What Is Digital Transformation?
If “digital transformation” sounds like a corporate buzzword from 1991, that’s because it is. Digital transformation refers to the integration of digital technology into a business, and it’s been an ongoing effort for decades now.
As technology has evolved, digital transformation has come to mean different things—but it started with moving from paper to spreadsheets and literally “digitizing” physical files.
So, what is digital transformation, and how has its meaning evolved over time?
In the 1990s, digital transformation often referred to launching a website or converting physical materials to a digital format:
“One sees the continuing digital transformation of an astonishingly wide range of material artifacts… people are saying in effect: Let us take what exists now and restructure or replace it in digital format.” (John Hopkins University, 1997)
By the year 2000, ecommerce and online advertising were the new frontiers of digital transformation:
“There has been a significant increase in online ordering and payment and in online advertising and numbers of links to other firms' corporate websites.” (European Management Journal, 2001)
Needless to say, we’ve come a long way.
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Here’s how digital transformation has progressed:
- 1970s: Initial use of computers in the enterprise.
- 1980s: Business becomes increasingly digital. (Spreadsheets!)
- 1990s: The rise of websites and ecommerce—digital transformation reaches consumers.
- 2000s: Online ads, smartphones, apps, and the rise of social media.
- 2010s: The rise of the cloud, marketing automation, and remote work.
- 2020s: Integration of technology like AI, NLP, and machine learning.
Of course, not every business is in the same “decade” of transformation. Some are still working to modernize with ecommerce, apps, and social media. But those businesses need to catch up fast because digital transformation is more urgent than ever.
If you’re stuck in the 2000s—but your competitors are using no-code platforms, APIs, cloud computing, automation, remote employees, and AI—you won’t be efficient enough to compete.
And even more important is this:
Consumers are demanding a customer experience (CX) that takes advantage of the latest technology. They expect relevant, personalized content that can be accessed on any device, at any time.
In this article, we'll explain why digital transformation is pivotal to your brand, how you can use it to improve the customer experience—and why it gives you an edge over your competitors.
Why Brands Need Digital Transformation
In 2016, I started a business.
To make it official, I got in the car, drove down to my local county’s Register of Deeds office, stood in line, wrote a check, and filed some paperwork. Then, I sent a separate application to the IRS.
Six years later, I started another business.
This time, I never left my computer. A tech company automated the whole process for me.
This is the speed at which technology is changing—and consumer expectations are changing right along with it. Instead of waiting in lines, we expect companies to cut through the paperwork for us. Instead of driving to stores, we expect same-day delivery.
Customer experience is now a primary differentiator for brands. In a 2018 survey of executives, PTC found that 34% of executives felt the biggest advantage of digital transformation was an improved ability to meet customer expectations.
Brands that tailor their experience to the “digital consumer” are the ones that generate loyalty and gain a competitive edge.
Digital-first brands also make more money, with consumers paying up to 16% more for better experiences. Companies that are more mature in their digital transformation journey report 45% higher revenue growth and 43% higher margins, according to Deloitte.
How to Design A Digital Transformation Strategy
Digital transformation isn’t just about creating a branded TikTok account or launching a new app—it’s a holistic effort that gives you a chance to reimagine how your business operates, and how it delivers value to customers.
Let’s look at an example:
Starbucks started as a fully-analog regional coffee chain in 1971. Over the years, the company grew astronomically and modernized along the way.
By 2017, Starbucks had rolled out a fully integrated digital transformation strategy built around improving the customer experience and improving customer loyalty, including:
- An app-based rewards system
- Mobile ordering and payment
- A customer strategy is driven by data insights
- AI-driven personalization of product offerings and discounts
Companies that implement a transformative digital business strategy, like Starbucks, create more engaged customers—and engaged customers buy 90% more frequently, spend 300% more than non-engaged customers, and are five times more likely to be exclusively loyal to your brand, according to a study by Rosetta.
Despite all the benefits of digital transformation, plenty of businesses simply aren’t prioritizing it. Many spent the 2010s in a state of digital denial—a 2016 Progress study found that 47% of businesses “know [digital transformation] is important, but haven’t started yet.”
The Role Of Digital Transformation In Improving Customer Experience
Customers want personalization, speed, and convenience—and if your brand isn’t offering that, they’ll switch to a brand that does. That's why it’s so crucial to manage your business’s digital transformation projects in ways that improve the customer experience.
Here’s how digital transformation can improve CX:
1. Add Value to Your Product
In the 2000s, Netflix was a popular DVD-by-mail service. You created a queue on their website, and they sent you the movies you requested. After you watched each movie, you mailed it back.
Of course, Netflix today is the poster child of successful digital transformation, having pioneered on-demand streaming service technology.
But the key takeaway here is that Netflix designed its digital transformation efforts around pain points the customer had:
- No more waiting for DVDs in the mail.
- No more trudging to the mailbox to return movies.
- No more limitations on how many movies you could rent.
- No more brainstorming about what to watch next.
Follow Netflix’s lead. Make your product indispensable to customers by asking yourself what pain points you can relieve through your digital transformation initiatives.
2. Understand Unspoken Customer Needs
Listening to customers is the foundation of CX:
- 1-on-1 interviews
- Customer surveys
- NPS, CSAT, and other benchmarks
Digital transformation opens the door to a whole new source of information about what your customers need. You no longer have to rely solely on what customers tell you.
Now, you can watch what they show you.
Digital experience (DX) platforms give you a more granular level of insight into customer needs, beyond what customers tell you in surveys and interviews. With tools like heatmaps, session replays, and A/B testing, you’ll get a wealth of data on customer behavior, allowing you to optimize your product and customer journey to meet their needs.
By analyzing user behavior like scroll time and session duration, you can identify areas where customers are dropping off, and optimize those sections to keep them engaged. This kind of data-driven optimization is the key to providing a great user experience that keeps your customers coming back for more.
3. Reimagine the Customer Journey
The customer journey used to be simpler:
Customers might hear about your product via word of mouth, go to the store to look at it in person, compare a few options, and then buy one.
Today, the customer journey is vastly different—and customers have more options than ever before. For many products, the customer journey takes place primarily on a digital landscape.
Reimagining the customer journey through digital transformation means:
- Being omnichannel—showing up everywhere your customers are.
- Creating compelling, useful content that wins customers over time.
- Personalizing each customer’s experience, from marketing to onboarding.
- Using digital experience tools to monitor and optimize your service delivery.
- Using data analytics to improve the customer experience over time.
4. Personalize
Personalization is one of the biggest opportunities available in digital transformation.
91% of consumers are more likely to shop with brands that provide personalized communication and recommendations. And nearly half of the consumers have left a business’s website because it wasn’t well-curated to their needs.
As more brands create hyper-relevant content and experiences, the brands that don’t are falling behind.
Here’s what personalization often looks like:
- Targeted advertising
- Personalized marketing automation workflows
- Recommendations based on customer behavior
- Conversational AI-driven customer service
- Custom loyalty programs
5. Be Wherever Your Customers Are
Whether your customers are on Twitter or TikTok, you need to be there.
Attention has never been more fragmented. One way digital transformation can make life more convenient for your customers is to be present 24/7 on the platforms they spend time on.
Take Airbnb, for example.
Every part of their service happens through their mobile app. They have a phone number and a support email, but many users prefer to get support via their in-app messaging or through various social media channels.
Make sure you’re taking advantage of the latest technology, like chatbots and conversational AI, to help you scale your customer communications across platforms.
Digital Transformation Is Change—And Change Is Hard
If you’re working on digital transformation in your organization, you’re up against a big obstacle:
Inertia.
Change is difficult. Many companies—especially those with legacy systems—are set in their ways. 46% of CIOs say organizational culture is their biggest barrier to digital transformation.
But digitally transforming your business operations—and your customer experience—is non-negotiable if you want to thrive in the coming years. With the maturing of artificial intelligence and other disruptive new technologies, digital adaptation is your key to surviving an uncertain future.
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