Digital transformation, or DX, isn’t just another buzzword or acronym to add to the IT dictionary. It’s comparable to the Industrial Revolution, where we’re seeing a shift of seismic proportions.
But what exactly is DX? It’s hard to define, since it’s different for every business. Generally, though, it refers to the integration of digital technology into all areas of the business, changing the way it operates and delivers value. Clearly, that’s going to require a cultural shift — and that could be the biggest change (and challenge) of all.
There are any number of reasons a business may be considering (or already undergoing) a digital transformation. But by far, the most likely reason is because they have to, according to an article on the Enterprisers Project.
IDC predicts in its report, “FutureScape: Worldwide CIO Agenda 2016 Predictions,” that one-third of the top 20 firms in industry segments will be disrupted by new competitors within five years. And those that don’t transform will perish.
We’ve heard this ‘do or die’ mantra before. But this time, it’s different. Cloud is pervasive; we’re seeing the rise of artificial intelligence, machine learning, virtual reality and the Internet of Things. Robots are starting to replace human beings for various job functions. Watching HBO’s Westworld was unnerving, not because of the premise of the TV show, but because that premise could become a reality one day.
Companies that have embraced digital transformation are more profitable than their industry competitors and have a higher market valuation, according to MIT.
“Digital is approaching a tipping point. Over the next five years, companies will begin to see digital affect the majority of their revenues,” says Nigel Fenwick in a blog post for Forrester Research. “Most of today’s companies are unprepared for this change.”
While a majority of enterprises surveyed by Enterprise Strategy Group believe they will not be competitive moving forward if they don’t embrace digital transformation, only a small number are prepared to do that right now, according to the 2017 IT Transformation Maturity Curve report.
While 71 per cent of those surveyed agree that transformation is necessary, only a small number have made any significant strides. Those who have, though, are seeing results. It’s not just about keeping up with the Jones’; it’s not about technology for technology’s sake. The good news about DX is that you could actually see real, tangible benefits — like increasing your revenue.
Enterprise Strategy Group found that of those who embraced DX, 96 per cent exceeded revenue targets last year — nearly twice as much as the least mature companies in the survey. MIT found that companies which embraced DX are 26 per cent more profitable than their industry competitors and have a 12 per cent higher market valuation.
A few things stand apart: These firms were eight times more likely to report a highly cooperative relationship between IT and the business, according to Enterprise Strategy Group, and six times more likely to leverage IT resources to speed product innovation and time to market.
That speaks to a culture that’s willing to work together and embrace change.
“The strength of digital technologies — social, mobile, analytics and cloud — doesn’t lie in the technologies individually. Instead, it stems from how companies integrate them to transform their businesses and how they work,” according to a digital business global executive research project by MIT Sloan Management Review and Deloitte.
That means DX requires not only a shift in technology, but a shift in cultural mindsets. A corporate culture that has traditionally been risk averse may have to switch gears and encourage risk. A corporate culture that has traditionally focused on hierarchical rule may have to embrace a more collaborative workflow.
IT is no longer about cost-cutting and ‘keeping the lights on.’ It’s about business innovation. So don’t think of DX as another acronym; think of how it’s going to fundamentally change the way you run your business.