What Is Digital Transformation? Definition, Strategy + More

The term digital transformation can apply to anything changing from analog to digital. On a global scale, it is the sum of ongoing changes in the current digital age, often called the information age. With the vast amounts of data readily accessible through digital means, particularly via the internet, spending on digital transformation technologies is expected to reach 3.9 billion by 2027, a figure quadruple its size just a decade earlier [1].

Explore more about the importance of digital transformation, including digital transformation strategy, processes, benefits, and examples. 

What is digital transformation?

Digital transformation is the process of integrating digital technologies into all parts of an organization, such as products, services, or operations, to deliver value to customers. In a globally and digitally connected landscape, this type of transformation is more than keeping up with the rest of the world and your industry—it’s about continuing to innovate and seek new, better ways of doing things.

Digital transformation examples

An example of digital transformation that you are likely familiar with is paper records at doctor's offices. Today, most medical documents are digitized into electronic health records (EHR). This digital transformation process makes it easier for patients and providers to access records quickly. It also enhances scheduling and monitoring capabilities beyond paper and pen. You can familiarize yourself with examples of digital transformation across different industries in the following sections. 

Digital transformation in health care

As mentioned above, the shift from paper-based patient records to EHR has made monitoring health concerns easier for patients and providers. Online portals also help make virtual doctor’s visits more accessible in recent years. For example, the company Doxy.me created a free web-based system designed for telehealth. Clinicians can create an account and offer a personalized waiting room to communicate with patients. Patients can click a link to “wait” in the room until the clinician is ready. This service provides an easily accessible, secure, and safe virtual platform for telehealth.

Learn more: Check out Northeastern University's Master of Science in Management: Digital Transformation in Healthcare.

Digital transformation in entertainment services

Netflix started out as a DVD distributor and then pivoted into a streaming service. It was a bold (but smart) move. Blockbuster stores were dying out, and people were spending more and more time online. Later on, competitors like Hulu, Disney+, HBO Max, and Amazon Prime would enter the market for a slice of the streaming service pie.

Digital transformation in finance

Financial services have undergone a significant transformation in recent years, enabling several forms of mobile banking. Consider the transformation from cash to credit cards and automated teller machines (ATMs). Or, think about how touch-free payments such as Apple Pay and CashApp have proliferated. Another notable example is Wise (formerly Transferwise). This company created a borderless banking application that allows businesses and individuals to send and receive money in multiple currencies.

Wise's digital transformation strategy

Rather than being divided into departments (like marketing, finance, etc.), Wise implemented small, autonomous teams to focus on specific key performance indicators (KPIs). Additionally, they cultivated a mission-driven culture to encourage innovation with speed and agility.

Learn more: Check out Copenhagen Business School’s Digital Transformation in Financial Services Specialization.

Digital transformation in manufacturing

Many manufacturers undergo digital transformation to create more lean, efficient supply chains. Using predictive analytics and other forms of artificial intelligence (AI), they reduce costs, maintenance, and consumption. For example, Tesla is known for being a manufacturer of electric cars. It is the only car manufacturer that provides updates that allow the car to improve safety and performance capabilities remotely. It has also worked to produce more lithium-ion batteries at its manufacturing plants, using digital technologies to increase year-over-year growth [2].

The digital transformation process in 4 phases

Digital transformation efforts look different from industry to industry. The process can vary slightly depending on customer expectations, business models, and organizational culture. However, the overall digital transformation process can be broken down into four phases:

1. Early stage: The first stage of the process includes planning, cultivating the necessary partnerships, and testing the organization's capabilities. Business leaders develop the approach and select the tools or digital innovations they want to implement. 

2. Mid-stage: During this stage, business leaders choose focus areas like business processes, digital products, or key roles within the organization. The digital transformation strategy is defined, along with key performance indicators (KPIs) that help measure success. 

3. Growth stage: The growth stage in a digital transformation project emphasizes scalability. It focuses on adopting new business processes, products, and protocols across the organization. Change management is introduced during the third stage of the transformation process. 

4. Mature stage: The final stage in a digital business transformation is centered around continued innovation and improvement. A strategic approach to governance should also be defined during the mature stage.  

Even in organizations where a digital transformation initiative has been “completed,” continuous maintenance and re-evaluation are required.

What is a digital transformation strategy?

A digital transformation strategy is the holistic approach an organization coordinates. The goal is to make the digital transformation journey seamless and efficient. Beyond implementing new technologies to better support your employees and customers, true transformation requires a company culture that is open to embracing change, experimentation, and failure. The success of digital transformation in an organization relies on openness to innovation and flexibility.

Digital transformation services

Some organizations employ the help of digital transformation services to ensure a smooth employee experience and minimize disruptions in daily operations. Commonly utilized digital transformation services include:

• Consulting: Experts can analyze your company's IT infrastructure and operating model to make strategic recommendations. Goals include enhanced performance, scalability, and sustainability. 

• Big data management: Digital transformation services may include the implementation of big data infrastructure. Structuring how an organization collects, stores, and analyzes data can provide essential insights to guide decision-making. 

• Re-engineering of existing infrastructure and digital products: Many organizations seek expert guidance in modernizing legacy systems and outdated processes for optimal digital transformation success.  

Digital transformation careers

When an organization undergoes a digital transformation initiative, every team is affected. The sections below outline some of the key roles that affect digital transformation efforts.

1. Engineers and developers

Software engineers, user experience (UX) designers, developers, cloud computing specialists, and product managers are essential roles in the rollout of new products, services, systems, and processes. They work alongside operations staff to implement software at every stage of the business.

2. Data science and IT professionals

Data scientists, data architects, and data analysts sort, analyze, and produce insights. Machine learning and AI engineers support digital transformations by creating models for quicker, targeted analysis of data to assess needs. Other IT jobs include systems administrators and help desk technicians, who troubleshoot and assist before, during, and after big operational changes.

3. Strategists and creatives

Strategists, such as change management and digital transformation consultants (or agencies), can provide much-needed support for high-level leadership and help facilitate the company-wide adoption of tools and technologies. Additional job roles needed for internal communications during a digital transformation include content and brand strategists and ethical compliance specialists. 

4. Digital leaders

At the top of the organization, chief information officers (CIOs) must work with other executive staff to ensure a smooth transition and continued revenue growth by introducing new digital products and technologies.

Interested in starting a career in digital transformation? Consider learning from an industry leader with the Google Data Analytics Professional Certificate.

Benefits of digital transformation

Digital transformation has plenty of benefits in addition to keeping pace with organizations at the forefront of the digital revolution:

• Increased return on investment (ROI): Organizations that spend money on and complete their digital transformations tend to see margins that are higher than their industry average. While ROI may vary, it’s hard to deny that implementing digital systems and processes can speed up productivity and operations to increase business growth.

• Data-driven insights: Digital tools help organizations collect, sort, and analyze huge amounts of data. Across an organization, departments can translate raw data into actionable insights to optimize operations, production, finance, and marketing. Business intelligence tools help leaders make data-driven decisions.

• Improved communication and collaboration: Teams can benefit from enhanced productivity by using digital tools that facilitate better communication and collaboration. Whether it’s Microsoft Teams or Slack, email platforms like Outlook or Gmail, or collaborative tools like Google Docs and Miro, numerous options for digital collaboration are available.

• Better customer experience: Creating more intuitive and seamless experiences for customers begins with adopting digital technology. When reaching customers through email marketing and social media, businesses can track metrics with digital tools. A digital infrastructure can help an organization cater to different customer segments to deliver value propositions like fast delivery, competitive pricing, and good quality. As a result, customers will be more likely to choose that company’s product, even among competitive choices.

Read more: Digital Supply Chains: Definition, Benefits, and Careers

How to start your digital transformation journey

Digital transformation projects start with adopting a culture of change. First, you’ll want to consider your business goals. What are the needs? How can you be human-centered? What can be done more efficiently with technology? Then, collaborate with and empower IT staff to research the best tools for your needs. You’ll want to align this strategy with the right technology. Finally, redesign your business to focus on your customers and employees, whether it’s elevating your products, distribution channels, human resources, or financial organization.

Keep learning about digital transformation with Coursera

Whether your organization is launching a digital transformation initiative or you're interested in starting a career in this field, you can prepare yourself with an online, self-paced, and beginner-friendly course developed by the Darden School of Business at the University of Virginia. You'll have the opportunity to learn how to apply the Boston Consulting Group’s framework to navigate digital transformation strategy, core processes, and technology.