Digital transformation evolution: how incremental change can go a long way
Digital transformation has been going on for decades - from the initial digitization of analog processes to the subsequent expansion of systems into CRMs, ERPs, cloud services, and beyond to where we are now.
However, for all the hype around it over the last few years, digital transformation is also criticized in some corners as either being too unspecific, too grand, or simply the wrong approach. Digital evolution, critics say, is the better phrase and approach, as the implications differ.
So is this all semantics, and does it really matter what it is called? Or are these different approaches to entering the digital age and, if so, how do they differ? What’s more - can they be combined? Does digital transformation evolve?
Here’s what you need to know about the evolution of digital transformation, and what are its business benefits!
Digital transformation or digital evolution?
The meaning and practice of digital transformation are not set in stone, and there are differing opinions as to what it entails. Some have called digital transformation simply the process of adopting and integrating digital technologies, while others have said it is a misleading phrase because it sets high expectations. And in reality, between 70% and 95% of transformation efforts have been observed to fail. This raises the legitimate question of whether and how digital transformation is precisely possible.
To approach this thorny question, we might set out by defining the terms in the most straightforward way.
In essence, digital transformation can be seen as the process of enabling business transformation via information technology with the explicit aim of creating new products and services, and growing revenues. Typically, this process involves the digitization of physical products or the integration of physical and digital.
Digital evolution, on the other hand, is the process of adapting and adopting new technologies and services with the aim of increasing the efficiency of the business, lowering costs, changing business models as well as improving overall capabilities. I.e. digital evolution is the maturing of how a business utilizes technologies, combines them, and makes something new out of them. It is usually understood as a gradual change, without the need for a revolution. This, however, does not answer the question of why digital transformation efforts have been so fraught with difficulties.
What are the challenges?
One way to make sense of this is to look at the digital transformation challenges businesses have needed to face over the last few years. As this Deloitte article notes, in the past digital investments were about “foundational elements like data modernization, core technology enhancements, and back-office automation”.
All of this changed with the advent of the digital economy, the pandemic, and a host of other external pressures, including greater cyber threats, and geopolitical shifts. The post-pandemic world is distinctly different and has raised the stakes for businesses and the need for more thorough digital transformations that provide them with a competitive advantage.
Unfortunately, this has also made the process harder and significantly more disruptive for them. Hence the need to reconsider whether and how digital transformation works.
The impacts of digital technology on an organization's evolution
Industry 4.0 technologies now have the capacity to change organizations on every level. They allow them to transform and reinvent themselves, open horizons, change digital strategy, and tap into new capabilities to gain a competitive edge.
This state of digital development is the result of decades of gradual buildup and of combining several types of systems:
- Systems of record such as CRMs
- Systems of collaboration such as Slack or Microsoft Teams
- Systems of engagement such as Zendesk and social media platforms such as Facebook
- Systems of productivity and outcomes such as Trello or Microsoft 365
In effect, organizations can now easily, cheaply, and automatically collect, store and work through vast amounts of data from both digital and physical sources. They can combine and analyze such information to forecast developments and take the results in directions that previously did not seem possible. And this is only a fraction of what are the digital transformation benefits for businesses and the new ways in which they can create value.
The disruption in the digital world
The other side of this equation is the fact that with such powerful digital tools at their disposal, companies may also come to perceive technology as a threat. Naturally, competitors are always looking to outsmart their rivals, and all too often this is portrayed as a matter of technological power. In anticipation of such events, companies will frequently choose to disrupt themselves, in order to prepare, as well as to reconsider how they create value in the future.
While such disruption is necessary, it can raise the bar excessively and lead businesses to become mired in fine distinctions about desired improvements, lengthy optimization processes, and ultimately - scope creep, and runaway deadlines. Moreover, rushing toward the latest solution in order to outrun competitors can end up obscuring the reason why this is being done in the first place.
This, at its core, is the criticism against framing digital transformations as the be-all and end-all. With the stakes being high already, companies are increasingly recognizing that such an approach can actually be less, rather than more effective. But there is a different way of approaching digital transformation, and this is what the idea of digital transformation evolution is about.
What is the evolution of digital transformation?
In a nutshell, an “evolutionary” approach to digital transformation entails the utilization of digital technology to improve the current situation. But unlike how digital transformation is frequently portrayed, it does not entail starting from scratch and discarding all previous systems and processes in favor of new solutions. I.e. it reiterates what digital transformation is about in the first place and emphasizes the “why” of transformation, rather than the “what” that needs to be achieved.
This makes it a more gradual and incremental approach that seeks to introduce change that can be integrated by the organization while leading to real increases in productivity, efficiency, and business value. Behind this is the understanding that it is not technology per se that delivers business outcomes. Instead, as obvious as it may sound, what creates value is what technology allows a business to do - the capabilities it provides and the differentiation it enables.
Benefits of digital evolution
Adopting such an approach to digital transformations offers a distinct set of benefits that set it apart from a more disruptive but possibly also unstable form of transformation. Such benefits include:
- Reduced risk: making gradual and smaller changes means there is less risk for the overall functioning of the organization
- Lower costs: focusing on current problems and developments reduces the upfront investment cost of transformation and allows for more efficient management of resources, as well as better tracking of ROI
- Faster change: though it may be counterintuitive - the incremental transformation can result in faster change because it reduces the time required for developing and implementing a new idea or technology
- Flexible development: by setting short-term and smaller-scale goals, businesses have greater input in where they want to take the transformation and can more easily change course
- Greater insight: gradual change allows for insight at a granular level and how technology is impacting performance and results
A lot can be at stake when a business is transforming. A digital transformation roadmap creates the necessary space within which change can occur, without risking the overall stability of the company.
Instead of overturning the status quo, digital evolution seeks to make meaningful interventions that take into account existing systems and processes and seek to build on them, not scraping them altogether.
How will digital transformation evolve in the future?
The scale at which digital transformation is possible will continue to grow in the future. Technologies such as quantum computing and communication, artificial intelligence (AI), intelligent automation (IA), blockchain, virtual reality (VR), and augmented reality (AR) will become more prominent and increase in capability. For businesses, this means that the possibilities, as well as challenges, will continue to increase.
This can become a source of creativity if companies can embrace the task of transforming. In order to rise up to that task, however, it is necessary to prepare a digital transformation framework - to rethink what transformation means, why it is required, and how it should be undertaken. With a digital evolution perspective in mind, businesses can reap the benefits of transformation in a more balanced way, and do so with greater frequency.
Evolve digitally with Resolute Software
Undergoing digital transformation can seem like a daunting task. Having an experienced partner to guide you through the process can be indispensable in helping you maintain focus and control over the process.
Resolute Software has extensive experience in helping companies, both big and small, undergo digital transformation. Regardless of whether you want to reshape your company entirely or want to transform services gradually, we can help you define your digital transformation goals, assess your current state, and define the steps you need to take in order to successfully enter the digital world.
Digital evolution is the process of gradual transformation of how businesses utilize digital technology and the types of technologies they utilize. It involves building on the foundation of already existing technologies such as legacy systems, in order to improve the digital ecosystem, yet without introducing too much stress to the company.