Updated: Mar 4, 2019
Credit from Mark Samuels
What is digital transformation?
Digital transformation involves using digital technologies to remake a process to become more efficient or effective. The idea is to use technology not just to replicate an existing service in a digital form, but to use technology to transform that service into something significantly better.
Digital transformation can involve many different technologies but the hottest topics right now are cloud computing, the Internet of Things, big data, and artificial intelligence.
How important is digital transformation?
Worldwide spending on digital transformation technologies -- hardware, software, and services -- hit $1.3 trillion in 2017, according to IDC. The tech research company expects spending to almost double between now and 2021, when the total amount spent on digitalisation globally will surpass $2.1 trillion.
In a survey of 460 execs by IT analyst Gartner, 62 percent said they had a management initiative or transformation program to make their business more digital. Just over half (54 percent) said that their digital business objective is transformational, while 46 percent said the objective of the initiative is optimization.
Executive attitudes to business transformation
According to a recent survey conducted by Grant Thornton, more than two-thirds (69 percent) of CFOs and senior financial executives are planning to increase their investment in technologies that speed business change, and four in ten said they plan an increase of more than 10 percent in the next 12 months. Just under half said their companies' digital-transformation investments are meant to help them overtake their competition through differentiation.
Executives believe that level of investment is already leaving a mark. Forty-six percent think half of their revenue will be influenced by digital by 2020, according to analyst Forrester. The World Economic Forum suggests the value of digital transformation for both society and industry could reach $100 trillion by 2025.
The state of digital transformation.
Criticisms of digital transformation
To critics, digital transformation simply offers tech vendors another opportunity to rebrand their offerings: it's not uncommon to see systems and services being sold as the answer for digital transformation. This kind of over-selling helps explain why Gartner believes digital transformation is approaching the trough of disillusionment.
Tech workers also express cynicism about grand talk of digital. No technology worker spends their working day digitally transforming, rather than coding, programming, and developing. And the phrase can be applied so broadly that it becomes effectively meaningless.
Why does digital transformation matter?
Such disillusionment might suggest there is little to be gained by focusing on digital transformation. But beneath the buzzwords there lies a crucial concept: digitalisation is helping smart entrepreneurs and pioneering executives to change the established economic order -- and the effects are everywhere.
From Amazon's influence over retailing to Facebook's impact on publishing, traditional firms and sectors are being challenged by nimble, digitally-savvy operators. Yet, while almost three-quarters of business leaders are aware their organisation is under threat from disruption, many are not taking the risk of change seriously.
What does digital transformation look like?
Technologies from big data to cloud and from the IoT to AI are helping entrepreneurs to develop new business models and disrupt the established way of running operations.
"These technologies are not just the latest buzzwords," confirms Akash Khurana, CIO and CDO at engineering company McDermott International. "We see tangible value coming from these technologies in terms of improving product optimisation, increasing production output, and tacking operational efficiency challenges."
Digital transformation examples
Rolls Royce's R² Data Labs initiative uses machine learning, AI and data analytics to create new services. The R² Data Labs team, which includes 200 data architects, engineers, scientists and specialist mangers, has helped Rolls-Royce deliver more than £250m in valuethrough engine-health monitoring activities in the past 12 months.
Logistics firm UPS is placing analytics and insight at the heart of business operations. The firm is using real-time data, advanced analytics and AI to help employees make better decisions. The firm recently launched the third iteration of its chatbot that uses AI to help customers find rates and tracking information.
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