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Digital transformation remains one of those buzzwords that gets thrown around in business conversations. But what does it actually mean? And more importantly, why should businesses care about it? Let’s cut through the jargon and look at what digital transformation really means for businesses today.
What digital transformation really means
Digital transformation is about fundamentally changing how a business operates while using digital tools.
“This world is becoming more digital, more technology all the time,” said Tom Altman, a fractional CTO who focuses on digital transformation, on Episode 701 of “The Business Storytelling Podcast.” “And what we find is as many companies are coming along and they have to update systems, and when they do that, that is a digital transformation,”
The scope of digital transformation can range from implementing a new enterprise resource planning system to moving to a different customer relationship management (CRM) platform. But at its core, it’s about ensuring business continuity and preparing for future challenges and opportunities.
Why digital transformation matters now
It’s become evident that modern businesses need to adapt to changing work environments and customer expectations. The global nature of business today demands more flexible and efficient ways of operating.
“We’re so flexible now with this digital nature,” said Tom. “You and I talking here, it’s just as good, maybe better than if we were in person. People can live kind of where they want, when they want, and we can still connect.”
Digital transformation enables businesses to:
- Connect globally without geographical constraints
- Operate more efficiently with automated processes
- Reduce operational costs through streamlined systems
- Improve customer experience with better digital interfaces
- Enhance employee productivity with better tools
Key components of successful digital transformation
Before jumping into any digital transformation initiative, businesses should focus on two critical elements:
- systems documentation
- process mapping.
Without these foundational pieces, transformation efforts often stumble.
The first step involves documenting all existing systems.
“If you don’t have a map of that stuff and how it interacts with each other, that’s where you have to start,” Tom explained.
This documentation should include not just technology and software, but all operational systems and their interconnections.
The second crucial component involves documenting processes. Standard operating procedures (SOPs) need to be clearly defined before any digital transformation can succeed. Having these processes documented makes it easier to identify where digital solutions can add the most value.
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The role of AI in modern transformation
Artificial intelligence has become an integral part of digital transformation strategies. From automated email responses to invoice processing, AI can significantly improve operational efficiency.
“The places where we’re seeing today the biggest use of AI is in efficiencies,” Tom noted. “Some of the ERPs like NetSuite… in the finance team. You get an invoice and you have a PO and if those two things match, why in the world would you not just go ahead and approve it?”
AI adoption represents the next frontier in digital transformation, with opportunities for automation expanding rapidly. For example, email management is evolving beyond simple auto-responses to more sophisticated AI-driven solutions that can understand context and provide appropriate responses.
Legal and compliance considerations
When implementing AI and other digital tools as part of transformation efforts, businesses must consider legal and compliance implications. Companies need clear policies around how these tools are used, particularly when handling sensitive information.
As technology attorney Mitch Jackson pointed out on Episode 699 of “The Business Storytelling Podcast: “What you want to do is take a step back right now. This is the moment in time where you really want to understand the terms of service agreements and the licensing agreements that dictate and control the platforms that you’re using.”
Key legal considerations include:
- Privacy and security protocols for handling data
- Employee training on proper use of digital tools
- Clear policies for protecting proprietary information
- Proper documentation of third-party agreements
- Understanding intellectual property implications
Challenges and implementation hurdles
While digital transformation offers numerous benefits, it’s not without its challenges. Implementation can take longer than expected. What starts as a six-month project sometimes stretches to 18 months or more. One common pitfall occurs when organizations look to software as a quick fix.
“Sometimes people are looking for software to solve solutions, and they aren’t taking the time to really understand what their business does and how they do it,” Tom warned.
When implementing new systems, businesses at times need to adapt their processes. As Tom pointed out, each system comes with its own way of doing things. Organizations need to be prepared to change their ways rather than trying to force new systems to match old processes.
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Getting started with digital transformation
To begin a transformation journey, consider working with experienced professionals who have guided similar transitions before. Fractional executives can provide expert guidance without the commitment of a full-time hire. They can ensure transformation efforts align with business goals.
The process should start with thorough documentation of current systems and processes. Only then should businesses begin evaluating specific tools or platforms for implementation. Digital transformation isn’t about choosing the most expensive or feature-rich solution – it’s about finding the right tools that fit business needs and processes.
Digital transformation usually requires a shift in mindset and working methods. Sometimes, this means adapting existing processes to align with industry-standard practices rather than customizing systems to match current workflows.
And, digital transformation isn’t a one-time project. It’s an ongoing journey of adaptation and improvement. Technology continues to evolve, so businesses need to be flexible and ready to embrace new tools and methods that can improve their operations.
The key to successful digital transformation is in the thoughtful implementation and ongoing management of digital solutions that truly serve business needs. By taking a strategic approach and focusing on fundamental business processes first, while keeping legal and compliance considerations in mind, organizations can navigate their digital transformation journey more successfully.
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