Digital transformation vs business transformation
Thursday, July 7th, 2022
Today we look at the difference between business transformation and digital transformation, aiming to add insight into how these two terms overlap and diverge.
While both business and digital transformation initiatives can sometimes refer to the same thing, their distinction is an important one to note for business leaders keen on driving change in their organisations.
One looks more closely at digital experience (for both customers and employees) and technical operating models, while the other takes a more integrated approach to business strategy, considering all ways in which transformation can be achieved, digital and otherwise.
What is digital transformation?
Digital transformation is the application of digital technologies to help bring an organisation Into the 21st century.
To conduct digital transformation, managers need to take a “customer-driven, digital-first approach” across all organisational processes and operations, from business models to customer experiences (IBM).
Digital transformation success requires strategic management to implement new technologies such as AI, cloud computing, automation and beyond to create efficient workflows and leverage data for future growth.
What are the four main areas of digital transformation?
- Process transformation – a strategy intended to modernise business processes, services and models by utilising new technologies and applications such as data and analytics to gather and process information more efficiently.
- Business model transformation – implementing a new vision of business possibilities to drive revenue and improve customer experience through the utilisation of technology.
- Domain transformation – when an organisation successfully shifts into another business area, often involving fast adoption of new technologies.
- Information systems transformation – an overhaul of information management systems including updates to technologies, processes and staff.
What is business transformation?
Business transformation, meanwhile, is more focused on the application of business and go-to-market models in alignment with new ways of working. This approach may consider aspects such as globalisation and regulatory change in addition to technological modernisation.
Sound business transformation does not ignore the latest digital approaches but also avoids focusing too heavily on technology as a first step, preventing the risk of undermining organisational culture and fundamental structures of the company. Instead, business transformation should be recognised as a complete overhaul, looking at the business model beyond digital advancement.
What are the main types of business transformation?
- Process transformation – aiming to make ways of working more efficient and effective through better collaboration of people, processes and applications.
- Business model transformation – implementing a new vision of business possibilities to drive revenue and improve customer experience often through the utilisation of technology.
- Cultural/organisational transformation – concerned with changing the mindset of employees and the organisation as a whole to achieve a modern vision.
- Digital transformation – not to be forgotten, digital transformation is very much a part of business transformation, spanning all the digital-first points outlined above.
The impact transformation can have on business
In the 21st century, transformation is critical for the ongoing success of an organisation. Whether you have digital-first or fully integrated transformation goals, the process will impact all areas of the company.
Studies conducted by the Harvard Business Review suggest that transformation efforts tend to focus on one (or a combination) of five distinct missions:
- Globalisation: aiming to extend market reach and become more international in terms of leadership, innovation, talent flows, capabilities, and best practices
- Customer-centric focus: aiming to provide enhanced insights, experiences or outcomes for customers ahead of just products or services
- Efficiency: aiming to speed up and/or simplify processes to become more strategically, operationally and culturally agile
- Innovation: incorporating new models and approaches, from both internal and external sources, to allow for new opportunities and organisational expansion
- Sustainability: focusing on becoming greener and more socially responsible in positioning and execution
Successful digital transformation can support any of these five pursuits, allowing enhanced technology to bring about organisational change at multiple levels.
Why most business transformations fail
Caption: Ulster University is not affiliated with McKinsey and includes this video for reference purposes only.
According to research by McKinsey, up to 70% of business transformations don’t achieve what they set out to do. The reasons for failure are straightforward but come at a high cost to any company. The key obstacles to success, as outlined by IMD, include:
- No clear or compelling case for change
- Lack of shared vision in the senior team
- Lack of employee engagement
- Low investment in capability building
- Failure to create and sustain momentum
From the above, you can see that the problem with transformation often lies with insufficient strategy and vision. Digital transformation is no different, but also presents added technical challenges that should be predicted and recognised by senior management. When embarking on digital transformation, it is crucial that management has the technical expertise as well as the leadership skills to manage the process.
How to ensure transformation success?
Understanding that transformation is more than just ‘going digital’ is the first step in a long process of modernisation. Studying further could be the difference between failure and success, allowing management professionals to see a wider picture of growth and gain the tools needed to achieve their vision.
On Ulster University’s Business in Tech MSc, you will gain all the vital skills needed to successfully lead transformation within a tech-led organisation. As part of the full Masters programme, you will embark on four modules directly related to leading transformation, including Strategy and Transformation (15 credits), Leadership and Transformation (15 credits), Tech Operations in Transformation (15 credits) and Transformation in Practice (15 credits).
The Transformation in Practice module alongside an additional Transformation Consultancy Project (30 credits) are opportunities to develop practical skills in transformation leadership through a live consulting project. Explore all the modules on the MSc Business in Tech programme.
Whether it’s a full business transformation or digitalisation of processes you wish to achieve, one thing is clear: you shouldn’t underestimate your strategy or vision. Invest in yourself before investing heavily in any transformation.