Digital transformation is a fundamental reality for businesses today. Organizations of all sizes realize that to delay digital transformation further is to risk obsolescence. And it is up to a company’s leadership team to commandeer this revolution while ensuring business continuity! – Warren Buffett, Chairman and CEO of Berkshire Hathaway
What is Digital Transformation?
In this age, which is driven by Information Technology, businesses must adopt new and emerging technologies into business processes and organization strategies to survive the fierce competition.
Digitization is the first step towards Digital Transformation. Now, you may be wondering, both are the same, isn’t it? No. they are not!
Digitization
Digitization means to convert information present in physical / non-digital format to digital format. This makes information available to be used freely on mobiles, computer systems. This is the first step towards the automation of processes and initiation into the world of digital transformation. Digitization helps save, access and share information easily.
For e.g. Instead of writing notes on paper, we type them in Word or Excel or We scan a paper document & save it as a digital document in PDF format.
Digital Transformation
This activity focuses on digitizing individual processes and automating manual or physical processes in the company. Firstly, identify the areas of improvement in current processes. Then determine how to introduce and harness the power of digital technology in the current processes, or modify the existing process or redefine the entire process to optimize it. The most important objective obviously to improve speed, efficiency & productivity.
Let us now read the example of a manufacturing company spread across 5 different cities. We see how it was managing the inventory information manually and compare what has changed after implementing digital transformation.
Stage 1: Manual Processes:
Company maintained records on paper in physical files for each office. Suppose they wanted company-wide data available at the headquarters, they had to make additional copies and physically send them to the headquarters. This was a purely manual effort, involved a certain cost for sending the records and was time-consuming.
Stage 2: Digitization:
With the advent of computers, the company started saving their inventory records and information using word files, excel sheets, etc. This means they have now introduced digitization. Data is now stored on hard drives of computers in their respective offices. However, each office still has its own set of records at disparate locations and not consolidated or up to date all the time. But, it is easier to send data and collate data using spreadsheets and other tools.
Stage 3: Digital Transformation:
ERP, Mobile Apps have now leveraged digital technology to help companies provide access to real-time data, from anywhere, anytime – with the help of a single data source, which stores information across departments and locations. Thus, we eliminate, manual, repetitive work, improve processes and save significant time.
Business intelligence software can now read digital data, analyze the data, provide information and insights about trends in business in dashboards at the click of a button. E.g. if the inventory of a company has reached a certain level, concerned authorities can get a notification. They can immediately take the necessary actions.
Thus we observe that a manual process that involved a lot of paperwork, acquiring physical approvals, depended on the availability of a person is now transformed into a digital and automated process which is fast and real-time.
What are the Advantages of Digital Transformation?
Digital Transformation is about adopting innovation to create value for your business as well as customers. Some of the significant advantages of Digital Transformation are:
1. Digitalization of Business Operations: Digitizing processes and documents makes information available at the click of a button. Saves significant paperwork & physical storage space. Saves significant time involved in routine, manual & time-consuming paperwork, reduces the chances of errors & delays. The workforce can, therefore, focus on more strategic work.
2. Speed in Business: With standard business processes set up, well-defined business rules in place, employees are empowered & encouraged to make decisions, to ensure smooth functioning of business and escalate only the exceptions which are beyond their authority. This turbocharged the approval processes and reduces cycle time.
3. Improved Collaboration: With the help of mobility and digital platforms, communication and collaboration between departments within the company are improved significantly. This ensures that standard processes are followed, there is minimum deviation, increases productivity & efficiency of the company.
4. Transparency: With Digital transformation, the entire process becomes real-time & transparent. Real-time data, insightful reports, and analysis of business trends are easily available in the form of dashboards and reports to concerned departments and authorities. This makes it easier to track processes, identify bottlenecks, take corrective actions to improve performance promptly.
There are 2 major aspects involved in Digital Transformation
- Creating a Digital Backbone &
- Creating a Digital Transformation Strategy
How to create a Digital Backbone?
Digital Backbone is the foundation stone on which all digital initiatives are built. It focuses on creating an IT infrastructure which is conducive to meet digital business requirements
1. Store data digitally in a centralized location.
Storing data in digital format such that it is easily accessible and can be converted to MIS whenever needed. Data stored in a single central location can be accessed by all and provides single accurate information to all employees of the company.
2. Make the right data available to the right people at the right time.
With the help of a single source of data, a company can provide all the required information to the Senior Management, Middle Management, and Employees, by establishing a set of business rules. Thus the most appropriate information is available to relevant people at all times. This will improve the overall functioning of the organization and eliminate communication gaps.
3. Analysis and Reporting
Daily and monthly reporting and analysis take up a significant amount of time. Digitizing the reporting and analysis functions involves automating the reports to provide real-time analysis and trends in the form of easy to understand charts, graphs, dashboards.
4. Developing a digital culture
Management & Employees should be persuaded to adopt Digital & Think Digital. They should leverage the digital culture to take prompt actions based on alerts/notifications. They should start approving/authorizing using mobile apps, software, etc. Making optimum use of digital technologies will significantly save time and effort of employees and speed up the processes.
5. Business Integration with Vendors, Partners & Customers
Companies are using digital technologies to connect with their partners which makes communication easier and real-time. Based on insights into their interaction trends, companies can provide more personalized and customized services.
How to create a Digital Transformation Strategy?
To ensure the transition from manual to a digital company must first develop a digital transformation strategy.
1. Evaluate the current state of digital: Understand how your current processes work. Identify areas of improvement. Assess how digital can bring about an improvement?
2. Assess Technology Readiness: Will your current systems support Digital transformation? Ascertain whether you can leverage the existing systems or need to adopt new technologies for digital transformation
3. Buy-in from Stakeholders & Approval of Budget: Top Management should be the driving force in the journey of transforming to a digital company. They should provide the requisite financial, technical & physical resources for Digital Transformation.
4. Define Goals of digital transformation: Define specific objectives of digital transformation such as: to streamline processes, to automate processes, to improve speed to market, increase productivity, efficiency and so on
5. Outline roadmap: Clearly outline the steps & areas of improvement with digital transformation. This will help ensure that activities follow the timeline and get executed as per schedule.
6. Digital Transformation Team: Identify team members who will be primarily responsible for the implementation of the Digital Transformation Strategy.
Summary
Digital technologies are reshaping almost every industry, including manufacturing. Hence, adopting digital transformation is inevitable for manufacturing companies to stay relevant & competitive. In the above article, we have clearly defined the need to define the goals & objectives for digital transformation, how to create a digital backbone & steps to implement digital transformation strategy for successful implementation.
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You may also like to read Importance of Digital Technology Adoption for Manufacturing
