The why behind digital transformation
Over the last few decades, we’ve seen a steady shift of businesses and systems from analog to digital. With this shift came a significant change in how companies build teams, design go-to-market strategies, and generate revenue. This shift was fundamentally a shift from paper-based processes to computing-based processes, where files and data went from being stored in filing cabinets to databases and filestores.
Imagine that you had to run a sales report to understand how much a department had done in sales over the last 10 years, growth rate year over year, and project out 5 additional years of sales. If the documents you required were on paper and scattered across three different sites, it may take weeks to collect them, analyze them, and provide the desired report. If, however, all of the data had been digitized and made available through an application, you would be able to run a report within seconds. Moving from weeks to seconds is a massive productivity boost and would enable business leaders to make faster, more accurate decisions. This is an example of the value digital transformation can provide.
According to the Google Cloud documentation (https://cloud.google.com/learn/what-is-digital-transformation), the official definition is as follows:
The push to digitally transform is felt across organizations, as highlighted by the official definition, as it impacts not only the tools the technology team uses but also the organizational culture and the ability to deliver modern customer experiences. Engineers often have to learn new skills or completely new technologies, adapting how they’ve worked to address the needs of today.
There are many reasons why companies choose to go through this transformation:
- Infrastructure flexibility
- Ease of R&D
- Quantifiable innovation
- Global collaboration
- Customer value
- Agility
Let’s explore these in detail.
Infrastructure flexibility
In the world of physical data centers, capacity planning and availability can be a big blocker. Having a server procured, shipped, configured, and pushed online can take days, weeks, or even months, depending on the circumstances. One of the big advantages of working with a cloud provider is that machines of all shapes and sizes are available through the click of a button. Spinning up a server, whether it’s in the US, Europe, or Asia, is a trivial workflow that makes it very easy to spin up servers virtually, deploy them, and manage them. It’s all done through a secure internet connection and if you decide that you no longer need something, you can spin it down to effectively stop paying for it.
Ease of R&D
By leveraging a cloud provider such as Google, organizations can quickly and easily access, test and validate new technologies as they are developed and launched. They can spin up development projects within a secure environment, ensuring that corporate or customer data won’t be accidentally leaked and that they have access to the latest technology being launched by cloud providers and their independent software vendor (ISV) partners.
Measurable innovation
When experimenting with different services, tools, and technologies, it can often be challenging to define success criteria and costs and make the right decisions. By leveraging a data-centric approach to testing and validation, businesses can quickly iterate on their developments and make smart decisions based on the results.
Global collaboration
Working with cross-functional teams that are distributed across the globe can be an issue whenever you don’t have the right tools, systems, and processes in place to facilitate the collaboration without the appropriate security and compliance controls. Through digital transformation, you can make data more accessible to people who need it, when they need it, while still ensuring compliance with existing requirements.
Customer value
The demands that come from customers are ever-evolving concerning developments in the market and associated technologies. By analyzing how customers prefer to engage, how they grow through their life cycle, and what needs arise throughout that journey, businesses can provide tailored experiences that meet and exceed customer expectations. They can find patterns and reasons why people leave the platform for example, identify the root cause(s), and implement a way to overcome those challenges proactively, thereby increasing retention and reducing churn.
Agility
Organizations are having to compete on a global scale with companies large and small to win new customers and retain existing ones. Through digital transformation, development teams are enabled to accelerate the pace at which they innovate while also being able to significantly increase the scale of their launches. Rather than having to launch a service in a specific region or city due to process or technology constraints, businesses can now build once and launch anywhere through innovations such as global cloud providers and Infrastructure as Code (IaC).
There are many reasons for a business to transform from analog, paper-based processes to digital processes. Not only will employees be more productive, but they’ll be more innovative and make better decisions. Workflows that might’ve taken days, weeks, or months can be compressed into days, hours, or even seconds. A common anecdote for demonstrating the impact of failing to digitize is the story of Blockbuster. Blockbuster was a brick-and-mortar store where you would go to rent or buy movies and TV shows. The walls and floors were lined with shelves covered in empty VHS and DVD boxes highlighting which titles were available. Many customers had come to cherish the experience of walking through those aisles, exploring interesting titles and genres until they finally found the one – and hoped it was in stock! Blockbuster, by 2004, had 9,000 stores globally (as per https://www.businessinsider.com/blockbuster-is-closing-forever-2013-11) and earned $5.9 billion in revenue (as per https://www.sec.gov/Archives/edgar/data/1085734/000119312507239499/dex991.htm).
Fast forward to 2023 and you won’t find a Blockbuster anywhere as they were digitally disrupted by Netflix. They started by competing with Blockbuster through a video-mailing service, eliminating the need to go to a physical location and be at the mercy of what was in stock, but eventually moved onto cloud-based video streaming. Online video streaming created a new way to browse and consume content, where a customer had a massive library of titles at their fingertips. Customers began to expect to be able to watch the latest release from the comfort of their homes without having to worry about whether or not Blockbuster had that video in stock. Today, Netflix continues to be a successful company, having reached $8.1 billion in quarterly revenue for Q1 of 2023 (as per https://www.statista.com/statistics/273883/netflixs-quarterly-revenue/#:~:text=In%20the%20first%20quarter%20of,the%20corresponding%20quarter%20of%202022). They are now facing an innovation dilemma as they face intense competition from new services such as Disney+, Paramount+, and Max.
Now that we understand why organizations are transforming digitally, let’s explore the benefits of going through that transition.
