approach at a strategic level to facilitate the absorption of change. A large majority of companies go wrong by implementing tech initiatives as a set of disconnected efforts within the IT department rather than envisioning how the tech changes will impact the entire spectrum of business from end-to-end.
Digital Transformation calls for aligning technology initiatives with business strategy. It calls for taking on board the ‘people’ working within the organisation, making them understand the benefits of it and taking away their fear of losing job because of technology. It calls for a mindset shift not just at the management or lower level but at the very top. As per a study published by Boston Consulting Group in 2021, only 35% of the 950 companies surveyed were able to successfully implement digital transformation.
How Can Businesses Implement Digital Transformation?
Executing transformation at an organisational level is a big change, and that cannot happen effectively with proper planning and strategy. Below are some areas that businesses, which intend to digitally transform, must address at a strategic level:
- Putting technology at the core of business strategy. This approach will not only bring in operational efficiency but can also possibly change the business model and scale it.
- Realigning business operations with what customers and employees need, and how technology can help in the process.
- IT Uplift. For a lot of companies, the process of digital transformation starts with upgrading the company’s IT infrastructure that ultimately results in increased employee efficiency, lower tech maintenance costs and increased customer satisfaction.
- Digitizing Operations. This means simplifying existing processes and it often comes in the initial stages of the digital transformation journey. At a small business level, digitising operations can involve simple changes such as replacing manual activities with digital whereas at a larger scale it can involve rearchitecting the entire system to meet customer needs.
- Implementation of a flexible tech architecture supported by modular platforms & adopting new ways of working to ensure agility and keep up with the pace of rapidly changing customer expectations.
- Avoiding reliance on any one technology but rather keeping processes flexible in terms of core technology to allow for continued innovation and sustainability.
- Reimagining the role of technology as a business and innovation partner rather than a standalone business process.
- Flat organisational structure to avoid delays in decision making due to hierarchy and ensure agility.
- People Management & Change Management. This requires upskilling people not just in terms of technological skills but human skills, building human capacity, people change management at leadership level and a cultural shift that supports and encourages change. This means training teams on how to communicate better, increasing trust levels within teams given the increased remote nature of work, redesigning roles and responsibilities, and exploring ways through which technology can enable knowledge sharing.
The most important in all of this is that leaders must empathise with employees, recognise their fears of being replaced by technology, reframe their mindset and make them believe that the digital transformation process is an opportunity for them to upgrade their expertise rather than being sceptical about it. This means taking an ‘inside-out’ approach. To overcome resistance from teams, leaders should involve the teams equally in the process, take their feedback, make them realise their strengths and how they can contribute to business growth by using technology as an enabler.
Global Examples of Companies that Successfully Implemented Digital Transformation
Despite the challenges involved in bringing digital transformation in an organisation, one finds some good examples of companies from around the world that were able to successfully implement transformation and experience hyper-growth as a result. The Swedish furniture company, IKEA, and global sports footwear giant, NIKE, are noteworthy examples of it. Both companies made use of digital channels, AI and predictive analytics to establish an omni channel presence, target prospects and enhance customer experience. Both companies have set standards of shopping experience in their own domains leveraging the power of digital. End result? An increase in brand loyalty by a multiplier effect and a fast-paced growth in business.
Is Digital Transformation Only Meant for Large Businesses or Can Small Businesses Adopt It Too? How?
No matter what the size of your business is, customers always demand convenience and better experience. This means that small businesses too can begin their journey of digital transformation and reap the benefits of it. For them, it can simply begin with conducting an internal need-gap analysis, identifying the areas that need to be changed the most, leveraging data analytics by using easily available online tools, and harnessing the power of digital marketing.
Are Pakistani Businesses Ready For Digital Transformation?
Digital transformation is the need of the hour, however, a mindset shift is a pre-req to take off this process. Where stepping towards digital transformation in the current economic situation may appear as an added cost, in the longer scheme of things, it is in fact an investment that will pay off in the form of an increased efficiency and subsequently decreased cost.
A conventional risk-averse approach has been a common hurdle in business transformation in Pakistan especially for family-run businesses and SMEs. For organisations to succeed in these unprecedented circumstances, bold decisions need to be taken at a strategic level. The way-of-doing-things calls for an overhaul. What our business leaders need to understand is that the present bleak economic state of affairs is rather an opportunity for businesses to adopt digital transformation in order to initially sustain themselves and then eventually scale.
We’re living in the times where technology is not an enabler but a determining factor of success for any business; it is time that businesses in Pakistan recognise this and adopt the globally validated transformation process to strengthen Pakistan economically.