A comprehensive guide to 4 types of digital transformation

If you’re undergoing digital transformation at your company, you might find it challenging to get started without a clear model to follow. Whatever your industry, leadership, your IT team, and other key stakeholders should first understand the different digital transformation models to map out an actionable plan.

Understanding the different types of digital transformation

Digital transformation can take many forms. When you know how you might approach digitization, you have the background you need to build a realistic digital transformation strategy.

That said, it’s important to remember that your digital transformation may not look like your competitor’s. Instead of comparing your plan to your competitors’ strategies, focus on how you can use new technology to meet your organization’s specific objectives.

Your company's digital transformation will likely look different than that of your competition

What are the 4 types of digital transformation?

There are four primary types of digital transformations a company can undergo:

  • Strategic
  • Operational
  • Customer experience
  • Cultural

Each type addresses specific pain points and goals, which is why more complex digitization strategies often include multiple types of digital transformation.

Type 1: Strategic transformation

Your competitors could adopt new technologies that make maintaining the status quo unsustainable for your organization. Or you might find yourself in a situation where you need to diversify your company’s offerings to survive in the market. Also known as “domain transformation” or “business model transformation,” a strategic transformation completely transforms how a company does business. 

That’s exactly what financial services company JPMorgan Chase has done. Once a traditional bank, the firm has successfully leveraged new technologies to expand its offerings far beyond simple banking. Now, the firm offers diverse financial products and services such as asset management, investment banking, and more.

That trajectory is ongoing. The firm was the first large bank to add an AI assistant to its offerings, which it plans to implement throughout its entire organization. Additionally, according to its website, one of JPMorgan Chase’s active initiatives is exploring how blockchain technologies can fit into their business offerings and add value for customers. 

Type 2: Operational transformation

Inefficient legacy systems and manual workflows can cost you valuable time and effort on simple tasks, raising your operating expenses and affecting your ability to provide excellent customer service. Operational transformation improves specific processes by using digital technology to save your company money and time.

Other goals of operational transformation include:

  • Streamline work: Automated software eliminates the need for human employees to handle repetitive manual tasks like data entry and document generation
  • Enhance efficiency: With less time spent on tedious manual tasks, employees can focus all their energy on getting their core work done according to schedule
  • Leverage data: Advanced technologies like artificial intelligence (AI) and machine learning (ML) generate more accurate insights from your data, enabling you to make better business decisions
  • Become more agile: Cloud-based tools allow you to change direction more quickly when you encounter digital transformation obstacles and challenges

For an example of what an operational transformation can look like, look to the U.S. federal government. The Federal Cloud First Strategy aims to shift most of the government’s data storage to the cloud, a move that will improve inter-agency collaboration, make federal data more accessible to employees, and provide greater support for the ever-expanding Internet of Things (IoT).

Cloud-based tools increase collaboration, make data more accessible, improve efficiency, and support smart devices

One of the benefits of this campaign is that it cuts some of the costs associated with operating and maintaining legacy data centers. Since 2016, the government has saved nearly $2 billion due to this initiative.

Type 3: Customer experience transformation

Top-tier customer experience is a critical aspect of digital transformation for organizations across every industry. Today’s customers are more in tune with the digital world than ever and expect a personalized, seamless digital experience no matter what channel they use to engage with your brand. Your company must anticipate what each customer needs and wants, then adapt to meet those demands. Satisfying your customers’ needs can be difficult with legacy customer relationship management (CRM) software that doesn’t integrate with the rest of your tech stack.

Nike, a well-known activewear and sneaker company, provides a great example of how digital technologies can revolutionize how customers interact with a brand. The SNKRS app, released in 2015, leverages artificial intelligence (AI) and augmented reality (AR) technologies to help customers find the perfect shoe and fit without ever having to visit a physical store. This new customer touchpoint created a robust platform for capturing vital customer data, which has pushed the brand further on its digital transformation trajectory.

Type 4: Cultural transformation

While it’s easy to get carried away with exciting new technology, your people are still the most vital asset in your digital transformation journey. Your company must build a thriving culture of creativity, collaboration, and continuous improvement to embrace digital opportunities fully.

If your organization is brand-new to digital technologies, this kind of transformation can be challenging to accomplish. Many companies experience strong resistance from their people, especially if they lack the experience and skills needed to navigate new tools successfully. With the right approach, you can get the necessary buy-in from your people and create a framework for ongoing development.

Just look at the robust digital-first culture at Swedish furniture company IKEA, which managed to maintain the essence of the company while implementing various digital initiatives across its business model. The company’s e-commerce revenue tripled from 2018 to 2021 as a result of this shift, and the success has only continued.

Cultural transformations include focusing on human-centric technology, ethics, ongoing learning, and agility

There are several key components to IKEA’s success:

  • Human-centric technology: IKEA is selective in its technology investments, choosing only the tools that present a clear benefit to customers and employees
  • Ethical standards: The company culture places a strong emphasis on proper data usage, which protects sensitive customer data and ensures fair treatment both internally and at all customer touchpoints
  • Continuous learning: IKEA invests in its people through upskilling and reskilling initiatives that empower them to find innovative solutions for new obstacles
  • Agile mindset: The business can pivot when it encounters snags in the digital transformation journey and keeps an open mindset to learn from the experience

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