What is Digital Transformation?

Written By: Eric Kimberling
Date: June 22, 2021

Digital transformation is a commonly used buzzword used all around the world – but what exactly does it mean?

When I first heard the term “digital transformation,” many years ago, I disliked the term and it didn't make sense to me. I actually grew up with my parents working at a company called Digital Equipment Corporation back in the 80s, but since then that company has gone out of business. It's obsolete now and so when I hear the term digital, I always thought it sounded a bit outdated. Nevertheless, digital transformation is one of the biggest buzzwords out there.

It is so commonly used and, quite frankly, is overused. It fills in the blanks or tries to fill in the blanks in a lot of different ways in which it really shouldn't be used. With all this said, here is a question to ponder while reading: What does it mean to me and my organization? I want you to keep this in the back of your mind as you begin your journey.

The Simple Definition

First, it helps to provide a real simple overview definition of digital transformation. In simplest terms, digital transformation is the use of technology. Any sort of technology that helps improve your business. For example:

If you're a manufacturing organization, it could be robotics, blockchain, or artificial intelligence. I know I'm rattling off a bunch of buzzwords and technologies that you may or may not understand, but the key point here is that digital transformation is any sort of technology that enables your business and allows you to be more productive, efficient, and effective.

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History

I don't have an exact pinpoint of when the digital transformation began but it was a very organic evolution of technology and its use in businesses and organizations. If you think about it, you can trace a lot of this back to the 80s and 90s when businesses were first starting to use spreadsheets, word processors, and other types of rudimentary technology.

There was a big revolution of enterprise software (particularly in the 90s), that went beyond spreadsheets and word processing. This allowed companies to track orders, information, financials, and sales information. It evolved into what is now known as ERP.

Digital transformation started off as material resource planning, in many cases for manufacturing organizations that were just trying to track their inventory and operations. It then evolved into enterprise resource planning or ERP. At the same time, a lot of organizations were starting to implement more robust accounting and financial software. All in all, the 80s, and 90s are where you can really trace that evolution of digital transformation.

In my opinion, what happened in the 2010’s is that a lot of new technologies have exploded onto the scene. Technologies like blockchain, artificial intelligence, predictive analytics, the internet of things, etc. These are revolutionary technologies that allow businesses to operate better and more effectively.

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The term digital transformation has become sort of a catch-all bucket for a lot of these technologies and there is not one definition of what digital transformation means to any given organization. For some, it could just be an ERP system, for others, it could be implementing a financial system, implementing robotics on the shop floor, or whatever the case may be, it's a matter of defining what digital transformation is to you.

Digital Transformation- What is it Actually?

Now, I'm going to let you in on a little secret: digital transformation really doesn't have a lot to do with the digital part of the term, but it has a lot more to do with transformation. It's more of a business transformation that organizations are trying to accomplish. Generally, they're trying to improve their efficiency, provide a better customer experience, be more effective as an organization, and they're trying to make the jobs easier for the employees.

The real term is that it is driven by the business needs, and it just so happens that technology is one way to enable those changes. The real keyword here is transformation. That's the operative word within digital transformation and in fact, I would argue that we can just scratch it digital altogether and call it a business transformation.

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Digital is likely to be a big part of that business transformation, but there's a lot more to it than just the technology itself. There are also the process improvements, process management, and process reengineering that needs to happen in addition to organizational change management. This is why business transformation is probably a more descriptive term in defining what exactly digital transformation is. It's more of a business transformation to enhance and improve the business or the organization that you're working toward.

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Why Digital Transformations Fail

Now, despite all the new great technologies out there, a lot of digital transformations fail. In fact, more digital transformations fail than succeed and it's not because of the technology, isn't there, but it's because we haven't addressed that business transformation side of things like I mentioned earlier.

When we neglect the business process and the organizational people side of things, we're neglecting the entire digital transformation. It does not matter how great the technology is if we haven't addressed the people and processes side of things. If an organization has not planned for the people and processes just as much as they have in investing in the technology, the likelihood of failure is very high.

Digital transformations have a high failure rate. They're very painful for a lot of organizations, especially if they don’t have a lot of experience. The process can be overwhelming, and businesses are not always sure what to do when the transformation starts to go sideways. It's very important to recognize that digital transformations are only going to succeed when you invest heavily in the people and process side of things to correspond with the investments in technology.

Resources

This is the landscape that we're dealing with, and I encourage you to learn more about what digital transformation means, how organizations can maximize the benefits and some of the risks that they struggle with by reviewing our 2021 Digital Transformation Report. I hope you found that information useful.

If you have any questions or if you’d like to brainstorm ideas related to your digital transformation and how to be sure you right strategy – please feel free to reach out to me directly. I’m always happy to be an informal sounding board for you and your team.

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Author:
Eric Kimberling
Eric is known globally as a thought leader in the ERP consulting space. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.
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