What Is Digital Transformation? And Why Is It Important for Businesses

By Kyla Mintz

Organizations around the world are pursuing digital transformation. Large and small companies are seeking tech tools to help streamline, automate, and assist operations. Many are willing to invest in these IT upgrades, with current annual spending for digital improvements topping $2.16 trillion, worldwide. Spending in the sector should reach $3.4 trillion by 2026.

Companies hoping to take advantage of this trend need to understand how to create a digital transformation strategy that leads to future benefits.

What Is digital transformation?

Digital transformation is the integration of new tech tools into various business operations. It encompasses every aspect of the process, including deciding how to deploy software, embedded systems, analytics, data, and artificial intelligence. While many focus on the process improvements and overhead cost savings offered by these changes, digital transformation also includes adjustments to company cultures and workplace norms.

Remote workplaces, virtual offices, and online collaboration are examples of how digital transformation affects the workforce. In addition to selecting and deploying systems, such as virtual office platforms, file sharing, and video conferencing software, companies need to find ways to provide workers support and ensure they remain engaged and motivated and don't feel isolated and disconnected from their co-workers.


Key components of digital transformation

Here is a closer look at the different steps necessary for a complete digital transformation. These four components are equally necessary for the successful adoption of new technology.

Technological innovation and adoption

The first step in the digital transformation process is to find and adopt tools that bring benefits to your organization. This step might be more challenging than you think. Innovations are changing all aspects of business operations, from office management to decision-making to customer interactions. You need to select digital tools that will bring the most benefits and the fewest pitfalls.

Business process optimization

The new technology should ultimately make business processes easier, faster, and less expensive. Optimization is not usually a question of plugging in new software. Instead, it is an ongoing effort to streamline operations by finding the most effective applications for new tech. This continuous improvement process is a hallmark of digital transformation.

Cultural and organizational change

Organizational changes are necessary during the digital transformation process. Companies need employees to fill new roles, and workers may have significantly different daily responsibilities. Also, process optimization and the adoption of new roles require a significant cultural shift. Workers need to embrace innovation and experimentation and be willing to go through trial and error until they perfect new processes. Also, managers need to find new ways to ensure employees remain engaged and happy even if face-to-face interactions and the social aspects of office life are limited by computer-based tasks.

Data-driven decision-making

One of the primary advantages of the switch to digital tools is the generation of data on all processes and interactions. If properly organized and utilized, this information can help with decision-making. For example, a company can use performance-related data to assess whether a new automated process saves time and produces quality results.

Data can also define trends and provide insights that companies can use to make predictions about their operations and their industry. These forecasts can help with strategic development.


Why is digital transformation important for businesses?

Businesses able to skillfully manage their digital transformation can enjoy specific benefits.

Better user experiences and customer satisfaction

Digitized systems do more than offer better office efficiency. They can also bring better communication and personalization to customers. For example, automated emails update customers about the status of orders or upcoming promotions. Cookies and data collection on a company website can facilitate personalized offers. Also, customer service applications using natural language processing (NLP) can provide immediate service to customers, even if no human representative is available.

Efficiency and cost reduction

AI software uses algorithms to quickly complete tasks, such as entering data. These jobs are time-consuming for humans and require companies to pay for employee hours. If the company automates these tasks with software, employees are free to work on higher-level jobs that will actually affect the company's performance and profits.

Competitive edge

Companies with streamlined operations and better customer service systems will be able to keep up with other tech-minded companies and gain an edge over those who are slow to adopt time and cost-saving innovations.

Fostering innovation and business growth

The operational advances may allow your company to expand into new areas, take on new clients, or offer additional products and services. Also, digital transformation fosters a culture of innovation where employees and stakeholders have the tools and support to experiment with new ideas and use cutting-edge software or systems to solve problems.

These benefits are within reach for businesses able to come up with a digital transformation strategy.


Developing a digital transformation strategy

The primary goal of building a digital transformation strategy is finding and deploying technology to bring short and long-term benefits to your company.

Assessing your organization's digital maturity

Some organizations may be well along the path toward full digital transformation. Many firms already rely on data-driven decision-making or use embedded systems to monitor inventory or manufacturing operations. Others, however, could require a complete operational overhaul that refocuses processes on digital systems.

Identifying key objectives and success metrics

A digital transformation should bring new successes. However, these successes may be difficult to define unless you have clear aims and methods for measuring success as you move forward with your tech deployments. You need key performance indicators, such as sales, operational costs, customer engagement, or other metrics that you can use to compare to past data to measure improvements.

Aligning digital initiatives with overall business goals

The best method for ensuring you only adopt beneficial technology is to align upgrades with your company's goals. For example, if your goal is to create a vibrant remote work culture, a virtual office platform like Kumospace is an effective option.

Building a roadmap for digital transformation implementation

A plan will clearly outline steps that can help your company manage the adoption of new tools and systems. It can provide a timeframe and ensure that your team completes each step of the process and troubleshoots before moving on to the next step.

It's also advantageous to get assistance from outside experts familiar with digital transformations.


Digital transformation services and solutions

Digital transformation services help companies adopt new software or systems to improve their operations. These third parties may not help with every aspect of the shift, but they can handle specific upgrades. For example, one service provider may help migrate your operation to a cloud-based platform, while another could provide training for employees to use specific technology in their work.

You want to select digital transformation partners with expertise to meet your needs. For instance, if you are establishing a virtual office for your remote team, you would work with a company like Kumospace, which has been developing a platform with different integrations for a full-featured online workspace.

Challenges and obstacles in digital transformation

Here are some potential pitfalls to be aware of when planning your digital transformation.

  • Employees and management may resist change because they are comfortable and familiar with current processes.
  • Your company may lack the budget to make changes, or it might not be able to afford to slow work down to migrate operations to a digital environment.
  • One of the main drawbacks of digital workplaces is security. Even if your network and computers are secure, careless employees could compromise login credentials or fall for various scams that leave your systems insecure.
  • Your current workforce may lack the skills to take full advantage of available tech upgrades.

Careful planning, budgeting, training, and regular check-in meetings can help everyone thrive in your new digital workplace.


Real-life examples: digital transformation success stories

Many companies have already engaged in successful digital transformation. AB InBev, which owns many different beer brands from around the world, created a digital platform that connected their breweries. Kraft Heinz followed the same model, using a platform to manage worldwide marketing efforts and utilize region-specific data and insights to improve performance in certain areas.

Measuring the impact of digital transformation

Key performance indicators are essential for comparing performance after a digital transformation with times before the new systems or software were adopted. You should always choose metrics that illustrate progress toward company goals.

Also, digital transformation is not a one-time event. Your company can continue to improve processes and find new ways to use technology to increase profits, cut costs, or make tasks expedient.


Launch your digital transformation efforts

If your company can carefully choose software and systems that will improve your operations and help you reach company goals more expediently, you can enjoy the benefits of digital transformation.

Whether you establish a virtual office for your remote team, improve data collection and analysis, or streamline customer service and personalization, you should understand that this process requires flexibility. With continuous assessment and improvement, you can use tech to enhance your company.

FAQs on digital transformation

What is digital transformation?

Digital transformation is the deployment of tech tools and systems to streamline and improve all aspects of a business operation.

What technologies enable digital transformation?

Cloud-based collaboration tools, analytics systems, automation software, and embedded software facilitate the switch to a digital work environment.

Why is digital transformation important?

Executed properly, digital transformation efforts can streamline operations, lower operating costs, and free employees to focus on higher-level tasks.

Transform the way your team works from anywhere.

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Headshot for Kyla Mintz
Kyla Mintz

Kyla is part of the Marketing team at Kumospace, where she helps run the social media accounts and creates content. Kyla has many different passions outside of work, including volleyball, traveling, and restaurant dining.

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