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With increasingly competitive markets, many companies are aiming to improve their customers’ experience by using digital transformation.
Emerging technologies continue to disrupt the way businesses across all sectors interact with their clients and suppliers. In particular, what is conventionally called digital transformation – the incorporation of new technologies into products, processes and strategies – allows businesses to compete better in a digital economy.
Recent findings, published by Dimensional Research, revealed that investing in digital transformation resulted in improved employee productivity, lower costs and greater customer satisfaction. It also found that the people aspect of the change, in terms of culture and organisation, was more challenging than the technological side.
“We found that companies that were growing faster engaged in certain types of behaviour, one of which was design thinking,” says John Newton, CEO of Alfresco, which sponsored the research. “The other is how much they share information. The faster they grow, the more they use that information – not just internally, but with their customers as well.
“Those that look at their systems beyond their four walls and engage them in a more distributed ecosystem of sharing information, and collaborating more effectively, tend to be growing faster.”
As an example of digital transformation, Easy Bathrooms used ArtiCAD software to create 3D visualisations of bathroom designs for prospective customers. The installation of ArtiCAD in the company’s outlets took several weeks. The product libraries were uploaded onto its system and ArtiCAD also provided training workshops for Easy Bathroom’s staff.
“Customers who have a CAD drawing are twice as likely to place an order than those who don’t,” says Lee Reed, marketing manager at Easy Bathrooms. “This is a huge jump in conversion rates, and it’s had a big impact on our bottom line.”
Investing in digital transformation can mean different improvements for different organisations. “If you ask 100 people in 100 different organisations what digital transformation means, you’ll get 10,000 different answers,” says retail expert Martin Newman. “It can mean different things to different people.”
However, most organisations have found improved productivity and reduced costs resulting from digital transformation, and these operational benefits filter down to clients and customers, resulting in greater customer satisfaction.
Digital transformation can lead to organisations becoming paperless. Consequently, business operations become more able to respond swiftly to new challenges. “When things come through in a digital format, it’s easier to read the data and make decisions,” says Stephen Ralph, product manager for Zarion. “You can take a lot of the manual tasks, so that people can concentrate on the stages after that, which require more decision-making. It’s about presenting the right information to them at the right time.”
Understanding business processes
Determining how best to incorporate digital transformation requires a thorough understanding of the business processes, thus identifying where the greatest inefficiencies and opportunities lie. “One of the challenges is to filter that information, and be as selective as possible, and to dig deep with those users in order to find out what they’re looking for,” says James Klymowsky, CEO of Peddler. “It came down to our research team doing their job well, so that we could come up with a cohesive plan.”
Digital transformation often incorporates cloud computing and subscription-based services. In 2016, McKinsey Global Institute’s Digital Europe report estimated that the UK operated at only 17% of its digital potential, the US at 18% and Germany at just 10%. The global revenue that digital transformation is expected to generate over the next four years is estimated at $370bn (about £280bn).
“We focused on using a scalable architecture, and that meant we wanted to be able to scale up our clusters in order to provide the most cost-effective marketplace,” says Klymowsky. “We went for cloud server architecture – these are systems that are designed to boot and scale up on request. Whenever a user visits our site, we dynamically build all the servers that we need. Then, at the point of them getting the information back, our servers don’t exist out there any more.”
But digital transformation can also present new challenges. Although Amazon was not the first e-commerce site, it is certainly the largest and most prominent, and its success disrupted the retail sector. However, with pioneering the online retail methodology came the challenge of avoiding security breaches, such as the theft of debit or credit card information and customers’ personal information.
Embracing digital transformation without first considering all the possible consequences or performing sufficient resilience testing can have negative consequences. TSB and British Airways are examples of businesses where recent system migrations resulted in huge complications.
In the case of TSB, a long-planned IT upgrade last year resulted in six weeks of system failures. During that time, millions of customers were unable to access their accounts. Some discovered that their money had disappeared, and others found they were able to access other people’s accounts. The cost of the system failure is estimated at £330m.
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Problems are inevitable whenever a system is being migrated to a new platform. However, having multiple redundancies in place can provide the best chance of preventing any unforeseen consequences becoming critical failures. Major migrations are generally considered a last resort, because they have the potential to severely cripple an organisation.
Gaining the required expertise is a challenge that organisations will need to consider when investing in digital transformation. Dimensional Research’s report showed that more than 70% of organisations investing in digital transformation needed to hire or train their staff in order to gain the expertise required for using infrastructure as a service (IaaS) systems.
“We use a scrum-based methodology in order to build our projects, and then integrate them with our various suppliers,” says Klymowsky. “We identified our core architecture, how that could scale up, and how we could maintain our current platform points of sale for retailers, as well as delivering the social network at the same time.”
It is important to consider the optimum time to schedule a changeover. This involves reviewing business operations to identify times of peak workflow, so as to avoid these times.
As part of the preparations, clients should be kept informed about the proposed system improvements, including the times they can expect services to be unavailable. Scheduling such timing should also allow for any unexpected issues, to prevent customers trying to access services before the changeover has been completed. This can be facilitated through email and social media.
Technological and financial challenges are obvious hurdles to overcome when embarking on a digital transformation initiative. However, organisational resistance can also be challenging, especially in convincing employees to use a system they are unfamiliar with.
Involving the workforce
Engaging with staff ahead of a digital transformation provides leaders with an understanding of how their organisation will be affected at all levels. Involving the workforce engages them with the process of digital transformation, making them more accepting of the changes.
“The best way of taking them on that journey is by involving them quite early, even before you have decided what technology you are going to bring in,” says Newman. “Involve your internal stakeholders in helping you to define what to do more efficiently, if they had the tools to do it, rather than pushing down the decision that you’ve made.”
Given the highly involved nature of digital transformation initiatives, there is the temptation to shorten the development time as much as possible to reduce overheads and lead time. But such shortcuts can be counter-productive, leading to systemic challenges being exacerbated by employee resistance and a lack of preparation.
Once the systems are installed, a thorough testing programme should be performed to ensure the systems can withstand the expected workload during peak demand. This can be simulated through resilience testing, alpha testing and beta testing to ensure operability.
During the changeover period, financial drivers may provide compelling reasons to drop the legacy systems to reduce overheads. However, abandoning legacy systems before the new system is fully tested creates a vulnerability to failure, due to having inadequate redundancies in place.
Digital transformation is all about investing in new technology to provide greater efficiency. One of the emerging technologies that is expected to bring a fundamental shift in how businesses operate is the 5G cellular network, thanks to its increased transmission speeds.
“5G can enable connectivity without us having to spend £200,000 a year on redoing the wiring,” says Hugo Mathias, chief information officer at the Northamptonshire Health and Care Partnership. “It’s as fast as the wires, and yet I don't need the wires. Would it not be better if I just got a 5G contract, everything had a SIM card and we created a VPN?”
Emerging technology has enabled fresh opportunities, creating new revenue streams, while increasing competition within markets. Digital transformation can provide efficiency improvements as well as the optimal customer experience.