Digital Transformation: Is More Than Just a Buzzword in Business Consulting

Digital Transformation: Is More Than Just a Buzzword in Business Consulting

The term digital transformation has been widely discussed for years, but it truly gained traction with the onset of the COVID-19 pandemic. During this impasse, businesses that had already digitized, either fully or partially, were able to maintain a higher level of activity than traditional companies. This created an urgent need for many businesses, especially in less digitized sectors like primary industries, manufacturing, and even hospitality with the rise of delivery services, to digitize in order to survive in this new environment.

Despite the widespread use of the term, it often leads to confusion due to its misuse in various contexts: by large tech companies, the banking sector, consultancies and advisory firms, and even in politics with the eagerly awaited Next Generation EU funds. It's come to represent simply the level of technological development of a company. Many of these groups have clear commercial interests and only aim to take advantage of the term to sell you their "solution" for digital transformation. This is a mistake, as we will see later, since digital transformation should be a process of change management within the company - although it can be aided from outside.

In this article, we aim to shed light on the concept of digital transformation, first distinguishing what is often confused with digital transformation, and what key characteristics and traits are necessary to correctly identify it.

It's Not Just About Implementing the Latest Market Technologies

Digital transformation is often confused with always being at the forefront of implementing solutions based on very innovative technologies, (where there is an overexpectation generated by the market itself), such as solutions based on Machine Learning or Blockchain among many others. Many companies are induced to embark on digital transformation by implementing solutions with technologies they don't understand, nor do they know precisely the return on investment they expect to obtain. Additionally, there's a lack of understanding of the new competencies and knowledge that professionals within the company will have to acquire with them, leading to economic losses if they cannot make a proper transition.

It's Not a New Form of Online Presence

Another common confusion is the tendency to equate digital transformation with aspects belonging to online marketing, that is, the mere fact that a company has a good internet presence through its website, social networks, or an e-commerce, does not mean that the company has successfully digitally transformed. Many initiatives driven by Public Administrations through concessions and grants go along this totally wrong line. Of course, any company today must have an online presence to be relevant in the digital world, but linking it to the concept of digital transformation is a tremendous oversimplification.

It's Not Merely Digitizing Operations

Although one of the objectives within a digital transformation plan may be to increase operational efficiency to reduce costs and inefficiencies that can hinder the business, if we simplify it to this area, then we are confusing digitization with digital transformation.

Digitization refers to the use of digital technologies that allow processing information in a more agile and efficient way than its analog counterpart; thanks to information technologies, we can access and consult information infinitely faster than in a traditional medium such as paper. Hence many initiatives go along the line of having a paperless Public Administration or companies. And indeed, that's fine, but even though a company may have all kinds of technologies and even have a high level of development in information systems such as an ERP, CRM, and a Business Intelligence solution, it can also have a low level in digital transformation since they have only automated or digitized their processes, but they have not managed to detect and generate new business opportunities that the emergence of these technologies offer.

In other words, digital transformation is a change in the way the organization operates and with which it seeks to generate new forms of value (and which will of course translate into tangible results): better satisfaction and loyalty from our customers, reduction of operational costs, higher productivity, or generation of new revenue streams through new digital services. The differential aspect lies in that it has a holistic focus, that is, it includes a redesign or adaptation of many different aspects within the organization: vision, business model, strategy, processes, people, and also putting the customer at the center of the whole process.

These ARE the keys to digital transformation
  1. The Business Model: Transforming the business model is the central concept from which digital transformation arises. The business model is the reference framework of our business structure: we reflect with whom and how we relate, what our value proposition is, as well as how we will obtain profits and what will be the main cost units. The emergence of numerous technologies in recent years has caused innovative and disruptive business models to arise that confer a competitive advantage in their respective markets. Well-known are Amazon, Uber, or Airbnb, which although they may seem like very exceptional companies with a scale that is not that of our small SME, every company will have to address this process since the adoption of technology does not stop accelerating reaching all kinds of companies, sectors, and geographical areas even if it is at very different speeds and rhythms.

  2. The Culture: Corporate culture could be defined as the set of values, beliefs, norms, and behaviors shared by all members of the same organization. Peter Ducker, a consultant and one of the ideologues of the modern corporation, was the one who coined the famous phrase "Corporate culture eats strategy for breakfast", meaning that culture precedes strategy since the inertia of day-to-day behaviors and routines is so strong that not even the best of strategies can resist its influence. For this reason, it is totally necessary to implement changes in the culture of the organization before any technological implementation or change in the business model. All members of the organization must be aware of the process they are immersed in; what their roles and functions will be within it; the new skills and competencies to acquire and how the various business units will have to cooperate to implement the new operating model.

  3. The Customer: digital transformation is not understood without the new forms of communication that digital technologies enable us to relate to our customers. Today's customer is a fully informed consumer who above all seeks experiences. They are willing to pay more for differential services that are capable of covering their needs. That's why we must seek to have emotional ties with our customers so that they are loyal to our brand and become ambassadors of it. Disciplines like User Experience can help us develop new points of contact with them and with Big Data we can interpret their needs and their degree of satisfaction in relation to our products and services. Beyond the various technologies, the key will be to have the necessary skills to collect useful information about our customers and use it effectively to be able to make better decisions in our business.

In short, talking about digital transformation is talking about change management. It is a hopeful process by which we can generate a new horizon in our company with which to get excited and dare to dream big. This has only been the first post of many others that are yet to come with the aim of helping you to address the process in your business with full guarantees of success.