Digital Transformation: 4 Key Types to Understand

Organizations across industries are embracing digital transformation as a road to meaningful change. It’s critical to recognize the different ways this can play out.
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A record number of CEOs are citing digital transformation as a key priority, a 2021 Gartner survey found.

Increasingly, businesses of all types are recognizing the need to revitalize their processes and procedures and infuse technology into a variety of operations, including those that they previously performed manually. With that comes meaningful benefits, from more efficiency to increased profits. 

What does this really mean? Digital transformation is a broad term to describe several different kinds of change. These are 4 types that are commonly recognized, each of which applies to specific scenarios. 

What Is Digital Transformation?

Digital transformation touches every aspect of an organization — its processes, its departments, its employees, and its customers and users. In its simplest terms, it means incorporating various technologies into the business to change how operations take place and produce stronger results

It’s important to recognize that digital change is movement, not a single process. Leaders are typically the ones to spearhead this series of initiatives, working closely with technology professionals within and outside the organization. It demands buy-in from employees and stakeholders at all levels in order to be effective. In fact, one of the most common challenges is when those involved don’t understand or resist the change taking place.

Change is never easy, of course. As part of digital transformation, those leading the efforts must support their initiatives with research and data demonstrating the need for them.

4 Types of Digital Transformation

1. Business Process Transformation

Business process transformation refers to the way employees and/or consumers get things done. Organizations leverage tools to change the way they complete various tasks, making them more efficient and effective.

Process transformation often results in reduced costs and sometimes greater profit. It can also lead to higher-quality products or services. Using innovative technologies and tools, from AI to big data, businesses find new ways of achieving better results. 

In order to set the stage for business process transformation, the leaders spearheading the change should pinpoint the objectives and collect data on how and why they should be doing it.

2. Business Model Transformation

A model transformation essentially involves an overhaul of the types of services that are delivered. Think of Netflix’s reconceptualization of distributing movies and television shows. Originally, the entertainment giant developed a subscription service model, in which customers would receive a certain number of DVDs per month, and now, the platform largely offers streaming. In the process, Netflix turned the entire industry on its head.

Business model transformation can mean a reconsideration of an individual organization’s structure and purpose or the transformation of an entire industry. Often, one affects another. 

Embracing this type of digital transformation means tapping into new opportunities. Businesses that change their models can see greater profit, growth, and ultimate success. We have seen how it has dramatically improved the outlook of companies across different industries, from transportation to entertainment to healthcare.

3. Domain Transformation

Domain transformation involves tapping into new markets and territories. By reaching into diverse areas, including those they haven’t previously attempted to enter, they can reach a greater number of customers and even overtake established leaders in the domain.

This is a sometimes overlooked area of digital transformation that deserves more attention. As the landscape changes, businesses should increasingly seek out opportunities to reach and serve new consumers, expanding their capabilities. More and more, we’re seeing this kind of transformation take place, as organizations of different types attempt to add new value and broaden their horizons.

Digital technologies make this possible. With a wide range of tools such as the Internet of Things and AI at their disposal, organizations can leverage their considerable resources to make their mark and expand their horizons. Sometimes, the opportunities to tap into diverse markets already exist — businesses just need to look beyond the surface to realize them.

4. Cultural Transformation

Adopting or leveraging new technologies is only part of the digital transformation process. Real, meaningful change involves a dramatic shift in attitudes, behaviors, and the entire culture of an organization. Unlike the other types of digital transformation we’ve discussed, this is mandatory for making technological change happen. 

We underscored the importance of stakeholder and staff buy-in. You must also transform ideas and beliefs. If you are unable to facilitate a system-wide shift and successfully encourage the people within your organization to embrace this change, you’ll have trouble persuading users and consumers to adopt your services. 

In order to produce effective cultural transformation, you must back up your digital transformation plans and efforts with real information about how the change will be positive and meaningful. Adopting these new technologies is, of course, a risk — but the payoff is often great. You must also be able to communicate the why and how of your efforts, emphasizing the importance of collaboration.

Be fully transparent about the nature of the transformation, being open about these risks. Address challenges, too. For example, explain that this will require significant time — real change doesn’t happen overnight — and effort. Cultural transformation is also known as organizational transformation, and that’s exactly what you’re doing — changing an entire organization with everything such a massive undertaking entails. 

Digital transformation translates to real value. It means growth, profit, an increased consumer base, and other tangible benefits.

As you incorporate new technologies into every area of your business, bear in mind the 4 types of digital transformation — business process, business model, domain, and cultural — to determine what the right steps are for you and your organization. Where will you reap the most rewards as a business? How will you do it?

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