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What is digital transformation?

Charles Swain
10.11.2020
Everything you need to know to bring your business into the 21st century!

When Heliotrope Digital was founded in 2018, we created a so-called 'native' digital business. We use Google Workspace for document collaboration and file sharing, which we can easily access from our mobiles. We use other cloud-based software such as Jira and Slack for workflow and project management. And our team has worked remotely in four different countries since our inception.

If digitalisation is a spectrum with digital native at one end, then at the other you might have a 100 year old law firm keeping all their clients' details in paper format and sending letters as a preferred means of communication. For older businesses, questions of how to refresh information systems, business processes and management styles in order to take advantage of technology can be very complex, with decisions having a lasting and sometimes unforeseen impact on the company's future. Harnessing technology is a process every company must undergo in order to remain competitive. But where do you start?

Defining digital transformation

The process of changing a business to take advantage of new technology is broadly referred to as 'digital transformation'. The term implies a fundamental, radical and lasting change achieved with the assistance of digital technology. Digital transformation covers not only IT systems and business processes, but also people skills and can even call for a culture change throughout the whole organisation.

In reality a digital transformation programme will differ depending where a business sits on the spectrum described above. For some, extreme changes may be called for; for others, a digital optimisation programme might be sufficient, enhancing or redesigning systems and processes already in place. Various factors will impact the extent of a company's transformation, including business strategy, constraints such as budget and timescale, as well as resources available.

"90% of CEOs believe the digital economy will impact their industry, but less than 15% are executing a digital strategy."

It can also help to look at digital transformation not as a single event, but as an ongoing cycle beginning with definition of goals, continuing with design and implementation of a new system with constant analysis to ensure alignment with the business strategy. This is particularly true given the exponential nature of the pace of technological change.

Some trends & themes

Before getting into the details of going about transforming your business, it is useful to understand some of the recurring trends that accompany a successful digital transformation programme.

Holistic, integrated solutions


Key to the success of any business change project is taking a holistic approach. If one department is performing poorly, the initial reasons that surface rarely tell the whole story. For example, a frequent problem area in business involves 'hand-offs' from one person or department to another, which can often cause delays or miscommunication. A buildup of work after a hand-off might initially imply that more resources are needed to process the bottleneck. Queueing theory tells us, however, that counterintuitively this is not the case and that waiting times can in fact increase as a result of attempts to correct the situation. As a result, attempts to optimise processes should be viewed within the context of the business as a whole, so as not to end up increasing delays.

This is related to the concept of information silos in a business. An information silo occurs when information is restricted to individual departments within a business. This can have various negative consequences, such as duplication of work, tasks being omitted or miscommunications occurring based on differing viewpoints of a common situation.

Taking a holistic view, sharing information across all departments, and ensuring that the perspectives of all stakeholders throughout the business are taken account of is vital for any successful digital transformation programme.

IN TODAY'S ERA OF VOLATILITY, THERE IS NO OTHER WAY BUT TO RE-INVENT. THE ONLY SUSTAINABLE ADVANTAGE YOU CAN HAVE OVER OTHERS IS AGILITY, THAT'S IT. BECAUSE NOTHING ELSE IS SUSTAINABLE, EVERYTHING ELSE YOU CREATE, SOMEBODY ELSE WILL REPLICATE."

Customer-centric design

Another significant trend of the digital age is an increased focus on customer expectations. In many businesses, internal metrics such as Key Performance Indicators (KPIs), Critical Success Factors (CSFs) and other objectives are often defined at an organisational level and cascaded down through departments. Whilst these metrics are great for assessing your business's performance, a frequent problem is that they are often focused on what the organisation is aiming to achieve rather than what the customer actually wants or values.

The term 'customer experience' (CX) emerged in (relatively) recent years to counteract this tendency. CX is about a customer's journey from their first impression of your business, throughout the decision-making and purchasing processes to any post-purchase experiences or interactions. Fundamentally, CX is about empathising with your customers and putting yourself in their shoes. Buyer personas, customer journey maps and surveys/requesting feedback are all useful exercises in improving your company's CX.

8/10 people are happy to pay more for a better experience. It is one of the key factors in ensuring customers become loyal, long-term and sending more customers your way. Ultimately, CX is about going above and beyond and giving users a noticeably unique experience. Harnessing this is key to standing out from the competition and converting your clients from customers into the company's marketing division.

Data analytics

The amount of data that can be used by companies to improve their service today is vast. Constant monitoring of site analytics and marketing processes are vital to stay ahead of the competition. Link tracking, remarketing and analysis of user characteristics can all be used to define the company's offering and understand the customers better.

SMEs in particular can benefit from optimising their data analytics and quite often possess data about their customers they might not use. For example, a company that has to collect passport details for anti-money laundering purposes, by recording customers' dates of birth (this can be done anonymously), can easily establish clients' average age, and adjust its marketing strategy accordingly. Recording the source of a referral during an initial call will also provide huge insights into where the company should be focussing its resources.

Changes to a business's activities should be constantly assessed and improved against metrics such as ROI and response/engagement from users. We also believe use of clients' data must not only comply with relevant legislation, but also be handled in an ethical manner. The risks of not doing so far outweigh the rewards.

Workflow & management automation

A vast number of software packages are now available for facilitating virtually any business task. These include sophisticated CRMs like Salesforce and Hubspot, which not only act as a database but also perform essential data analysis and visualisation, to handy workflow tools such as Trello and monday.com, which work very flexibly to streamline internal processes and increase efficiency. Software such as Receipt Bank means that instead of having to key in details from receipts for purchases, you can simply photograph the receipt and AI will work out all the details (net amount, VAT, supplier etc.) and post it to your accounting system.

Needless to say, choosing the right package or understanding whether a package solution is even the right option in the first place is of utmost importance. A mistake can have costly consequences further down the line, and the process of Requirements Engineering to align a business's needs with the best solution is an extensive discipline in and of itself.

And of course, the most perfectly aligned, comprehensive enterprise software solution is rendered useless if members of staff are improperly trained to use the new system.

Realising a successful digital transformation programme

While the prospect of digital transformation might seem daunting, there are many ways you can reduce risk and ensure a successful outcome. If you are a business owner and you are reading this now, you have actually overcome perhaps the biggest hurdle, which is a realisation that your business needs to change. Executing new strategies always implies risk, and ultimately strategic leadership, buy-in from stakeholders and a culture of positivity throughout the business are what really drive success.

Below are some tried and tested steps to help guide you through your digital transformation.

1

Start with 'why'

There can be a tendency in SMEs to focus so frantically on the day-to-day activities that development of business strategy can be neglected or even completely forgotten about. Not only is it obviously advantageous to have a long-term plan for your business, it can also help to take a step back and ask why you are doing what you are doing.

Business author Simon Sinek in his TED talk, Start with Why (which is well worth taking 15 minutes to watch), suggests that truly successful businesses are able to tap into their customers' deeply held beliefs and resonate on another level by identifying their 'why' rather than their 'what' or 'how'. If you haven't done so recently, it can definitely help to think about your core beliefs and what truly motivates you and incorporate this into your strategy. As a side note, we think this applies just as much to hiring staff as it does to finding customers.

2

Strategy Analysis

Once you have done this, analyse your external and internal environments. Various tools and methodologies exist to help with this, such as PESTLE, Porter's Fiver Forces model for external analysis and MOST, Resource Audits and The Boston Box for internal. A balance between internal and external analysis will help to ensure that you are not making too radical a change without being certain that the internal capability exists for successful delivery.

3

Ensure buy-in from stakeholders

Stakeholder analysis and management is crucial for the success of your project. Of course, this will vary hugely depending on the business but again there are tools such as RACI charts, CATWOE and business activity models which can help to ensure that all parties are on board. Bear in mind that it is not just the most influential internal stakeholders that dictate the success of your transformation project; operational staff as well as competitors, suppliers, regulatory bodies etc. can all derail your plans if they are not taken into account.

4

Map out your current business situation

Essential to planning where you want to be is having a true picture of where you are at the moment. This can be achieved through workshops and interviews with staff, scenario analysis and various other investigation techniques. The important thing here is to dig down to the real issues and ask tough questions.

5

Map out your ideal solutions and analyse the gap

Set targets and goals for each part of the business. Map out how they should function in an ideal 'happy day' scenario. Remember to keep the customer at the forefront of the process and have an open mind when it comes to change. When looking at improving your internal processes, there are many ways of achieving greater efficiency. These include simplifying things, redefining the boundaries of a specific set of tasks, changing the order certain tasks are carried out as well as automating tasks. Business process models can help with this stage, but a logical visual flow chart can be just as helpful for these purposes (depending on the complexity of the process).

It may be that you need to map out more than one solution if, as is explored below, an ideal solution is not financially viable. As with any project, there is always a trade-off between cost, quality and timescales. For digital transformation projects specifically, there is always a 'build vs. buy' question which will have a big impact on the solution. Generally speaking, a bespoke solution will be more expensive but may have long-term cost savings which should be taken into account. Of course, if there are budget constraints, an 'off the shelf' solution may be preferable.

Gap analysis is a fairly large area of business analysis. The main thing to remember is to take a holistic approach considering the whole organisation, including culture and management style. The POPIT™ model is useful for providing a framework for ensuring everything is taken into account.

6

Ensure there is a financial case for change

It may sound obvious, but before implementing changes, it is important to ensure that the proposed solution will provide a return on investment. This can be difficult, especially when many benefits of digital transformation may be intangible, for instance, increased employee satisfaction or better internal communication.

Recording and analysing costs and benefits in a business case will reduce risk and ensure alignment with business objectives.

7

Documenting and delivering the solution

As mentioned above, Requirements Engineering is a significant field of practice in the development of new information systems. If you are approaching a digital transformation project on your own, however, it will help to record in plain English what the new business system will need to do. Use case diagrams and entity relationship models can also help to visualise requirements better.

Once you have completed the steps above, you should have a good framework for implementing your new systems. It is worth repeating here that a holistic approach is essential here incorporating structures, performance measures, people's skill development, business process design and IT.

If you'd like any further information about anything covered here, please feel free to give us a call. We're always happy to have a friendly chat over the phone and see if there is any way we can ensure your project's success!