This blog is part of our blog series on digital transformation. Watch this space for more in-depth knowledge!
What’s in a name? Most of us can agree that digital transformation is essential for businesses to stay competitive and relevant today.
However, what seems to be more challenging to agree on is what it is today and what exactly is needed to achieve success. Like many widely used terms, “digital transformation” has become a catchall phrase that holds varying meanings for different individuals.
“Here at Calibo, we believe that digital transformation is the key to unlocking a company’s full potential,” says Scott Sandschafer, CEO of Calibo. “Today, it’s not just about adopting new technologies, but about fundamentally reshaping how businesses operate and deliver value. By focusing on enhancing competitiveness, increasing productivity, and elevating customer experiences, companies can achieve remarkable growth and outpace their peers. As technology evolves and customer demands shift, digital transformation empowers businesses to streamline processes, accelerate operations, and optimize resource utilization. It’s a long-term journey, but one that ultimately positions organizations to succeed in the digital age.”
McKinsey defines it as: “Digital transformation is the rewiring of an organization, with the goal of creating value by continuously deploying tech at scale.[…] “Digital transformations … are long-term efforts (like, really long term; most executives will be on this journey for the rest of their careers) to rewire how an organization continuously improves and changes.”
Salesforce has a different take: Digital transformation is the process of using digital technologies to create new — or modify existing — business processes, culture, and customer experiences to meet changing business and market requirements. This reimagining of business in the digital age is digital transformation. […] Digital transformation begins and ends with how you think about, and engage with, customers.
As many as 90% of all organizations are currently undergoing some kind of digital transformation, according to McKinsey research.
McKinsey goes on to say that it’s a continuous process, most executives will be on this journey for the rest of their careers. As technology advances and customer expectations evolve, businesses are increasingly turning to digital solutions to streamline processes, speed up operations, and make the best use of their resources.
Thus, the importance of digital transformation cannot be understated.
Salesforce
Beginning in the early 2000s, digital transformation was one of the most significant investments in technology aimed at modernizing businesses.
It truly gained traction after 2011; however, it was often more about digitization than actual “transformation”.
Image credit: Icon8 blog
Since that time, the emergence of generative AI has led CEOs to see a chance to transition from a technology-driven digital transformation to a business reform driven by executive leadership.
According to a Statista report, as many as 97% of companies report that the COVID-19 pandemic accelerated their digital transformation efforts.
During the early 2020s, digital transformation was mainly centered around embracing emerging technologies such as cloud computing, artificial intelligence, and the Internet of Things.
Today, “digital transformation” has broadened to include not only the implementation of technology but also a change in mindset towards agility, innovation, and a focus on the customer, rather than the (vending) enterprise itself.
As many as 90% of all organizations are currently undergoing some kind of digital transformation, according to McKinsey research.
However, research by BCG revealed that as many as 70% of digital transformation efforts continue to miss their targets, often resulting in serious consequences.
IMD professor Didier Bonnet, confirms that “Most digital transformations fail. Studies indicate that the rate of digital transformations failing to meet their original objectives ranges from 70% to 95%, with an average at 87.5%.” He attributes the widespread challenges to severe time and scope underestimation, poor change management and inadequate tech deployment oversight.
Thus, executing digital transformations is challenging, but can yield great results and benefits, if done well. Name some, you say?
Companies who focused on enhancing competitiveness, increasing productivity, and elevating customer experiences—that is, genuine digital transformations—surpassed their peers, realizing earnings growth that was 1.8 times greater.
As technology advances and customer expectations evolve, businesses are increasingly turning to digital solutions to streamline processes, speed up operations, and make the best use of their resources. Thus, the importance of digital transformation cannot be understated.
We know that digital transformation is crucial for organizations aiming to update legacy infrastructures and remain competitive in challenging environments. It involves investing in technologies and creating a self-service business ecosystem to enable collaboration, data-driven innovation, and efficient product engineering.
This internal process is focused on incremental improvements and the strategic use of current technology to achieve meaningful outcomes.
However, to truly thrive, organizations must differentiate between undergoing digital transformation and becoming a digital business. While both aim for growth, speed, and continuous innovation, a digital business emphasizes rapid, outcome-driven initiatives that leverage technology solutions and data to create agile, responsive business models.
This approach fosters agility, simplifies processes, and relies on a single source of truth (SSOT) to provide comprehensive, accurate data.
However, you don’t have to choose between improving what’s already there and making big, new changes.
As Gartner says in Digital Transformation: How to Scope and Execute Strategy, “outcomes from digitalization fall into two broad categories:
The best digital plans combine both approaches, balancing them across different areas of the business (see below visual).
A successful digitalization strategy works on both fronts at once: It targets major changes in a few key product or service lines, business units, or departments while making quick improvements in other areas to see faster results.
Source: Gartner, Digital Transformation: How to Scope and Execute Strategy.
An example of digital optimization is Nike, who innovatively modernized its internal operations. By digitizing 6,000 footwear materials, design teams can work faster and more efficiently, improving their ability to respond to market demands.
Another great optimization example is Audi’s digital showroom. Generally, finding an industry more analog than the automotive one is as tough as getting a good Wi-Fi-signal at the top of Kilimanjaro. Audi has boldly ventured into the digital realm with its innovative services, becoming a leading example of digital transformation.
In 2012, under the Audi City banner, Audi launched an avant-garde showroom concept. Instead of large traditional showrooms filled with numerous vehicles, these compact city center showrooms allow customers to explore Audi’s entire lineup through digital means.
Car shopping and exploration can be done conveniently while strolling through city center stores, making it an enjoyable and accessible experience for all. Audi City also hosts forums and exhibitions in the evenings, boosting the brand’s visibility.
Shoppers can experience advanced car configuration on interactive screens in stores, viewing full-size car images. Additionally, using a tablet, customers can peer into the car, watch it in motion, and hear the engine’s roar.
Audi City showrooms, which showcase only four cars permanently, have led to a 60% increase in sales compared to traditional showrooms, offering significant savings for Audi as well.
Image credit: Press/ Audi
Subsequently, Gartner explains in Digital Transformation: How to Scope and Execute Strategy, “digital transformation means entirely new business models or products, providing net-new opportunities and disrupting the status quo. The emergence of disruptive technology often triggers the need to prioritize transformation over optimization.”
“Digital technologies open up new business opportunities that are both technically doable and financially smart. Big digital companies, like Amazon Marketplace, Uber, and Apple App Store, are great at using platform business models.”
These models are popping up in many industries, including finance and insurance, using peer-to-peer (P2P) approaches like Prosper, Lemonade, and Friendsurance. Industrial marketplaces, such as StationOne for railway supplies, are also benefiting from these new digital models.
Embracing digital business alongside digital transformation accelerates revenue growth, enhances market share, and improves operational efficiencies, offering a sustainable model for long-term success.
Source: Gartner, Digital Transformation: How to Scope and Execute Strategy.
Businesses need to perform well on six specific factors to be successful, according to McKinsey.
Their book “Rewired” highlights six essential capabilities for successful digital transformation:
Source: Gartner,, How Data Fabric Can Optimize Data Delivery
Without coordinated efforts in these areas, digital transformations are unlikely to succeed.
We’ll dig deeper into this topic with our upcoming blogs and our next eBook series – watch this space!
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