What is Digital Transformation?

Creating new solutions with the use of emerging technologies is a way of innovation. Digital technologies are a part of this. Companies approach the emerging digital technologies with a bit of anxiety and a bit of fear of not being in full grasp of the subject.

What is called digital transformation is, the transformation of customer-oriented activities, processes, and business models, using existing or newly developing digital technologies. This term encompasses the effect of transformation to the management model in the company and to the society. Social, mobile and analytical technologies came to mind in the past when digital technologies were mentioned. Now added to these are, the Internet of Things, API ecosystems, Artificial Intelligence, Machine Learning, Virtual and Augmented Reality and others. In other words, making a mobile application, being on social media, getting digital analysis reports and using cloud solutions is no longer considered digitalization. These have become commonplace.

Companies that are less digitally mature and do not want to be left behind are looking more at how they can use these in their own business by focusing more on specific technologies. Companies with higher digital maturity are looking at the issue in terms of transforming their business. In spite of a lot of hype around Digital transformation surveys show that most of the companies are not going for a full-scale transformation and doing something piecemeal.

There are three basic approaches in digital transformation. The first and most visible of these is a Focus on the Customer and the Value Provided to the Customer, the second is Transforming Operational Processes, and the third is Transforming the Company's Business Model. Further, even if this is not the purpose, transformation in the company's Management Model also emerges as a result. It is possible to look at this as a side benefit, it is also possible for some see to it as a threat. In a total digital transformation, the established management methods also have to change.  Communication and collaboration among employees with digital tools are becoming more liberal. In addition to the assigned leaders, natural leaders emerge. In summary, power is shifting down from appointed managers.

The subject on which companies concentrate their digitalization efforts is customer experience and value provided to customers. Behind this lies the urge to provide faster, more personalized services to the customer. In customer-oriented digitalization, self-service, and services which are fast and which make the life of the customer easier are important issues. Thus, it is possible to reach large masses at a very low cost. Branchless banking applications are an example. In Amazon's automatic check-out retail app, Amazon-Go, the app is activated when customers enter the store, they take whatever they need from the shelves and go out. The invoice comes directly to the app. IoT, image processing, machine learning, and Artificial Intelligence technologies are used in Amazon-Go. Apart from these examples, it is also very important to “listen” to, analyze, and make sense of the information contained in the client's entire internet footprint, including social media. Many channels such as physical stores, e-commerce sites, and social media create the touch-points to the customer. It is also very valuable to understand seamlessly and decode the behavior of the customer in all these channels including what the customer is trying to do under different circumstances in the stages of the journey to the purchase decision. Of course, these are challenging and complex issues, and there are no simple solutions. Other issues to be overcome in digital transformation are the integration of various technologies, and security concerns

The second important leg of digital transformation is the transformation of the internal processes of the company. Achieving efficiency and cost reduction through digitalization of processes is of course the leading motivation here. In production operations, the most "transformational” process is to reach self-operating factories by machines talking to each other which is called Industry 4.0. Another issue in business processes is to empower employees with digital tools. Within this there are tools for communication and collaboration, as well as remote work. Yet another point is using real-time data about customers, products, and geographies to support performance management and decision support systems.

The third leg is about the transformation of business models. Packaging of physical and digital value offered to the customer; redesign of business architecture; project groups manned with people from diverse specializations for fast results, organizing shared services in areas like HR, design, and finance are some of the topics covered in this context.

A total digital transformation requires looking at the whole business value creating process and maybe removing some steps altogether. Digital transformation is a tool, not a goal. Instead of clinging to developing technologies under competitive pressure, it is more correct to fulfill the requirements of your company’s purpose and vision.