Why Digital Transformation (DX) is crucial for your Bottom Line

Updated: Jul 12

There is a lot of buzz around the concept of “Digital Transformation” (DX), but what does it actually mean and why should it matter to you and your business?

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What many people have understood by the term is that Information Technology (IT) is playing an increasingly critical role in the success of businesses and organisations. The error that many businesses are making as they plan and undergo their digital transformation is overemphasize the technology part of the equation, while forgetting the myriad factors that underpin the success of technology.

Digital transformation is the process of shifting your organisation from a legacy approach to new ways of working and thinking using digital, social, mobile and emerging technologies. It involves a change in leadership, different thinking, the encouragement of innovation and new business models, incorporating digitisation of assets and an increased use of technology to improve the experience of your organisation’s employees, customers, suppliers, partners and stakeholders.

An MIT and Capgemini study titled “The Digital Advantage: How Digital leaders outperform their peers in every industry” (2017) found that there are two major spheres that businesses must tackle in order to reap the financial rewards of Digital Transformation:

The first is the digital sophistication of technology, which means that the company in question is investing in best practice tech for their field to enable greater automation, customer engagement and efficiencies. Digital practices in this arena include location-based marketing, connected products, mobile sales, social media communities and optimised pricing. Luxury fashion brand Burberry, for example, increased profits by improving their in-store customer experience and operational efficiencies using a range of retail-appropriate digital technologies.

The second important sphere – which is what is most often ignored – is the paradigm shift that the organisation’s management needs to make in order to foster digital transformation. Leadership capabilities that must be advanced in this regard include cross-silo coordination, evolving the culture, IT-business relationships, governance and skills development. Leading car brand Volvo is noted for the vision and governance competencies it produced prior to rolling out new digital services in its vehicles – features that set its vehicles apart from competitors to drive sales.

The above-mentioned study of over 400 organisations from a wide range of industries found that when a company addresses both those spheres (companies that the study calls the “Digirati”), they beat their competitors in terms of profit by up to 50%. Interestingly, businesses that focused just on digital sophistication (dubbed “Fashionistas”) did not reach the profitability of those who invested mostly in developing management competencies (dubbed “Conservatives”). Companies who had invested little into either arena – “Digital Beginners” – were the least profitable.

For Digital Transformation to occur, someone needs to take the reins and lead the enterprise forward.

For Digital Transformation to occur, someone needs to take the reins and lead the enterprise forward. While it is debatable as to where in the organisation this push should come from, studies have found that effective change can transpire when IT leaders expand the scope of their role to become business technology managers. Digital Transformation experts Xuviate argue that this concept of Business Technology Management (BTM) is so vital that it should replace the more static concept of IT.

The worth of investing in BTM can be championed to business leaders by mapping the value propositions that digital transformation brings to the organisation.

Primarily, BTM aids finding and implementing the most appropriate, cost effective platforms to advance the businesses' objectives.

Secondly, using technology as value-driver ensures that business processes are optimised, which leads to cost-saving efficiencies.

Thirdly, when used intelligently, IT can help differentiate a business from its competitors in the market.

Finally, the fundamental transformation of the business toward the smart adoption of the right technologies aids the survival of companies as the marketplace moves increasingly toward digital.

Effective change can transpire when IT leaders expand the scope of their role to become business technology managers.

It can be difficult to determine the first step or even the next step for your businesses' journey toward digital maturity. Your starting point needs to focus on drafting and thereby creating a digital transformation strategy that establishes the scope and objectives for your digital transformation. It is important not to focus too heavily on the operational side of your business at first, and rather consider more strongly the ways in which your business can benefit from growing into relevant digital spheres. Next, you need to identify the skills gaps in your business that need to be filled for the vision to be realised.

Once the vision is established and the strategy to achieve it is in place, you need to get buy-in from all the members of the organisation. An MIT Sloan study showed that employees across all age groups want to work for a business that is committed to digital advancement. Once a digital culture is fostered, leaders can guide the business to invest in the right digital opportunities. As you progress, keep top of the mind the two-pronged approach of the Digirati. This profit-driving approach ensures that your company is creating value for customers along with digital transformation, rather than just keeping up with trends.

It is important to remember that different organisations take different paths to digital maturity. Every business will have a unique digital journey that is aligned with the needs of the business and its customers.

V5 Digital – a leading digital marketing agency based in Windhoek, Namibia - begins the process of digital transformation by helping you develop your unique digital business model. Whether that involves helping you to use digital to sell your products or services online, or connecting with your customers on social media, V5 Digital specialises in crafting fine-tuned, clear, agile digital transformation strategies to help your business succeed.

Don’t hesitate to contact V5 Digital for a free assessment or to help you decide whether investing in a digital transformation is the right next step.

Are you interested in the State of Digital Transformation 2021?

Download the comprehensive research report from our collaboration partner Altimeter, a Prophet Company.

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