Last editedApr 20233 min read
There are very few industries today that have yet to be touched by digital transformation. Moving business processes online offers cost-effective efficiency, yet it does come with its own set of challenges. A term coined by the McKinsey Global Institute in 2015, digital transformation includes four focal points. So, what are the four main areas of digital transformation and how can you use them as part of your business strategy? We’ll cover the basics in this guide.
What does digital transformation mean?
Digital transformation describes the process of making a business more competitive using technology. In a digital marketplace, businesses must utilize the latest technological tools to stay relevant. This includes automating processes and business activities in the name of efficiency. It also means designing more innovative products, streamlining operations, and providing an improved digital user experience. Digital transformation is an ongoing process, which means these changes can be rolled out in increments to move the business forward.
What are the benefits of digital transformation?
The overall goal of digital transformation is to make your business more competitive. Additional benefits include the following:
It engages customers by providing a better user experience
It increases customer loyalty through engagement
It motivates employees with improved tools for success
It makes an organization more efficient
It modernizes your IT infrastructure
It increases revenue with more relevant products and services
What are the 4 main areas of digital transformation?
There’s a multitude of specific processes and strategies used in digital transformation. These can be broken down into four main areas:
1. Business Model Transformation
Does your current business model make sense in a digital business environment? Look at new pricing strategies, products, and services that appeal to today’s high-tech markets. An example of digital business model transformation would be Netflix’s pivot from DVD rentals to streaming video content. The first step is to look at your long and short-term goals to determine how to grow your business.
2. Process Transformation
How can you update your everyday business processes? Audit your processes to highlight any inefficiencies for improvement. Use baseline metrics to analyze how effective each new tool or process is over time, bringing in stakeholders for feedback as needed. Some businesses might switch to an automated invoicing tool, while others will overhaul their entire workflow.
3. Domain Transformation
This third area of digital transformation describes the movement of your business into the cloud. Using cloud-based systems offers improved security, agility, and scalability – all at lower cost. Which processes can you start moving over to the cloud? Once you’ve identified these, you can start migrating workloads and data using the appropriate software.
4. Organization Transformation
Finally, don’t forget about the need for a cultural transformation across your organization. It’s one thing to offer your employees new cloud-based software, but it’s another to convince them to use it. Ask for feedback and input from across your company’s departments so you can assess attitudes to digital technology. Provide adequate training and resources for the whole team, with an emphasis on collaboration.
What are the 4 key challenges of digital transformation?
Now that we’ve broken down each of the four main areas, it’s helpful to look at the challenges you’re likely to encounter as part of digital transformation.
Risk aversion – Individuals within the organization may be resistant to change. They prefer to stick to procedures that they’re familiar with rather than taking a leap into the unknown with unfamiliar technology. You’ll need to provide reassurance as part of your strategy.
Lack of digital skills – The second challenge to address are gaps in your workforce’s digital skills set. Even when individuals trust the transformation, they’ll need adequate training and guidance to use these tools adequately.
Lack of financial resources – IT infrastructure and restructuring costs money. You’ll need to work the cost of digital transformation into your budget, which will take some time. Many organizations seek additional investment purely for digital technology.
Lack of business resources – You’ll need to source experts to assist with your implementation and training. Work together with HR to fill in any knowledge gaps and boost your business with highly skilled individuals.
The benefits of digital transformation outweigh these challenges. Although it takes some time to make your organization more efficient, you can get started with simple actions. Automate core business processes using cloud-based software. For example, GoCardless can help automate your payment collections. We integrate with over 300 partners including top accounting and billing software to make your digital workflow more efficient.
We can help
GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.