What Is Digital Transformation and What Does It Mean for Business Evolution?

If you own, operate, or manage a business of any size today, you probably have heard the term “digital transformation.” For many, digital transformation conjures up the idea of combining technology with business operations. While integrating new technologies is a component of digital transformation, there is much more to this business trend.

To stay competitive in their field and relevant to their customers, businesses have to adopt the right technology solutions. Identifying technology that provides optimal value is an essential initial step in digital transformation. The next steps, however, are critical. Merely acquiring the latest tech isn’t enough. Digital transformation involves fully embracing radical change for business process improvement and better customer engagement today as well as the ability to respond to tomorrow’s changes.

Technology’s Evolving Role in Business

Businesses have long used technology as a way to improve operations, make processes more efficient, cut costs, and provide optimal user and customer experiences. How organizations view technology has evolved over the past few decades. In the 1990s, the explosion of commercial internet made technology essential for competitiveness. Businesses rushed to have a web presence and adopt other technologies. In the 2000s, when every company was online, technology was considered a cost of doing business. Today, technology is much more than a cost center. It is the catalyst for revenue growth, and this growth occurs as a result of digital transformation.

The Difference Between Digitalization and Digital Transformation

Digitalization and digital transformation sound quite similar, but there are fundamental differences. When an organization introduces technology to an old process, it has digitalized a business function. Digitalization alone merely refers to adding tech. Digital transformation, on the other hand, has less to do with individual applications of technology and more to do with a total revamping of all aspects of a company. With digital transformation, businesses leverage technology to transform their processes, products, and assets for improved efficiency, enhanced customer experience, and increased monetization opportunities.

Examples of Transformative Technologies

There are many tools and new processes that fuel digital transformation. These include unified communications, cloud services, and on-premise and hybrid network solutions. Beyond specific tools for communication and computing needs, today’s IT solutions power everything from e-commerce to human resources management. Innovations in connectivity and data collection allow organizations to tap into advanced analytics which fuel improvements in customer experience, more effective marketing and sales, and more efficient workflows and processes.

When viewed individually, these technology examples are just costs of doing business. While each of these technologies holds promise for organizations looking for growth, they are not transformative unless integrated into a company’s culture, fabric, and essence. This is the root of digital transformation: taking advantage of innovations company-wide. Once technology’s reach is extended throughout an organization, customer engagement blossoms as well.

Each of these innovations involves the digitalization of a business component. Instead, the broader term of digital transformation refers to the customer-driven strategic business transformation that requires cross-cutting organizational change as well as the implementation of digital technologies. Digital transformation initiatives will typically include several digitalization projects, but executives that believe that there is nothing more to digital transformation than digitalization are making a profound strategic mistake.

Digital Transformation and Future Change

This key difference — moving from adding new technology to broadly reinventing an organization from the ground up with technology — is key to creating an agile business. Through digital transformation organizations learn to deal better with change overall, essentially making change a core competency as the enterprise becomes customer-driven end-to-end.

The Digital Transformation Payoff

With all the hype around digital transformation, it is sensible for companies to wonder if there are tangible business results from the effort. Technology, after all, is just a tool. Beneficial results require thoughtful design, implementation, and adoption. This is where digital transformation can have its most significant impact. Since it can occasionally involve a full-fledged business overhaul, with complete buy-in from all levels of an organization, most businesses find the transformation to be profitable. Strategizing a plan for transformation, usually with a third-party like a managed services provider, helps businesses get the highest ROI immediately where budget allows. BDO’s recent survey of mid-market companies showed that 74% of those polled reported an increase in profitability due to digital transformation efforts in 2018. The same survey respondents expect the rate of return on their digital transformation efforts to continue to increase.

Digital transformation presents a clear opportunity for businesses to improve operations, become more responsive to customers, and ultimately increase growth and profitability. The only remaining question is how to best engage in the transformation.

The Role of Managed Service Providers in Digital Transformation

Since digital transformation can require an overhaul of old ways, it is helpful to engage the right strategic partner. While most mid-market businesses have their own IT staffs, an outside perspective is often more effective in identifying areas that require transformation. At UTG, we help with more than just digitalizing technology. We help strategize priorities, update or refresh current LOB apps, and improve documentation and processes with our clients. We can help find talent and help with security for new technology. Our strategic IT business plans help IT leadership make a case for digital transformation with management which helps fully integrate the process.

As a managed service provider, UTG co-sources IT expertise to businesses looking for digital transformation. With UTG’s services, organizations can realize growth through technology. For more information on how our co-managed IT solution can help your organization achieve impactful digital transformation, contact UTG today.

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About UTG

UTG is a Mid-Market Managed Service Provider that partners with your organization to leverage technology strategically.  We help you meet company objectives, increase efficiencies and productivity through technology.

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