What Is Digital Transformation?

Dinesh Sharma

The digital economy is taking shape and undermining conventional notions about how businesses are structured; how firms interact; and how consumers obtain services, information, and goods. Recently, TechCrunch, a digital economy news site, noted, “Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate… Something interesting is happening.”

What is it about these companies that allows them to re-imagine the traditional boundaries and value proposition of their industry? What can these young companies teach you about leading a digital transformation in your industry? How will you adapt to the emerging fluidity found in traditional roles?

The four fundamentals of digital transformation

Success in this new era is entirely dependent on how companies can digitally transform themselves to meet the challenges of this hyper-connected future. Instead of marginal improvements to existing business models, leaders are looking to create new digital experiences that completely re-imagine the way organizations relate to their customers, suppliers, workforce, and assets.

In short, there are four fundamental areas of digital transformation central to business success in the digital economy:

Future of work

As millennials become more prominent in the workforce, the definition of “work” changes from being a place to becoming an activity. People regularly work from different offices, their home, or a local coffee shop. While where we work has changed, we all expect the same level of connectivity experienced in the physical office.

At the same time, the workforce is changing: 83% of managers expect to hire contingent workers over the next three years. The emergence of this flexible, global enterprise requires organizations to manage a dynamic ecosystem of talent and enable next-generation digital business processes that prove to be effective, even when distributed across various places and time zones.

Customer experience

Most first-generation digital natives (87%) are connected to the Internet while watching TV. In the digital economy, all customers – business-to-business as well as business-to-consumer alike – want to interact with businesses when and where they want and in a fashion that is most convenient for them.

This may mean banking online at 10 p.m., buying groceries online in the morning and having them at delivered to your front door that evening, or receiving confirmation of delayed inbound raw materials on a mobile phone. Customers desire engagement with brands through experiences that are seamless, omnichannel, direct, contextual, and personalized.

Digital supply networks

While the global middle class is expected to expand threefold by 2030, there is increasing pressure on essential business resources, which are growing at a slower rate of 1.5 times. The answer to this mismatch lies in how enterprises securely share data in real time to enable next-generation commerce applications to thrive.

The digitization of everything – from toothbrushes to industrial machines – is creating new intelligent digital networks of networks that fundamentally change the way commerce is managed, optimized, shared, and deployed. This results in US$5.6 trillion in savings through connected vehicles, a 67% increase in crop yields, and a 22% increase in supply chain efficiency.

The Internet of Things (IoT)

As sensor prices continue to drop, we are on the cusp of an era where everything can be connected – people, businesses, devices, and processes – to each other. The melding of the physical and digital world brings every asset into a digital domain where software dominates.

When an organization can understand its physical and digital asset inventory at any given moment, it can operate with precision previously unimaginable, paving the way for the ultimate lean enterprise. This will not be a nice-to-have differentiator, but an imperative for any digital business within the next two years. In fact, nearly 60% of senior executives believe this type of hyperconnectivity is the biggest risk to their organization moving forward.

To find out more about the digital economy and its impact on the future of your business, visit digitalistmag.com/digital-economy.

Read about more about these concepts in The New Economy paper: Our Digital Planet: Data-Driven Business Frameworks Are the Future. In a Hyperconnected World, the Collaborator Is King.

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About Dinesh Sharma

Dinesh Sharma is the Vice President of Digital Economy at SAP. He is a GM-level technology executive with leadership, technical innovation, effective strategic planning, customer and partner engagement, turnaround management and focused operational execution experience at both large enterprise and startup companies. Share your thoughts with Dinesh on Twitter @sharmad