Any organization considering going through digital transformation, regardless of its industry, will need to consider four main types of digital transformation – process transformation, business model transformation, domain transformation, and cultural or organizational transformation.
At Lumen Spei, we have the resources and expertise to help you undergo each of these four types of digital transformation. Reach out to us and let’s share some ideas!
Now, let’s dive into the article.
4 types of digital transformation
In short, we can identify 4 main types of digital transformation – process transformation, business model transformation, domain transformation, and cultural or organizational transformation.
Throughout the article, we’ll go through each of them and briefly explain how to start and what should your first steps be. Have in mind that digital transformation is a process unique to every single company. Meaning, there’s no universal blueprint for successful digital transformation.
Regardless of the type of digital transformation you undergo, the role of digital transformation in business growth is a substantial one.
Now, let’s talk more about one of the types of digital transformation – process transformation.
Process Transformation
Process transformation includes adjusting the elements of processes within the company to achieve new objectives. Companies will typically engage in a process transformation when needing a radical update. Such transformation aims to modernize the business processes, implement new technologies, save financial resources, and more.
Business process transformation is similar to business process management, but the goal is to drastically improve the way business works. These are the main steps an organization will need to take if it wants to transform its processes:
- Determine the goal of the transformation: Is the company looking to upgrade systems, incorporate new technologies, or adapt processes to their new organizational structure?
- Decide on baseline metrics: Companies need to gather the data, such as costs and time, to prove that the process transformation leads to success.
- Gathering all stakeholders: Approach everyone involved and ask for feedback on the previous and new processes.
- Craft the best scenario: Use a diagramming tool to create the desired workflow path, requiring human and system tasks.
- Launch and track: Introduce the new process to small teams first, and monitor the progress and needed changes to ensure success.
Business Model Transformation
Many companies pursue digital technologies because they want to transform conventional business models that no longer work or produce the results they used to. Almost across all industries, there are examples of such innovation. Netflix is reinventing video distribution and Uber the taxi industry.
These are the leaders in their industry, but there are many more examples of smaller companies incorporating these significant business model changes. Companies in the insurance sector are using data and analytics to charge separately by the mile instead of traditional insurance contracts.
By rethinking and changing their current models to achieve more success, companies can find new opportunities that lead to growth. That is why the transformation of the business model will be a priority for companies wishing to stay ahead of their competition.
Domain Transformation
Unlike process and business model transformation, domain transformation is not so much talked about, although it provides enormous value for organizations.
With new technologies, companies are redefining their products and services, blurring industry boundaries, and fostering opportunities for non-conventional competitors. This type of extensive transformation provides valuable opportunities for companies.
A great example of how the domain transformation enhanced an entire business is Amazon, the online retailer. The company expanded into a new market domain when they launched their Amazon Web Services or AWS. At the moment, AWS is the leader among cloud computing/infrastructure service providers, leaving behind corporate tech giants like Microsoft and IBM.
To start providing cloud services, Amazon only had to leverage the capabilities and services the company was already using, accelerating the process tremendously when moving into the new space.
Those companies that decide to undergo a digital transformation need to be aware of the potential of domain transformation when implementing new technology.
Cultural or Organizational Transformation
It is not enough to update your existing technology or redesign products for a successful digital transformation. Often, businesses will fail to align these digital transformation measures with their internal values, which leaves a heavy effect on the business culture.
Negative consequences will range from slow, complicated adoption of digital technologies to a complete market competitiveness defeat. That leads to revenue and productivity drop, which can be the end of an organization.
When you implement the right one, cultural or organizational transformation can help shift the entire business culture to understand, embrace, and extend digital transformation.
Leaders of these organizations need to create a clear transformation vision and communicate it successfully throughout the entire organization. Besides that, they need to be aware of the smart risks in front of them and why they are worth taking.
When it comes to digital culture, these are the core elements of it:
- Promoting external instead of internal orientation
- Appreciates delegation over control
- Focuses more on actions and less on planning
- Aims more for collaboration instead of individual effort
If we look at the nature of digital transformation from its first moment to today, it’s impossible to ignore its evolution. The meaning of digital transformation is also continuously evolving.
Firstly, it implied turning paper into digital form. Then, we used this term to explain process optimization by using software solutions. Naturally, what followed was networking, software as a service (SaaS) and lastly, we have a new digital economy.
Undoubtedly, pandemic accelerated the digital transformation and changed its meaning once again to explain the change from optimizing a business to transforming it. Climate change, social unrest, trade wars, and automation processes in factories were the main external factors of this change.
Adding pandemic to all of these factors, digital investments were accelerated even further. As a result, we are now having the digital transformation that was expected to happen in the next ten years or so.
Which types of digital transformation should your company undergo?
You want your company to go digital, but you’re wondering where to start? Our digital transformation experts at Lumen Spei will be happy to help you with all the challenges of digital transformation.
If you wish to find out more about how to digitalize or transform your business, please don’t hesitate to drop us an email at: krunoslav.ris@lumenspei.com
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