Digital Transformation Projects (1): What is Digital Transformation?

Digital transformation, digitization, internet of things, big data – these are topics that are of interest to all industries, even those that have not been affected by digitization so far, not just the IT world. Digitization is not a new topic, the success of the web 2.0 has paved the way for an almost perfect penetration of our lives by new technologies. Digitization is also not just a temporary trend but a long-term change. People buy things differently, they practice their hobbies differently and they work differently.

Organizations won’t be able to avoid officially starting the digital transformation process, because digital transformation has already had a big impact on organizations in all industries. New technologies and innovations have changed processes, structures and communication in companies fundamentally. Organizations must be aware of this change and should not stay reactive but need to take proactive measures. Only then will they be able to effectively control the digitization process and be sure that their companies digital transformation will be successful. Organizations that underestimate the power and importance of digital transformation and don’t continually improve and optimize their processes and methods, will lose market shares to new competitors or to current competitors, who have adapted to the new market environment better.

Effective project management is one of the most important requirements for a successful digital transformation. Just like any other change project, you will have to carefully plan and prepare digital transformation projects: you must modernize antiquated infrastructures and processes, but you also need to keep in mind the human aspect, because you will have to convince your team of the advantages of a digital transformation.

What is digital transformation?

The web 2.0 has fundamentally changed our society and our economy. Digital transformation has already permeated all parts of our lives and we live in an interconnected world which has never existed before: we work in “smart offices”, live in “smart homes” and use “smart devices”. Systems which previously have functioned completely independently from each other can now communicate and interact with each other. It’s even possible to communicate with non-digital objects – here’s where the internet of things comes in. Digitization has also permeated the complete value-added chain and impacts every part of a company. For organizations, it means that they need to radically reorganize their business processes and structures if they want to stay competitive.

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A digital transformation is a process of disruption and the following process of regeneration. Antiquated structures get torn down and are replaced by new, more efficient processes and structures.

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But it’s not just technology that needs to change, it’s more important to change your way of thinking towards “digital”. Digital transformation causes a disruption of established business models and processes to create more space for new and more efficient value-added processes. Instead of a linear value-added chain, which is characterized by asynchronous communication, we now have more flexible value-added networks, whose different elements can interact with each other and which can react quickly to requests and changes.

Leaders must ask themselves the following questions:

  • How advanced is the digitization process in my organization?
  • Which processes, methods and strategies do we have to improve/renew/eliminate?
  • How can I adapt my leadership style to facilitate digital transformation?
  • How well is my team prepared for digital change? How familiar are they with new technologies?
  • How quickly can we react to market changes? Can we quickly adapt our business processes – and if so, how quick?
  • How can we stand out from our competition and offer our customers high quality products and services?
  • How can we effectively communicate with customers and promote customer loyalty (“customer retention”)?

You’ll have to continually ask yourself these questions because digital transformation is not a onetime endeavor which you can check off your to-do list or which you can just shelve when you experience a setback. It’s a continuous project which can also constantly change its scope. This means that organizations are expected to be extremely flexible. A company needs to fundamentally change from its core and there must be a process of rethinking, especially when it comes to interaction and communication with external and internal stakeholders.

In part 2 of this series, we’ll look at the chances and challenges of digital transformation projects.