What Is Digital Transformation and Why Is It Important?

By Indeed Editorial Team

Published April 20, 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

For enterprises and small businesses, digital transformation can be imperative. The process of digital transformation involves integrating technology into all aspects of a company, which causes a fundamental shift in how they operate and deliver value to their customers. By understanding digital transformation, you can enhance efficiency, increase customer value, manage risk, and find alternative revenue sources within an organization. In this article, we explore the answer to, "What is digital transformation?", identify why digital transformation matters, discover what drives it, explain what a digital transformation framework looks like, and answer a few frequently asked questions.

What is digital transformation?

Digital transformation typically involves developing and implementing software that helps customers, automating operations, and analyzing business models. To meet evolving business and market requirements, digital transformation uses technology to change new or existing business processes, cultures, and customer experiences. Digital transformation helps organizations reimagine their business in the digital age. The process of digital transformation performs a wide range of processes, such as interactions, transactions, technological transformations, and modifications.

Here are some examples of digital transformation:

  • Implementing computerized customer service

  • Using artificial intelligence (AI) to gain customer insights

  • Storing files on a cloud server rather than on the premise

  • Establishing a remote workplace

  • Automating employee management

  • Upgrading software and equipment

  • Creating a company website

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Why does digital transformation matter?

Digital transformation matters because it helps businesses become more agile and innovative. An organization restructures all its operations when it undergoes digital transformation. Digital transformation affects every company department and facilitates better collaboration between divisions. Using the digital transformation process, companies gather, integrate, and analyze high-value data for better business intelligence and profitability. Business intelligence (BI) helps organizations understand raw data by coordinating different parts of the organization. A digital transformation can be costly, but it's often fundamental to remain competitive within various industries.

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What drives digital transformation?

A key component that drives digital transformation is technology. The major benefits of digital transformation come from the technologies that enable the process. As an example, many healthcare organizations still prefer to use outdated technology, like pagers, as opposed to smartphones. To save costs and increase effective communication, healthcare systems may switch to more modern devices during the digital transformation process. By replacing old technology, information technology (IT) departments can devote more time to developing innovative ideas instead of repairing current IT problems.

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What does a digital transformation framework look like?

A digital transformation framework is a guide that organizations use to navigate through a period of significant change in response to changing business conditions. Frameworks ensure that all parts of the business make improvements during the transformation process. The digital transformation framework is central to ensuring success because it provides a common reference point that can adjust as the organization changes. As the market conditions change, the framework enables businesses to be flexible and adapt to a rapidly changing market.

Digital transformation FAQs

Here are some frequently asked questions about digital transformation and how this process may affect a business, its customers, and stakeholders:

What's the difference between digital transformation, digitalization, and digitization?

Digital transformation refers to the entire business process, while digitization and digitalization are subsets of the entire digital transformation process. Digitization involves converting data into digital files, such as creating computerized spreadsheets from paper records or scanning paper documents and saving them as PDFs. Digitalization involves using digital data and technologies to improve business processes. For example, during digitalization, a company may share PDF documents from its cloud with its sales department. They can also save spreadsheets on a web-based storage system that team members have access to and can update simultaneously.

What are the benefits of digital transformation?

These processes usually improve every aspect of the organization. For example, technology innovations can increase staff productivity and decrease their time at work. Here are a few examples of how digital transformation can be beneficial to an organization:

  • Enhanced customer experience: The customer experience is one of the primary values of digital products. There are many ways to enhance it, such as using chatbots to provide 24 hours of customer service or tracking client behaviour to better understand their needs.

  • Advanced analytics: Through digitalization, the digital transformation process enables the tracking and analysis of metrics across a whole range of digitalized processes, including sales, marketing, logistics, customer service, and finance. The ability to understand the data behind the business' efforts and how they affect cost and revenue enhances and simplifies decision-making.

  • Reduced costs: The maintenance of old systems and products increases costs. By using more modern technology, companies can reduce costs and re-evaluate the efficiency of their processes.

  • Accelerated processes: Companies using agile processes use a sequential approach to software development and project management, which helps them deliver content to customers faster. Implementing agile processes and using digital solutions allows businesses to respond to changing surroundings quicker.

  • Diversified skills: Through investing in digital development, companies can advance their knowledge and develop their digital skills. Talent management can drive growth and development within an organization.

  • Enhanced culture: Digital transformation allows companies to automate performance reviews, employee training, and monitor employee satisfaction, which can provide supervisors with more time to focus on the individual needs of their employees. Investing in digital transformation can help motivate employees by offering them a more efficient way of performing their primary duties.

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How do you develop a digital culture?

Digital culture is an important aspect of digital transformation. For managers, understanding the existing workplace culture is an essential part of implementing new values in a manner that's least disruptive to the overall business. As a company transitions to digital culture, it's beneficial to motivate employees to take on new challenges and to compensate them adequately for their effort to learn those skills. It's important to encourage employees to be a part of the transformation process because they may identify the current cultural values with their success and perceive change as too risky.

Here are a few examples of how to ease the transition into a digital culture in the workplace:

  • Conduct training and development programs to help employees achieve their full potential

  • Answer employees' questions in a detailed manner and help them overcome any resistance

  • Ensure transparency through all departments and divisions within the organization to establish trust

  • Maintain consistent communication throughout the organization

  • Make sure everyone in the organization understands the intent and expected outcome

  • Assist employees in working remotely by providing the right tools and technology

  • Create a presentation that describes an organization's mission, vision, description, and cultural values

  • Establish a culture within the organization that supports innovation and fosters trust between employees and department heads

  • Provide team members with opportunities to unplug from the digital world by offering yoga or meditation sessions

  • Help your colleagues feel proud of their work by offering flexibility and autonomy

  • Monitor and analyze changes to help ensure a successful transition to digital culture

What is artificial intelligence?

AI is a broad field in computer science devoted to the development of smart machines capable of performing tasks that typically require human intelligence. Artificial intelligence uses a set of techniques and algorithms to mimic human intelligence. A key component of AI is its machine learning capability. Machine learning uses statistical techniques to teach computers how to get progressively better at a task without explicit programming. Machine learning involves supervised learning with labelled data sets and unsupervised learning with unlabelled data sets. Using machine learning, computers can perform various tasks without writing millions of lines of code.

There's an increasing demand for AI across all industries, especially for systems with automation capabilities, learning programs, legal help, risk alerts, and research capabilities. Artificial intelligence includes a broad range of theories, technologies, and methods. Here are some of the primary subfields of AI:

  • Machine learning: Using machine learning, computers can find hidden patterns in data using methods from neural networks, statistics, applications research, and physics.

  • Neutral Networks: In a neural network, neurons respond to external inputs as they process information by relaying information between themselves. Data passes through the network multiple times to find connections and derive meaning from undefined data.

  • Deep Learning: A deep learning algorithm builds neural networks from many layers of processing units, taking advantage of advances in computing power and training techniques to learn complex patterns in large amounts of data. For example, computers can use deep learning for image and speech recognition.

Please note that none of the organizations mentioned in this article are affiliated with Indeed.

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