10 terms that explain Digital Transformation
Digital Transformation is a complicated topic because it does not mean any one thing. The term 'Digital Transformation' means the act of change from one state to another using (or applying) digital technology. This definition does not explain what causes Digital Transformation, why businesses transform and what is being transformed.
In this article uses content of our Udemy course to explain the ten popular terms essential to the understanding of Digital Transformation.
"Every industry and every organization will have to transform itself in the next few years. What is coming at us is bigger than the original internet and you need to understand it, get on board with it and figure out how to transform your business."
Tim O'Reilly, Founder and CEO of O'Reilly Media
Innovation in the context of Digital Transformation is the creation and implementation of a new product, process or service. Innovation aims to improve efficiency, effectiveness or provide competitive advantage. Inventing new technology, adopting emerging technology or applying technology in a new way to generate products and services, are all examples of innovation. Innovation is a major driver of change and transformation.
The action of preventing something, especially a system, process or an event from continuing as usual.
In the context of digital transformation, disruption serves as a trigger or an inflection point where businesses realize they need to change. Businesses that respond to disruption by changing themselves via the use of technology are applying digital transformation. We may view the relationship between Innovation, Disruption and Digital Transformation as a cycle. In this cycle, innovators disrupt the market by applying new technology or creating new products and services. Other market participants react to disruption by transforming their business, products, data, processes using digital technology. Some businesses responding to disruption will transform only enough to 'catch up' to whatever was introduced by innovation. Others will generate more innovation thus starting another iteration of the cycle.
Whenever we describe a business, the word 'Incumbent' refers to businesses that have a presence within the market. Incumbents can try to gain advantage in the market by innovating and creating new products and services that disrupt the market. Incumbents may also experience disruption from outside factors such as competition, emergence of new technology and more.
Refers to new businesses, products or services created during the digital era using modern digital technology. New businesses may be forced to innovate and disrupt the mainstream market to gain entry into that market and compete with Incumbents. To do this, new comers apply newest digital technology, or use existing technology in a new way to create products and services.
The process of converting information into a digital format. Digitalization is a major transformation initiative where businesses convert assets and processes into a digital format. An example of asset digitalization is converting paper-based documents such as agreements, contracts and various forms into a digital format. An example of process digitalization is the replacement of physical signatures in document execution with a digital signature workflow. Digitalization is the most common and basic case of digital transformation.
Legacy is something received from the past. In the context of Technology, it is data, software or hardware for which superseding versions exist. Retiring legacy and replacing old data, processes, skills and technology with modern digital technology is a major theme when it comes to digital transformation. Incumbent businesses who have been using technology for a long time need to replace this technology with something new. Retiring legacy technology shows us that digital transformation includes replacing legacy with the new technology. Technology lifecycle and the need to retire legacy technology indicates that digital transformation is not a temporary trend.
An individual or a group that owns the task of initiating and managing change in an organization. Digital Transformation does not happen on its own. Instead, transformation strategy and objectives are defined by business leadership. A change agent is a leader who initiates and drives the transformation effort within their business. Enterprise-level change will require a Change Agent in the executive layer.
The shared philosophy, values, expectations, and practices that guide and inform the actions of all team members within an organization. Organizational Culture is an important factor for digital transformation as it represents the human environment in which transformation takes place. An innovative Organizational Culture helps businesses avoid complacency by experimenting with new technologies, products and new ways of delivering value. Organizational Culture will dictate how the organization views and responds to change. Businesses with a culture of innovation, are most likely to invent or adopt new technology, generate new products and services. Organizations with a 'status quo' culture apply digital transformation as a response to disruption.
A philosophy of the workplace where problem-solving, teamwork, and leadership results in the ongoing improvement in an organization. Many digital transformation initiatives focus on how the organization delivers value at operational level. Thus, businesses apply technology to enhance processes and achieve excellence via consistent, repeatable high performance. Digital transformation initiatives that target the Operational Excellence domain target the management, measurement, optimization and automation of processes using technology.
Capability Enablement is a major theme and an effect of digital transformation. Application of technology unlocks and enables the ability to do new things. Most technology trends such as digitalization, cloud computing, blockchain and etc., are adopted by businesses who want the ability to do more. Successful application of technology may enable many new capabilities for a business. Example: converting paper documents into a digital format will enable digital signatures, workflows, analytics, automation integration with other digital applications, and more.
Quayside Digital Consultants is a Toronto-based consultancy who specializes in high-profile Digital Transformation projects. To learn more about Digital Transformation, please enroll in our Digital Transformation Essentials course on Udemy.