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Digital Transformation: What Is It & How To Create a Strategy

By: Blair Felter on December 26, 2019

Decades of technological change and innovative disruption have upended many established industries, forcing them to reconsider their digital strategy and assess the capabilities of their IT infrastructure. In today’s economy, every company needs to think of itself as a “tech company” if it expects to thrive in an increasingly interconnected world.

Many organizations understand that these challenges will force them to make significant changes. Digital business transformation strategies help them to assess their current IT department and identify what changes need to be made in order for them to compete effectively in the future. But a good digital transformation strategy is about more than simply adopting the latest technology, and if companies go about it the wrong way, they can end up wasting valuable time and resources on initiatives that don’t contribute to business success.

What is Digital Transformation?

As exciting new digital technologies become available, companies are being forced to consider how those innovations will impact the way they do business. Digital transformation is a catch-all term for the process of implementing those technologies to modify key processes, operations, and services to better meet changing market demands.

“Customer expectations are far exceeding what you can really do,” says George Westerman, a research scientist at MIT. “That means a fundamental rethinking about what we do with technology for organizations.”

According to IDC research, organizations are rapidly making those investments, with a staggering $6.3 trillion expected to go toward some form of digital transformation strategy between 2018 and 2020. For many organizations, their digital business transformation began with the transition from analog operations to digital ones. But a true digital transformation strategy doesn’t just focus on using digital technology to do the same things the same way, only faster. It requires a radical rethinking of what that technology makes possible before competitors and startups use the same digital tools to disrupt the market.

What is Digital Disruption?

There is a tendency to think about organizational processes as a sort of natural law, that companies do things a certain way because that’s the best way to do them. In most cases, however, those “best practices” are merely a byproduct of the technology available to them.

Take, for instance, the logistics industry, where the tech giant Amazon has used the same digital transformation technology that made it so dominant in the online retail space to create a streamlined, scalable shipping business that’s already competing with well-established players like FedEx and UPS. If these companies aren’t able to adapt their existing infrastructure and processes to match, they could easily end up going the same way as previously venerable brands like Sears and Blockbuster.

Research has shown that organizations are not blind to the existence and potential of digital disruption, but also that they tend to think more about the opportunities it presents than the threats. This creates a sort of complacency in which waiting to take action is simply passing up on an opportunity rather than giving a competitor a chance to gain market share.

To guard against digital disruption, organizations need to focus on how digital transformation technology can help them stay ahead of market trends and deliver the cutting edge services customers are looking for. Building a comprehensive digital transformation strategy that takes an end-to-end view of how emergent technologies will impact the way an organization does business is the best way to stay on the right side of disruption.

5 Tips for Creating an Effective Digital Transformation Strategy

1. Understand the Goal

Organizations can launch major change initiatives for all kinds of reasons, but to be successful, these initiatives have to have a clear goal in mind. Too often, companies simply move to adopt the latest technology without fulling understanding why they need it in the first place or what problem it’s intended to solve. The BBC, for example, came under intense scrutiny in 2013 after its high-profile (and expensive) digital transformation initiative failed to produce business results. Part of the problem was that the desired results weren’t clear in the first place. The initiative implemented all sorts of new technologies, but it didn’t pair them with organizational changes that would have been necessary to get the most out of them. While the technology is important, companies need to remember that it is ultimately a means to an end. Without that end goal in mind, any transformation strategy is doomed to failure.

2. Assess Existing Technologies and Platforms

When a company develops a digital transformation strategy, it’s rarely starting from ground zero. Most organizations today have extensive IT infrastructure already in place, much of which is supplemented by a hodgepodge of cloud services and various device platforms. Before any kind of transformation can begin, they must assess what resources they have now. Some of this infrastructure can be integrated into a new digital strategy, but some of it cannot. A key aspect of the strategy will involve auditing existing solutions to determine what should stay and what should go. It’s important to keep the transformation goals in mind here because while it may make short-term sense to preserve much of the existing technology, doing so could lead to problems in the long run. Companies also need to consider how employees will react to planned changes.

3. Look Beyond Your Industry

Companies instinctively look to their competitors when they’re planning for the future. There’s a lot of sense in this, but it also creates significant blind spots when it comes to digital transformation strategy. True innovation comes from redefining the boundaries of what’s possible, and companies often need to look outside the particular confines of their industry to find inspiration. Technology has a way of spreading rapidly between industries once it matures to a point where its potential becomes self-evident. The last two decades are filled with established companies that failed to recognize how changing technologies in other industries would eventually render their business models and IT department irrelevant (Borders and Toys R Us come to mind, along with the aforementioned Sears and Blockbuster).

4. Focus on Your Customer Experience

The combination of high-speed internet connections and wireless technology has fundamentally transformed the way businesses interact with their customers. Cloud computing platforms and edge computing make it possible to deliver services faster and easier than ever before. While larger companies used to have an advantage when it came to reaching customers, today even the smallest start-ups can easily connect with customers around the world. With so much competition in the market and attention spans getting shorter, providing a superior customer experience is expected to be a key brand differentiator in the coming years. Every digital business transformation should be developed with this trend in mind. No matter what changes a company seeks to implement, they should be focused on providing a better customer experience that keeps people engaged and coming back in the future. A wide-reaching digital transformation of a company’s logistical infrastructure won’t count for much if server downtime causes its website to load slowly.

5. Create a Timeline

Enacting a digital business transformation, be it limited or comprehensive, isn’t something that just happens overnight. Depending upon the scope of the change, it may need to be carried out in stages. Some changes may be relatively simple and easy to carry out, such as a lift and shift solution that migrates workloads to a new platform. But other changes are more sweeping, requiring extensive coordination and careful planning on the part of an IT department. It’s also important to remember the human side of these changes. People within an organization need to be trained in the new systems and given time to adjust. It’s vital, then, that any digital transformation strategy rolls out according to a strict timeline that not only provides accountability, but also highlights potential problem areas ahead of time.

While it’s tempting to simply adopt every new technology innovation that’s making headlines, companies need to think about their business digital transformation strategy very carefully. By understanding their needs and being honest about where they want to position themselves in the future, they can develop strategies that help them to execute sweeping change to their IT infrastructure with minimal disruption.

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