The 4 Key Domains of the Larger Digital Transformation Process
Today, companies are increasingly turning to digital transformation to stay competitive. The rapid pace of technological advancements necessitates the swift adoption of the latest innovations. Failing to keep up with these changes puts businesses at risk of losing market share and customers.
Even though digital transformation is almost universally acknowledged as a top priority, many companies continue to think about it through a very narrow lens. Consequently, many companies tend to adopt technologies in a limited manner instead of embracing a comprehensive transformation. In practice, experts commonly categorize digital transformation into four domains, and it is crucial for a company’s future success to carefully consider each of these domains.
These domains are:
1. Process Transformation
When we think of digital transformation, we usually focus on process transformation. This means using technology to shift usual business processes. Machine learning, data analytics, and related technologies have provided new paths for reducing costs, minimizing development time, and driving quality.
Process transformation can vary depending on the nature of the company. For example, consider Domino’s Pizza, a company that has completely reimagined ordering to improve the customer experience. This transformation has led to record sales for Domino’s. Other companies have introduced robotics to automate construction processes or used artificial intelligence to streamline accounting projects.
The emphasis on process transformation is driven by the immense value that technology can bring to this aspect of business operations. Companies are scrambling to adopt the right technology that grants them an unbeatable competitive advantage. While process transformation is often the most straightforward way of leveraging technology to drive business evolution, it is far from the only strategy.
2. Domain Transformation
For companies aiming to revolutionize their markets, prioritizing domain transformation over altering business processes is paramount. The significance of domain transformation lies in its potential to revolutionize how goods and services are delivered, shaped by technological advancements. By leveraging these technologies, organizations can venture into entirely new business areas, creating opportunities to dominate novel markets and pave the way for unprecedented growth and success. Consumers are more open to blurred industry lines than ever before, especially if it benefits them in terms of convenience or cost.
One of the best illustrations of domain transformation is Amazon. Not only did the online retailer redefine what a single company could sell, but it also launched what is now the largest cloud computing service with Amazon Web Services. This domain was formerly dominated by names like IBM and Microsoft. Although success in this arena may have seemed improbable for Amazon, the company ingeniously repurposed its existing technology, originally designed to support its online store, to create custom-tailored products specifically aimed at startups. Despite being wholly different from the company’s other pursuits, Amazon Web Services now contributes to over half of Amazon’s annual income.
3. Business Model Transformation
Some digital companies are exploring how new technologies can enable innovative business models. This is another potentially lucrative approach to digital transformation in that it creates a new way of deriving value from a product or service.
Companies that successfully tackle business model transformation often become household names. Examples include Uber, which forever changed the taxi industry, and Netflix, which started online media streaming. Many other examples exist, from mining companies that are replacing human workers with robots to eliminate risk to human life to insurance companies that are charging customers according to driving style and mileage rather than through an annual fee.
The truth is that not enough companies are interested in business model transformation. To be fair, the risk involved is monumental, even for an established company. Nonetheless, the potential payoff is monumental, with successful companies virtually owning the new industry and being given a massive head start in terms of staying ahead of the curve. Business model transformation is what pushes industries in new directions and opens doors for future growth.
4. Cultural Transformation
Not all aspects of digital transformation have technology at their center. Cultural transformation is important for embracing new technologies and thriving in an environment that is constantly changing.
Companies that embrace digital transformation must foster a different organizational culture. For example, they will need agile workflows to adopt new technologies quickly and stay ahead of competitors. Often, this means adopting decentralized decision-making, which is quite different from how companies traditionally operate. In this system, employees of all levels can jump on opportunities they consider important for the future of the company to save time and facilitate change.
Overall, this means that companies embracing digital transformation need to change not just in terms of technology, but also in terms of operations. Managing change effectively takes a lot of diligence, but only agile companies will survive as the rate of technological innovation continues to pick up speed. Ideally, these shifts are not perceived as prerequisites for digital transformation but rather as parallel developments occurring alongside it, forming the fourth main area. Furthermore, cultural change must be considered a process rather than a destination. This change is always occurring as the company adapts to new circumstances.
