Digital transformation part 1 of 2: What does it mean?

You have probably heard the term digital transformation in some context. But what does it actually mean and how should you relate to it? In this two-part article series we clarify the concept and give you tips to get started.

We live in a digital era and, in step with technological development, customers’ needs, behaviors and expectations are changing. To remain competitive, companies must meet these changed needs by actively leveraging the new conditions that technology can offer. Perhaps that is also why digital transformation has received increasing attention in various contexts. In this introductory article we try, among other things, to clarify what the concept of digital transformation means, what the benefits are and why you should invest in it.

What is digital transformation?

In short, you could say that digital transformation is about change. It could also be described as a tool or approach where you leverage technological capabilities to gain access to new opportunities, new innovation and new business models.

If we compare digital transformation with digitizing something, digitization means converting something analog into digital, for example creating a digital PDF of a physical document. Digital transformation, on the other hand, is not just about making an existing product/service digital, but about how we use technology to improve, renew and streamline different parts of an organization. It can include changing the way we work, think and act.

This digital transformation does not happen automatically just because we live in a digital era. Companies must make deliberate and strategic decisions to bring about the changes that the transformation entails. Often it may be necessary to change fundamental structures and cultures through larger organizational changes. Sometimes you have to increase the use of digital technology, review skills needs and raise digital understanding among decision-makers. In this way, digital transformation becomes a journey of change and a long-term strategic effort. That is also why it is more about leadership and strategy than about new technology.

To be competitive you must also meet customers’ changed needs. Digital transformation is therefore also about increasingly starting from users and working in a more customer-driven way.

Why digital transformation should be part of your business strategy

Digitization provides new conditions and new opportunities for running businesses and making deals, and we must take advantage of this. Today it is not uncommon for new technology to shape an entire industry. Companies that do not keep up with the digital development risk being outpaced by start-ups, which have both a technological lead and agile working methods.

There are numerous examples of markets changing as people alter their behavior when newly established companies offer smart and user-friendly solutions. Swish and iZettle are examples of services that have challenged traditional payment methods and helped pave the way for a more cashless Sweden. Some even argue that Sweden could become the world’s first cashless society thanks to this digital development. Uber and Airbnb are two other examples of new players that have challenged entire taxi and hotel industries – even though they do not own any cars or accommodations.

What these companies do is, through new technology and by having private individuals on both sides of consumption, offer digital, customer-driven services built around users’ needs. They simply change the rules of the game and transform an entire market.

There is no escaping the fact that technology plays an increasingly large and important role in the everyday lives of both individuals and companies. New technologies and companies will emerge and challenge those already established. It is important to work proactively so that you are ready to ride the wave of change when it arrives. Focusing on digital transformation is simply a tool and an approach to create the right conditions for handling the fast-moving world we live in today. Companies that have not yet begun their digital transformation will therefore, in all likelihood, need to start their journey in the near future.

Advantages of digital transformation

Digital transformation can involve a range of organizational changes, some more challenging than others to implement. But because the benefits are many, you simply cannot ignore what the work brings. Here we list some of the advantages:

• Although digital transformation is not solely about technology, digitization contributes to creating better conditions. Digitalization has the ability to free up time and resources to create entirely new opportunities, new innovations and new business models. This can make things easier for both individuals and companies in the short and long term.
• Digital solutions and a digital approach can contribute to improvements and streamlining of existing products/services and processes. This in turn can reduce costs and increase revenues. By using data for analysis, you can, for example, make better-informed decisions, personalize your customer offering, improve customer relationships and deliver more targeted communication. A company's customer service could be made more efficient if digital tools and processes were implemented.

• Undergoing a digital transformation makes the company more agile and receptive to rapid changes. This is well suited to economic fluctuations and the fast-moving world we live in. As a bonus, your company becomes more competitive
  
  
• Through digital transformation you try to find new ways to run the business in the form of new work processes or new business models. This, in turn, can open up for new forms of collaboration and new business opportunities. The Internet of Things (IoT) and smart homes are examples of areas that have spawned several interesting collaborations. Take, for example, the automotive and telecom industries where self-driving vehicles communicate with each other and share data to warn of slippery road conditions further along the route. Or the home and electronics industry that has developed ovens that make sure food doesn't burn, refrigerators that tell you when you're out of milk, or washing machines that order laundry detergent. Smart technology that a few years ago was thought impossible has become part of our everyday life. The digital transformation process prepares us to keep up with this development

• When digital maturity is low many companies have an inside-out mindset. A digital transformation can make us stop basing things on ourselves and instead work more customer-driven and focus on the user experience. This benefits all parts of the business and is a must if you want to create competitive digital services and business benefits.

• No single individual can carry out a digital transformation alone. You need to bring all employees along on the journey of change. By focusing on leadership and strategy, which is what digital transformation is really about, you can prioritize and drive the company toward the right kind of changes. In this way we can create smarter digital solutions, better teams, more efficient work processes and a more profitable business

In summary

We hope you now have a better grasp of what digital transformation means and why it should become part of your business strategy. In part 2 of this article series we give concrete tips on how you can get started with your transformation journey.

Digital transformation case studies

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