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There are very few industries today that are not already affected by digital transformation. Moving business processes online provides cost-effective efficiencies, but there are a number of challenges. The term "digital transformation," introduced by McKinsey in 2015, includes four main areas. So, what are the four pillars of digital transformation and how can you use them as part of your business strategy?

What does the term "digital transformation" mean?

Digital transformation describes the process of making a business more competitive through technology. In a digital marketplace, businesses must use the latest technological tools to stay relevant. This includes automating business processes to increase efficiency. It also means developing more innovative products, streamlining processes and providing improved digital interactions with users.

Digital transformation is an ongoing process, which means that all changes can be implemented in stages to move the business forward.

There are very few industries today that are not already affected by digital transformation. Moving business processes online provides cost-effective efficiencies, but there are a number of challenges. The term "digital transformation," introduced by McKinsey in 2015, includes four main areas. So, what are the four pillars of digital transformation and how can you use them as part of your business strategy?

We'll look at them in this article.

What does the term "digital transformation" mean?

Digital transformation describes the process of making a business more competitive through technology. In a digital marketplace, businesses must use the latest technological tools to stay relevant. This includes automating business processes to increase efficiency. It also means developing more innovative products, streamlining processes and providing improved digital interactions with users.

Digital transformation is an ongoing process, which means that all changes can be implemented in stages to move the business forward.

The 4 main areas of digital transformation

There are many different strategies used in digital transformation. They can be divided into four main areas:

1.Business Model Transformation. Assess whether the company's current business model makes sense in a rapidly changing digital environment. Here you can look at new pricing strategies, substitute products coming in, new services, trends in changing customer needs. Assess what's attractive in today's marketplace. Look at your long-term and short-term goals to determine how to grow your business. An example of a business model transformation could be more TV companies moving into creating digital content for video hostings, or expanding banks' product lines into entirely non-banking products.

2.Restructure business processes. Assess how the company's business processes can and should be updated. Conduct an audit of the company's processes to identify any inefficiencies for improvement. I also recommend using metrics to analyze how effective each new tool or process is over time. For example, if a company's contract approval time before restructuring was 9 business days, and after it was 2, it is logical to use the "document approval time" indicator as an evaluation criterion.

3.Moving to the cloud and outsourcing. This third area of digital transformation describes moving business processes to the cloud and outsourcing. Using cloud systems provides increased security, flexibility and scalability, all at a lower cost. Similarly, outsourcing parts of non-core processes can significantly improve overall efficiency. For example, small companies are known to optimally outsource accounting and human resources, and many manufacturing companies outsource work during peak periods. Evaluate which processes can be moved to the cloud and outsourced? Once you've identified them, you can begin choosing the right products and services.

4.The transformation of corporate culture includes the preparation, implementation and training of the team for the changes, showing leadership in terms of the changes implemented. So, for example, if the company has moved to electronic document management, and the head refuses electronic interaction in the old way, such changes will be accepted by the team with difficulty and may not give the expected effect. It is one thing to offer your employees new rules or software, but it is another thing to convince them to use them.

The 4 Key Challenges to Digital Transformation

Now that we've broken down each of the four key areas, it's useful to take a look at the challenges we're likely to face during digital transformation.

Staff Resistance. Some employees may resist change, seeing many risks in it. Therefore, in developing a digital transformation strategy, it is important to take care of possible resistance in advance, to work out measures to reduce the emergence and impact of this factor.

Lack of digital skills. The second problem that needs to be addressed is gaps in the digital skill set (or digital literacy of employees). Even if people trust the transformation, they will need proper training and instruction to use these tools correctly. On our projects, we offer customers an additional step in implementation - training in the basics of digital literacy - working with office applications, operating system basics, and peripheral equipment.

Digital transformation requires significant financial investments. Therefore, the cost of digital transformation should be included in the budget in advance. Some companies are looking for additional investments solely for digital transformation, understanding the return on investment.

Lack of internal expertise. If you are at a point with your current team from which you want to move to a new, more technologically advanced level, you may need more skilled employees or outsourcing certain tasks along the way.

Despite the problems described, the benefits of digital transformation outweigh them.

Digital transformation takes time. The art of small steps can start today. For example, transferring the exchange of documents with counterparties into electronic form, transferring personnel interaction with employees into electronic form, these functions are available from any 1C accounting system and require virtually no additional investment. The next step can be the implementation of electronic document management system, also in small steps, starting with the creation of contracts, setting up templates, as an option. This step alone will allow you to significantly reduce the time employees spend on the preparation of the contract.

I hope that all the described tools will help you on your way of transformation to efficiency.