What the Heck is Digital Transformation?

May 10, 2022
August 10, 2022


Marketers and journalists love throwing around buzzwords, often without any thought as to what the term actually means. In B2B technology, "digital transformation" has been the latest victim.

Just about every company that does application development, IT, SaaS, websites, or even data entry now claims to be a "digital transformation" company.

You might reasonably ask, "Does digital transformation actually mean anything at all?"

Well, yes, or at least it did at one point. Sadly, what digital transformation means has almost nothing to do with what you see in your LinkedIn feed or when you read Forbes. Digital transformation is an economic term.

OK, So What IS Digital Transformation?

In a nutshell, digital transformation is a documented, significant trend in the consumer market in which customers are demanding more digital interactions with business.

These interactions were once manual and in-person, but customers want to do these same things digitally instead. “There, was that so hard?” (I said, staring intensely at the entire tech industry).

In other words, the customer is saying things like:

  • “I don't want to go to a bank to deposit a check. I want to do it on my phone."
  • “I don't want to have to call to order pizza. I want to order it online.”
  • “Wherever it’s possible, practical, and more efficient, let me interact with your business digitally.”

The secret to understanding digital transformation and how it impacts your business is to know that this is a consumer-driven trend, not a business-driven trend.

Getting that backwards has already been the root of many recent business blunders, and I will get to that shortly.

How Does Digital Transformation Affect My Business?

If you are following along, it’s clear that digital transformation has been underway for a while now. It started with the e-commerce boom in the 2000's and gained even more momentum with the rise of the smartphone. So why all the hype now, in 2022?

The reason for the growing talk around digital transformation is that while it started as a retail/general consumer trend, it is now expanding into B2B and consumer services.

A generation of young adults developing careers across every industry brings their smartphone expectations with them. Any business that requires person-to-person or manual interactions to work with customers and clients will be impacted by these growing demands.

Companies that find innovative ways to meet the demands of digital transformation will have a competitive edge over those who aren’t trying to adapt.

“It's always worked fine for us just the way it is." That’s the type of thinking that’s going to cause you to be left behind.

When Digital Transformation Goes Wrong

Now let me address the big misunderstanding about digital transformation. It is NOT about taking a heavy-handed approach to "digitizing" everything you do.

It is NOT about forcing your customers to use automation or digital tools when they don't want to. This is where most organizations falter.

You see, big name consultants and tech companies want to sell you on the idea of digital transformation as a way to improve margin. "If you replace all your people in customer service with AI, you don’t have to pay their salaries, and you’ll spend a lot less money."

Well, that's true in the short term. But your strategy will last just long enough to see all your customers walk out the door.

That's why I said it’s critical to understand digital transformation as a customer-driven trend.

Anything you do on the digital front to improve and streamline the customer experience is great. It makes customers happy AND improves efficiency for everyone.

But when you replace the personal interactions your customers WANT with digital ones, you are just giving them the middle-finger.

I’m not alone in having switched providers (of a given service or product) based on customer service alone. If I call your support number and never get a human being, I can't leave fast enough.

All this is to say that setting the foundation of your digital transformation strategy is simple. Think along the lines of, "How can we use modern digital tools to improve our customer's experience?"

OK, there is one more way digital transformation matters. Just take everything I’ve said and replace "customers" with "employees." Give your employees modern digital tools to improve their experience, and don’t take away the personal interactions that mean so much to them.

So, Here's Where You Sell Me Your "Digital Transformation" Solution, Right?

Nope. You can't sell digital transformation. It's like trying the sell the Industrial Revolution or the Space Age. They aren't products, they are trends, evolutions, and patterns in society that we like to label.

Anyone selling you "digital transformation" is probably using that as sexy buzzword to charge you more for whatever they were already doing.

However, while you can't sell the Industrial Revolution, you CAN sell conveyor belts and steel molds. The truth is that application development, SaaS solutions, and even good-old data entry can all be things a business needs to meet their customers' demands for digital interactions.

Onebridge is a BI and Data Analytics consulting firm. We picked this focus because we found that one of the biggest hurdles many organizations have in automating or digitizing customer interactions is a lack of control over their own data.

Digital customer engagement means there is a lot more data being created and moved around. If you can't manage, analyze, organize, understand, or ensure the quality of that data, you miss opportunities and frustrate customers.

So there, I’ve helped you understand an ambiguous industry buzzword, (hopefully) equipped you to make some better decisions, and still made my gratuitous-yet-practical plug for my company. I hope you consider that a fair trade. After all, I have a job to do here.

Still Here? How About Some Examples of Actual Digital Transformation?

Domino’s Pizza

Domino’s is my favorite "comeback" story of digital transformation. In 2007, Domino’s realized that the vast majority of their customers thought their pizza was, well, terrible.

Along with rolling out a new recipe in 2008, they went all-in on embracing digital, describing themselves as “a technology company that sells pizza.”

“What we saw then and continue to see now, is consumers prefer digital ordering over any other type. It’s got better repeat, higher spending, customer satisfaction is higher, they order new products at a two-to-one ratio, and then there’s all the data to learn from.” – Domino’s Chief Marketing Officer, Russell Weiner

Even today, Domino’s has the most advanced and seamless user experience for ordering pizza, tracking your order, getting customer support, and enjoying loyalty incentives. The pizza is . . . well, it’s OK.

A Revolution in Banking

Banking is probably the biggest before/after story of digital transformation. I am old enough to remember the constant struggle to “get to the bank” during work hours.

I heard a comedian once ponder, “Banks seem designed just to make it as hard as possible to get to your own money. It makes me wonder if bank robbers are just everyday people trying to get at their funds.”

Now banks are competing almost entirely on who can make it easier to bank online. Mobile deposits, online transactions, and even budget management tools are the new battleground over location and savings options.

Chatbots Are Scaring Away Your Customers

On the dark side, companies rushing into “digital” for the sake of their own margins alone are missing the point. A great example of this is the “chatbot.” That’s where a company forces you to negotiate with a computer before getting through the gate to talk to an actual person, if a real person is there at all.

A survey from the CGS Global Consumer Customer Service Report shows that customers are pretty frustrated with this trend. Research from different sources rates bad customer service as the top reason people part ways with a brand 70-90% of the time.

While there are some very helpful uses for this kind of interactive automation, if it isn’t done carefully and considerately, it will hurt your business more than helps in the long run.

Conclusion

I hope this background has armed you to think twice when someone throws around the buzzwords “digital transformation” in vague ways.

Don’t be intimidated by the term. You’ve lived through this experience. You know what services and experiences you and your family prefer to have digitized. Rely on common sense, and don’t be misled into thinking you need to digitize everything or force all your customers into digital experiences.

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