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What Is Digital Transformation?

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Last editedMar 20222 min read

Digital transformation is the kind of phrase that often gets dropped into business development plans or loan applications without people having a full understanding of what it means. In simple terms, digital transformation describes the use of digital technology across every part of a business, used to focus on delivering value to the customer.

What is digital transformation?

The full answer to the question “what is digital transformation?” is that it represents not just a technological change but also a cultural shift. By choosing to embrace digital transformation your business will be committing to innovate across the board. The shift from paper-based technology to digital applications will change how you interact within the business itself and with external partners such as suppliers.   

Building in digital transformation

The good news for any new business starting out is that the processes their working methods are based around don’t have to be transformed from existing legacy structures. Instead, the business can be built around digital platforms and working methods from the ground up. This will ensure a 21st-century approach to business structures that maximises flexibility and the versatility needed to grow and change as the demands of the market shift.  

Digital transformation in action

In practical terms, digital transformation involves handling data and information in digital form and using that to simplify the way you work and increase efficiency.  Processes such as invoicing, bookkeeping, stock-taking and customer services can be simplified, speeded up and delivered using technology that leaves members of your team free to concentrate on core activities focusing on customer delivery.    

In fact, direct customer services offer one of the best and clearest examples of digital transformation in action. The basic process of dealing with a customer complaint or query has stayed the same as it always was – the records pertaining to a particular customer need to be retrieved so that the information can be checked and a resolution offered. What has changed thanks to digital transformation is that the relevant details, rather than being hidden away in a filing cabinet in the building, can be retrieved instantly at the touch of a button or click of a mouse.    

On a more fundamental level, digital transformation has changed the way a business can gather, store and analyse the data that pours in at all times. Every digital point of contact with customers and business partners such as suppliers, as well as internal contacts between colleagues, generates highly valuable data. The most forward-thinking businesses are those that make use of digital transformation to take control of that data and use it to inform the decision-making process. Trends can be spotted, weaknesses within internal systems identified and reports developed on the basis of the data being gathered.

Disruption

In addition to radically altering the way in which traditional business practices are delivered, digital transformation can also alter the very basis of an entire business sector. Disruption of this kind can be seen in the form of a business such as:

  • Uber, which utilised digital technology to change the way people think of hiring taxis

  • Airbnb, which transformed holiday and short-term property letting in a way which has altered the industry and even the physical fabric of some popular city centres

The key to successful digital transformation lies in understanding which parts of your business can be transformed and which can stay as they are, rather than applying digitalisation across the board for its own sake. The question you should always ask is: how will digital transformation improve the customer experience? Answering this question will deliver the right kind of innovation.

We can help

If you’re interested in finding out more about digital transformation, then get in touch with our financial experts. Discover how GoCardless can help you with ad hoc payments or recurring payments.

Over 70,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today.

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