Digital transformation goes far beyond digitizing processes or implementing new technologies. If taken seriously, it means nothing less than comprehensive organizational development that leads to a fundamental change in corporate culture and can have sustainable effects, up to and including the realignment of the business model.

What is the essence of digital transformation?

Digital transformation fundamentally changes the way companies work, interact with customers, and create value. At its core, it is about using digital technologies to create new products, services, and interaction channels, as well as redesigning existing channels to meet changing customer needs and market conditions. True digital transformation requires a holistic approach that encompasses and connects people, processes, and technologies to better anticipate and meet customer needs in an increasingly digital world.

What is the potential of digital transformation?

True digital transformation enables companies to keep pace with technological advances, market trends, and customer expectations. The efforts required for this should therefore be seen as a medium- and long-term investment in the future security of a company, even if initial successes can be achieved quickly. Here are some reasons why digital transformation can be worthwhile:

• Efficiency and cost advantages: Digitizing processes, automating manual tasks, and eliminating inefficiencies lead to increased operational efficiency and thus also to cost advantages. Many companies start their journey with this step, as it is the most obvious from a cost-benefit perspective. However, this does not yet constitute a digital transformation, even if it may already create the conditions for a learning culture of continuous adaptation.
• Customer centricity: A customer-centric approach is at the heart of true digital transformation. By using digital technologies, companies can personalize interactions, improve the customer experience, and thus build long-term customer relationships. To do this, however, they must first understand the needs, preferences, and problems of their customers, which can be done by making better use of existing data and information.
• Data-driven decisions: Using existing data in conjunction with external data sources allows companies to make data-driven decisions and gain insights for strategic planning and optimization. This can help identify inefficient processes, gain valuable insights into customer behavior and needs, identify new market opportunities, and develop innovative business models.
• Agility and adaptability: Digital tools and processes enable companies to respond more quickly to new challenges and opportunities. This allows them to adapt their strategies and processes quickly and efficiently. Experiments are facilitated by the use of cloud technologies and agile methods, making the company as a whole more flexible and adaptable. However, these tools only provide a technological basis; the corresponding culture must be specifically promoted within the framework of organizational development.
• Promoting innovation: Digital platforms and systems enable the exchange of information and knowledge between different teams and hierarchical levels, which can promote an open and trusting corporate culture. At the same time, digital technologies offer new ways to solve problems and develop new ideas, which fosters the creativity and innovative power of employees.
• New business models: A consistent digital orientation can also open up new business models and revenue streams by developing innovative offerings and monetizing the new digital possibilities via digital platforms, ecosystems, and data-driven insights. At this point at the latest, one can speak of a true digital transformation, even if not every company will go that far.

What are the key elements of a true digital transformation?

As with any other transformation journey, it is important to consider different elements and building blocks that influence each other. Therefore, a holistic approach is necessary that goes far beyond the work of classic IT departments and should cover the entire company.

• Vision and strategy: A clear vision and strategy are the most important prerequisites for any change initiative. It is important to define tangible goals, understand the potential impact of digital technologies, and develop a roadmap to achieve the goals. The digital vision and strategy should be aligned with the overall business goals of the company and guide decision-making throughout the transformation process. Even if the goals may change over time based on learning effects, a journey without a sense of direction will not lead to success.
• Leadership and culture: Every transformation requires strong leadership and a culture that fosters change and innovation. Leaders must actively engage in transformation efforts, communicate the vision, and create a culture of continuous learning and experimentation. The entire organization should be involved and given the opportunity to be part of the change and contribute.
• Data and insights: Data is the lifeblood of digital transformation; without it, it is impossible to take advantage of new technologies such as artificial intelligence. Data enables companies to better understand their customers, optimize processes, and develop new business models. Companies should therefore use the potential of existing data to gain insights, make informed decisions, and drive innovation. However, first they must be freed from various data silos, prepared, and made accessible. Dozens of isolated reports are still created in companies every day in various departments without using the potential of aggregated data.
• Technology infrastructure: A solid IT infrastructure is essential for implementing digital transformation initiatives. Companies should evaluate their existing technology stack, identify gaps, and invest in the appropriate tools and platforms. However, they will not replace all existing systems in the course of a transformation project, as existing landscapes have been shaped over years, sometimes decades. More important than the specific technology, however, is the end-to-end integration of processes across system boundaries and the creation of a uniform data basis.
• Talents and capabilities: A sustainable transformation requires a workforce with updated skills and capabilities. Companies should assess their talent pool, identify skill gaps, and invest in training and development programs to upskill their employees. Providing employees with powerful new tools is a great step, but leaving them without the proper training and support to utilize them effectively will limit their potential and ultimately hinder the success of the project.
• Continuous improvement: Transformation is an ongoing journey, not a one-time project. It is important to establish new mindsets and foster a culture of continuous improvement and agility. Regular re-evaluation of strategies, monitoring of set goals, and adaptation to changing market dynamics are essential for sustainable success. A culture of continuous learning not only helps employees stay up-to-date on the latest technologies and trends, but it also fosters a culture of innovation and creativity. This, in turn, will attract and retain digital talent, which is crucial for success in the digital economy.
• Alliances and partnerships: Digital transformation often also means collaborating and partnering with external stakeholders. Companies should explore strategic alliances, ecosystems, and open innovation models to leverage external expertise, tap into new markets, and accelerate innovation.

Conclusion

True digital transformation goes beyond implementing digital tools and technologies and requires holistic organizational development. Even if redesigning and optimizing processes leads to increased efficiency and productivity, the potential of digital transformation lies beyond a mere improvement of the cost structure. With a clear vision, committed leadership, and a customer-centric approach, companies can master the complexity along the way.