“Digital transformation” is perhaps one of the most used expressions in recent years. It is often used in reference to business, where it is suggested as a sort of panacea for sectors, such as public administration, that are known for being outdated and inefficient. It is discussed in the context of the benefits and also regarding the associated challenges and risks of being left behind by not embracing digital transformation.
Often digital transformation is also indicated as an effective lever for marketing thanks to the new digital solutions it offers.
In all of this, as it often happens, the most important thing is overlooked: its definition. In fact, defining this concept is not easy, and for two reasons.
For one, the digital world is, by its very nature, in a state of continuous evolution and change. For another, the pervasiveness of the digital world in so many aspects of our lives means that a single definition may not apply to every scenario. Nonetheless, it’s helpful to have a working definition in any case.
Digital transformation is innovation
We’ll start with a first definition from the point of view of innovation: Digital transformation is a process of innovation, which takes place through new digital technologies, such as the cloud, the internet of things, blockchain and artificial intelligence.
Here, innovation isn’t only about updating tools that we use, in some ways it involves rethinking how we do business. It involves many aspects of the business, from the product itself to training and marketing.
For example, digital transformation has enabled new ways of managing employees and new ways for employees themselves to work. This is the case for remote working or “teleworking,” whereby employees can work from anywhere thanks to tools like the cloud and other communication tools. It’s also related to the concept of smart working, which is a philosophy of working that gives employees flexibility and autonomy in their choice of workspaces, times and tools used.
In the same way, it is a digital transformation for companies to adopt new communication strategies that leverage new touchpoints made available by the growing pervasiveness of the Internet. The most important example, in this sense, is the use of social networks (Facebook, Twitter, LinkedIn and others), which have become strategic for any company that wants to reach its customers more effectively and directly.
It is no coincidence that by 2017, one out of every two companies were using such tools, including in Italy where they are used by 44% of companies. This is because Italian entrepreneurs understand that social media can play a key role in supporting their business, especially when it comes to relationships with individual consumers, provided that they provide content that is really relevant.
In light of this, Italian companies use social for three main reasons (in order of importance): brand reputation (83%), brand awareness (74%) and finally conversion from the platform to the e-commerce site or store.
Digital transformation is also relevant when it comes to the marketing strategy.
It is necessary to offer customers a customer experience that can respond to the customer’s own needs and expectations; in fact, it’s because of digital transformation that customers have become increasingly demanding. This has led companies to change their approach and move from a simple multi-channel marketing strategy, in which the consumer-user has two sales channels (one online and one offline), to what is called an omnichannel strategy.
An omnichannel strategy aims to harmoniously combine and coordinate traditional and digital communication and sales channels in order to offer the consumer a shopping experience that is as immersive, integrated, and dynamic as possible. In doing so, each individual company has the opportunity to increase sales possibilities and to improve the relationship with customers, which becomes stronger and deeper because it is built around the new digital habits of the consumer.
From these three examples, one can understand a fundamental aspect of digital transformation: it always implies a change, an innovation on both the level of technology, linked to the advent of new tools and on the cultural level, which requires a change in activities.
This allows us to move on to the second definition.
Digital transformation is a cultural change
Digital transformation is a radical change in the way we do and conceive of business.
This type of change has involved entrepreneurs who have embraced digital technologies to build new business models or to innovate existing ones.
Maurizio Santacroce, CEO of the Business School of IlSole24Ore, talked about this phenomenon, describing it as a real cultural change since the integration of digital tools within their company is now perceived by entrepreneurs “as something normal, an evolution of the business that is part of daily life. It can help managers to do more, better.”
But concretely, what does this change in mentality translate into?
For example, in the new approach to data. With the digital transformation, every strategic decision can be data-driven, i.e. guided by data, which can support setting goals, tracking trends and understanding if those choices have been effective, or if they need to be revised.
This has a considerable impact, for example, when building a marketing strategy, which, thanks to digital tools, provides a long phase of listening to the audience of consumers through software that analyzes sentiment and behavior online. The change of approach represented by digital transformation is also shown in how a company’s products and services are designed.
If it is true that the product must respond to a need, digital transformation provides the necessary tools to create different versions (including digital) according to the targets identified in the analysis phase. The approach is substantially reversed: we no longer aim to satisfy a generic need but to intercept the differentiated needs and provide specific solutions.
Digital transformation is simplification
Another definition of digital transformation is the simplification of all processes through the reduction of redundancies and errors related to non-strategic, manual activities.
An example is the simplification that is guaranteed by dematerialization, which is one of the concepts most often associated with digital transformation. This term refers to the process of converting a document from analog to digital format, which involves a series of further changes and benefits that impacts an organization at all levels.
First of all, dematerialization reduces paper consumption and consequently, results in significant savings on paper and printing costs since it is no longer necessary to store paper documents in physical warehouses.
The second advantage is better management of documents that can be archived in a more rational and secure way, according to effective architecture that makes it easy and intuitive to search.
Among other things, the dematerialization of documents has advantages not only within the organization of the company, but it is also a significant resource for customer communication, allowing you to create a personalized document experience that is clear and effective, where the relationship is no longer unidirectional, but collaborative.
This has a positive impact on the customer experience, which is a strategic competitive factor for companies, since consumers, when interacting with companies, expect increasingly articulated, dynamic, and personalized communications.
In light of this, we can integrate these elements into our definition: Digital transformation is an opportunity to improve and optimize the business both in terms of internal processes, which are simplified and in terms of the quality of the final outputs.
Digital transformation is an objective
It is no coincidence that all industrialized countries have digital transformation on their agendas.
Europe has recently drawn up a pan-European program to tackle digital transformation in a coordinated manner over 2021 to 2027. Over a period of seven years, it foresees an investment of €9.2 billion to strengthen Europe’s global leadership in the field of digital transformation.
The investment includes:
- 2.7 billion for an autonomous and competitive technology park, increasing the quality and availability of supercomputers for the benefit of health, cybersecurity, renewable energy, and vehicle safety sectors
- 2.5 billion to stimulate growth and private investment in Artificial Intelligence
- 2 billion to develop cutting-edge solutions and infrastructures to protect the digital economy, society, and European democracies from hacking attacks
- 1.3 billion to support the digital transformation of the Public Administration, also through testing facilities and a consultancy service to better assess the economic feasibility of digital transformation projects
- 700 million for European citizens to acquire key digital skills through internships and training courses of varying duration, which can be carried out independently of the Member State of residence
Digital transformation is also a target for Italy. The Agency for Digital Italy, AGID, has developed a site called Digital Advancement that offers data on the progress of strategic digital transformation projects, allowing you to compare them with the objectives of the Digital Growth Plan. In looking at these statistics, it confirms the fact that in Italy, the road to digital transformation is still a long one.
We are seeing positive signals from Italian companies, which shows that we are reaching a remarkable digital maturity, even compared to the UK, France and Germany, and that in general there is a great desire to continue to invest in implementing more digital solutions. However, barriers exist that are slowing down this revolution.
So… what is digital transformation?
Digital transformation is a complex concept that encompasses several meanings, one for each of its relevant aspects.
It is, first of all, a motion of innovation, linked to the introduction of new, digital solutions, which affects many sectors of a company, from marketing to the internal organization.
Speaking of the internal organization, digital transformation also coincides with the improvement of processes, through simplification and dematerialization. The consequences of this is not only greater efficiency, but it also supports companies in providing customers with a product or service that is closer to his needs and expectations.
After all, with digital transformation, it is no longer the product but the customer who is at the center of a company’s strategies. In addition, there is also a change in the entrepreneurial culture, which is now open to the full integration of digital tools into the production model.
Digital transformation has also emphasized the importance of data and the strategic role of the custumer experience as a formidable factor of competitive leverage.
Finally, digital transformation is an objective to be pursued, a goal to be reached, which poses important challenges but which also promises considerable benefits. To grasp them, it is necessary to rethink (once again) about the necessary skills and the key partners that can help bring it to reality.
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