Why Is Digital Transformation Important?
Digital transformation is important because disruption is a given and competition is fierce. Digital technology has disrupted every industry, from media and energy to healthcare and transportation. As a result, it is imperative industrial companies reimagine their work methods, workforce, and even workplace. Investment in digital transformation has been proven to improve efficiency, maximize revenue growth, and reduce operational costs so they can be prepared for the next disruption.
WHAT ARE THE DRIVERS OF DIGITAL TRANSFORMATION?
Why is digital transformation a business imperative for industrial enterprises?
Worker Shortage
The industrial markets have millions of jobs unfilled due to a growing skills gap.
Risk & Cost Pressure
Global companies are facing increasing macroeconomic and cost pressures.
Digital Disruption
Traditional enterprises are threatened by the rise of digital business models.
WHAT ARE THE BENEFITS OF DIGITAL TRANSFORMATION?
Our research shows 92% of industrial companies are executing digital transformation initiatives—but what is the goal? Across a wide range of projects, the goals focus on three areas of benefit: cost and efficiency, growth, and quality paired with customer experience.
Reduce costs to improve efficiencies
The lowest barrier to entry with DX is finding efficiencies, driving productivity, and reducing costs. According to Gartner, 62% are adopting a cost-first mindset for digital transformation initiatives.
Drive exponential growth through product innovation
Organizations are investing in areas with high growth and attainable market share. Initiatives include reducing time-to-market, introducing new products and business models, or increasing throughput.
Improve quality and engage customers
Becoming customer-centric is essential to remain competitive. To differentiate, companies are improving product quality, creating unique customer experiences, and delivering higher levels of service.
What Are the Types of Digital Transformation?
The reasons and drivers of digital transformation are as varied and nuanced as the companies pursuing it. However, there are five main types and often these types are interconnected. For example, implementing a new technology-led process requires new thinking and collaboration from employees, which requires cultural transformation.
- Process Transformation
Redefining processes to achieve greater efficiency and reduce costs. - Product and Service Transformation
Driving faster product innovation and improving service delivery. - Growth Opportunity
Expanding into emerging areas with high-growth potential and attainable market share. - Cultural Transformation
Creating an organizational culture that fosters collaboration and alignment. - Customer Experience
Improving product and/or service quality and building superior customer experiences and engagement opportunities.
Digital Transformation Challenges
Strategy
More than one-third of executives cite the lack of a clear DX strategy as a key barrier to achieving full potential. Developing a DX strategy aligned with business goals and built to enable measurable value is essential to success and program longevity. Our DX framework provides a 5-step process to identify value and kick-start your strategy.
Data Alignment
Three-out-of-four executives say improving the ability to leverage data across the enterprise would be effective at addressing disruption. Gathering, organizing, and democratizing your data unlocks greater potential for DX outcomes. Enabling a digital thread allows critical data to be accessible across functions and roles.
Speed & Scale
Manufacturers on average start with eight digital transformation projects, with 75% of these failing to scale. To overcome this pilot purgatory, combine a value-led DX strategy with strategic partners and out-of-the-box solutions. This will set the business on the right path to achieve impact quickly and scale across an organization.
Digitization vs. Digitalization vs. Digital Transformation
Let’s clear up some common semantic confusion around these three distinct efforts.
Digitization:
The capturing of information about the business, products, and processes in a digital form. For example, scanning a paper document, keying in datapoints into an Excel spreadsheet, etc.
Digitalization:
The application of digital technologies to improve or implement functional processes that take advantage of data being in a digital format. For example, designing a product in a CAD environment instead of on a drafting table or collecting and analyzing manufacturing data via an IoT platform instead of manually.
Digital transformation:
The large-scale reorientation of business processes, workflows, and even strategy made possible when several interconnected functional processes have been digitalized. For example, leveraging IoT and AR to reinvent your service business, or adopting digital performance management as a cornerstone of driving manufacturing productivity.
What Does Digital Transformation Look Like & How to Get Started?
Dive Deeper on Digital Transformation
Digital transformation is an opportunity for industrial enterprises to lead their industries, capture market value, and drive efficiencies across engineering, manufacturing, and service. Ready to get started? Start with these blogs.