Fundamentals of the digital transformation

What does digital transformation mean?

While articles on e-commerce or modern business strategies today almost without exception address the issue of digital transformation, there are certainly those for whom it is still unclear what the difference is between digitization and digital transformation - so let’s start with the definition itself.

Digitalization is simply the process of converting information into a digital format - the most obvious example of this is the conversion of data stored in analog form to a digital format. In contrast, digital transformation at the enterprise level is the process by which a company integrates digital technology into all areas of its operations, moving previously real-world business processes and workflows into virtual space.

So it does not only mean the integration of the newest technologies into our previous operation processes but also the transformation of the enterprise operations, unifying and automating the processes, making the workflows more efficient in general. This kind of transformation also requires a change in attitude, as we also need to transform our company's operating model and corporate culture and adopt a new kind of experimental attitude, constantly looking for new solutions. 

Such a major change can be daunting for many (for example, there is often an unfounded fear in company employees that they will lose their jobs because of digital systems), yet it is a step to follow for efficient companies as the digital revolution has completely transformed consumer expectations and needs.

The digital transformation has a huge impact on the operation of all business lines, there are areas that have been redefined in recent years. These include, for example, e-commerce, as already mentioned (whether it is B2B or B2C sales), healthcare (it is enough to mention smartwatches that monitor various body functions or the use of blockchain technology), telecommunications, and freight. If a business operates in one of these areas, it is essential to adapt a business model that meets the requirements of the digital age.

Social trends promoting digital transformation

Even before the outbreak of the Covid-19 epidemic, it was observed that consumers were increasingly making their purchases online, and the pandemic further reinforced this trend.

Based on the data of Statista, in 2020, the number of people using e-commerce services exceeded two billion, and the total value of online purchases exceeded $ 4.28 trillion, accounting for about 18 percent of total retail sales worldwide. The increase of online purchases can be observed not only in B2C but also in B2B sales: last year, online sales with the B2B model reached 6.5 thousand billion dollars.

Omnichannel sales are also a growing trend: a significant proportion of customers are already actively using their mobile phones to search for product information when shopping in real stores. The Y and Z generations (ie born between 1980 and 1995 and 1995-2010) do most of their online purchases on various social platforms.

As consumers spend more and more time (an average of three hours a day worldwide according to Statista) on online activities, they have more and more expectations of all companies that also offer online services. Another example from e-commerce: the success of Amazon Prime indicates the great need of customers to have their online orders delivered to home as soon as possible. In order for companies to be able to meet these expectations, they must also transform their operational processes and image, otherwise, they will inevitably lose customers. The use of modern digital tools (such as artificial intelligence, which plays a key role in data collection and processing) is essential to provide the consumer experience expected by consumers.

Basic aspects of digital transformation

We can see that digital transformation is a complex process that is not feasible overnight - so let's summarize briefly what aspects we need to consider and what steps we need to take during the transformation!

1. Defining business goals

Unfortunately, it is often the case that companies only consider the introduction of a specific digital tool (such as machine-learning systems) or a marketing model (such as omnichannel marketing) instead of approaching the process from their business objectives. It is essential for the success of the digital transformation that we first clearly define what we want to achieve by transforming our company and, based on this, choose the technological tools to be used.

2. Transforming corporate culture

A digitális transzformációval együtt járó működésbeli átalakítások csakis akkor vezethetnek sikerre, ha vállalatunk valamennyi munkatársa – a komplex digitális rendszerek egyes elemeihez hasonlóan – közös célok elérésére irányuló, összehangolt munkát végez, ezt pedig kizárólag egy modern vállalati kultúra kialakításával érhetjük el. Az innovatív, önálló gondolkodásra és kreativitásra buzdító környezet megteremtésében sokat segíthet az agilis döntéshozatal, a gyors prototipizálás és (a hagyományos vállalati hierarchiával szemben) a lapos szervezeti struktúra által jellemzett startupok vállalati kultúrájának tanulmányozása.

3. Integration of digital technology

As mentioned earlier, digital transformation does not only consist of technological innovation, although it is an essential part of the process. When developing the technology toolkit and human resources, always keep cost efficiency in mind: it is only worthwhile to integrate a particular asset into the operation of the company if it really helps to achieve the set goals.

4. Improvement of customer experience

A successful digital transformation makes the business processes more efficient but also has an effect on customer experience. As nowadays a lot of participants of the industry are represented in the online space, when designing and developing a user surface it is very important to pay attention not only to the efficient operation but also to offer visitors a unique, company-specific customer experience.

5. The role of available technological tools in the development of business strategy

The success of the digital transformation is also fundamentally determined by the extent to which we take into account the development of technological tools when improving our company’s strategy. If a company wants to take advantage of the opportunities offered by digital transformation, it must not only have an in-depth knowledge of customer needs and the methods used by its competitors but also constantly study the latest technological developments available in the market.