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What is digital transformation?

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Defining digital transformation

Digital transformation is a term that has reached just about every company in every industry. It has been debated by analysts, thought-leaders, executives – you name it.  Digital transformation is a broad concept for the fundamental transformation of companies to a more technology-reliant approach for operating business processes, activities, models and competencies. A few means of digital transformation include the use of analytics, mobility, social media and smart embedded devices for improving on traditional techniques and technologies to change customer relations and internal processes.

According to the Guardian, there exists three key drivers of transformation: changing consumer demand, changing technology and changing competition. If any of these puts pressure on a company’s business model, it must adapt.

Already a reality

The word ‘transformation’ should not be taken lightly, digital transformation is a radically different approach to operating a business. According to i-Scoop, areas of a business that digital transformation impacts include:

Business activities: Marketing, operations, human resources, administration, customer service, etc.

Business processes: One or more connected operations, activities and sets to achieve a specific business goal, whereby business process management, business process optimization and business process automation come into the picture.

Business models: How businesses function, from the go-to-market approach and value proposition to the ways it seeks to make money.

Business ecosystems: The networks of partners and stakeholders, as well as contextual factors affecting the business such as regulatory or economic priorities and evolutions.

Business assets: Whereby the focus lies on traditional assets but, increasingly, on less ‘tangible’ assets such as information and customers.

Leading companies of this concept can be found in nearly all industries, with disrupters like Uber providing extreme examples of what digital transformation can achieve. In fact, in 2014 MIT interviewed 157 executives in 50 large companies — typically $1 billion or more in annual sales — and spanning 15 countries. Approximately half of the interviewees were business leaders such as CEOs, line of business managers, marketing heads or COOs, while the other half were IT and technology leaders. The companies interviewed were moving forward with digital transformation at varying paces and experiencing varying levels of success. MIT found that the best companies — those they refer to as Digirati — combine digital activity with strong leadership to turn technology into transformation, or what MIT considers reaching ‘digital maturity.’

How to be successful

I-Scoop goes on to emphasize four digital transformation realities:

  • Business/IT relationship is key 
    • Closing the gap between both, focusing on the same goals and not overlooking the role of IT.
  • There is a common DNA among digital leaders
    • And the path to digital transformation shows common traits.
  • Each industry is impacted, including your industry
    • Customers, employees, partners, nor competitors or new, disruptive players, will wait for business to catch up, regardless of industry.
  • Digital transformation is led from the top

IoT and digital transformation

IoT is at the heart of digital transformation with connected devices providing data that companies and consumers couldn’t easily access in the past.

We have covered a number of use cases and case studies, many of them showing what digital transformation can achieve. GE claims using IoT data to create even a 1% increase in fuel efficiency of gas turbine engines,used in aircraft engines and power plants, could yield $6 billion in annual savings.

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