What is a Digital Transformation Strategy?

A Digital Transformation Strategy is a plan of action describing how a business must strategically reposition itself in the digital economy. As customer habits change so do the way winning businesses operate. They innovate, change operating and business models and leverage emerging technology.

Why digitally transform?

Common drivers of digital transformation include reducing costs, improving productivity, providing a better customer experience, and ensuring governance and compliance. However, by far the biggest motivation for this change in the way companies operate is the need to survive. Changes in the market, disruptions to the supply chain, and shifts in customer expectations have made the ability to quickly adapt a necessity. Digital transformation gives you the agility needed to respond to such changes and not only stay competitive but stay in business. 

Common digital transformation objectives

As with the drivers of digital transformation, the objectives set will vary from one organization to another. However, some of the most common digital transformation objectives include: 

1. Reducing costs

Automating repetitive, time-consuming tasks means that not only can they be completed faster and at a lower cost, but the human effort that previously went into them can be reassigned to more value-adding activities elsewhere. 

2. Increasing revenue

Utilizing digital technologies to get things done quicker allows you to serve more customers, growing your customer base and increasing revenue. 

3. Increasing collaboration

The success of any business is down to the collective effort of the entire organization. Digital transformation connects employees allowing them to share knowledge and ideas and align their efforts towards your organizational goals. 

4. Increasing employee productivity

Digital transformation benefits employee performance in two ways:

• Reducing silos and bringing together different data sources means employees can access the business information they need to complete tasks faster. 
• As the more mundane tasks are taken off their to-do list they can focus on more valuable, rewarding work. 

5. Improving agility

Being able to respond to change (and do so rapidly) is crucial to keeping up with market trends and competitors. Connecting the people, applications, robots, and information in your organization allows you to quickly adapt processes to meet new demands and avoid getting left behind.    

6. Improve customer experience

Customers will often interact with your business through various channels. Process improvements made through digital transformation allow you to better meet customer needs and do so more quickly.

7. Increase governance and compliance

Failure to comply with regulations can damage brand reputation and incur hefty fines – but staying on top of the ever-changing number of regulations in the marketplace means compliance isn’t an easy task. Digitizing processes increases transparency and minimizes risk, making adhering to regulations and demonstrating compliance simpler.  

8. Gain competitive advantage

Better meeting customer needs, increasing productivity, and improving agility gives you the edge over your competitors. 

 

Digitization, Digitalization, and Digital Transformation  

Let’s start with the term digitization.  Digitization refers to creating a digital representation of physical objects or attributes.  For instance, we scan a paper document and save it as a digital document (e.g., PDF).  In other words, digitization is about converting something non-digital into a digital representation or artifact.  Computerized systems can then use it for various use cases.  An example from manufacturing would be when a measurement is converted from a manual or mechanical reading to an electronic one.

Digitization is foundational.  This is the connection between the physical world and software.  This is what we been doing since the 1960s.  It is an enabler for all the processes that provide business value because of the need for consumable data.

Digitalization refers to enabling or improving processes by leveraging digital technologies and digitized data.  Therefore, digitalization presumes digitization.  Examples of this could be as simple as PLC logic or PID control in a microprocessor-based system, sequenced logic for a batch process, automated shutdown logic, etc.  It could also be something more complex, like an error in a transmitter generating a work order in the ERP maintenance system for a maintenance tech.

Digitalization increases productivity and efficiency while reducing costs.  Digitalization improves an existing business process or processes but doesn’t change or transform them.  That is to say, it takes a process from a human-driven event or series of events to software-driven.

Digital Transformation is really business transformation enabled by digitalization.  The “digital” moniker is a little bit of a misnomer because the essence of digital transformation is the changing of business processes enabled or forced by digitalization technologies. 

One example of this is the convergence of IT/OT where the intersection and overlap of IT skills within the OT domain has created the need for a more uniform governance due to cybersecurity concerns, data flow requirements, and skills.  Another example of digital transformation is a shift from local control of physical processes to remote monitoring and control of those same processes.  A more ambitious example would be the integration of your customer sales volumes feeding though to your company’s raw material vendors, thus integrating the supply chain for greater efficiency and response.

So, what is Industry 4.0 then?  You can think of Industry 4.0 as being European for the combination of Digital Transformation and Digitalization, which kind of leads to a confusion all its own.

I would like to take a moment to share with you that there is a user community focused on topics similar to this.  Please take this opportunity to check out and join this community called the Digital Transformation Council.  This is a collaborative group of end user professionals who meet to exchange ideas and learn how digital transformation affects their companies, how to affect change within their companies, learn about failings and successes, etc.  It is free to join and open to anyone in your organization. 

Digitization refers to creating a digital representation of physical objects or attributes.  

Digitalization refers to enabling or improving processes by leveraging digital technologies and digitized data.  

Digital Transformation is really business transformation enabled by digitalization.  And, Industry 4.0 is European for the combination of Digital Transformation and Digitalization.