Digital transformation strategy – Overview, steps of creating, and key aspects

Nowadays, businesses and organizations worldwide have been accelerating their digital transformation (DX) to modernize processes, enhance service quality, and retain customers.

However, as IBM puts it – digital transformation is never a one-time fix. Navigating your digital transformation can be challenging without a solid strategy and competent tech talent to execute it. 

In this article, from an IT Service Provider’s perspective, GEM outlines the 7 steps to build a digital transformation strategy, before discussing the three essential aspects that constitute the success of your company’s digital journey. 

Understanding digital transformation and digital transformation strategy

Digital transformation is generally understood as integrating digital technology into a particular business or organization. The ultimate goal isn’t only about modernizing operations and services or acquiring digital solutions. DX has a holistic impact on an organization since it challenges pre-existing culture, mindset, working model, and management approach. Therefore, it requires the organization to seek improvements and experiment with new methods continuously. 

How can leaders and senior executives navigate their digital transformation journey and define specific action plans that guarantee success? The answer lies in a solid digital transformation strategy. 

A proper digital transformation strategy is guided by the following principles:

Making sure it is people-centric

Though largely driven by innovative digital technologies, digital transformation cannot be successful without the involved stakeholders feeling motivated enough to make adjustments to their mindsets and behavior. In other words, changes happen due to the acceptance and implementation of humans, not solely because of technology. 

To increase buy-in from employees, it is important to inform them about the changes. Several questions to answer may include: What are the purposes of the transformation? How urgent is it? How will the technologies be implemented? What changes are expected regarding operations and processes? Do they have any suggestions for improving the digital transformation project?

Better yet, many leaders choose to delegate their staff to execute the project, hoping the latter’s expertise in their job will yield useful feedback on how digital transformation can be tailored to the business’s unique challenges. 

Encouraging cross-functional efforts

Digital transformation is a long-term project with large-scale changes to be made. As a result, interdisciplinarity is a must. An effective digital transformation strategy calls for involving people from different departments. This cross-functional approach means not only will you leverage the staff’s separate expertise but also urge them to work together as a unified team. 

Tracking KPIs

It is essential for a digital transformation strategy to enlist specific KPIs to measure the impact of your digital initiatives. Below is a list of the most popular metrics:

Return on investment: Compare how much you have spent on technology purchase and implementation, training, and recruitment of new experts and how much revenue has been accumulated since the transition. It is, however, essential to note that sometimes, returns can take a while to become significant enough to be measured.

Employee productivity: This metric can be divided into clearer questions such as: How much time spent on a task has been reduced? Is there an increase in the number of tasks completed in a certain period of time? Though it may take some time for employees to get used to the new tools, if any dip in productivity is noticed, it is important to intervene and provide timely support or training. 

System reliability and availability: When tailoring a digital transformation strategy, another important metric is how reliable the digital systems are. If it constantly experiences downtime and has high latency, then it’s likely to bring more frustration and delay than innovation. You can measure system reliability and availability via uptime, mean time to failure (MTTF), meantime before failure (MTBF), and mean time to resolve (MTTR). 

Adoption rate: Digital adoption and performance metrics tell you how employees or users are engaging with specific tools or platforms. Popular adoption and performance metrics include Daily/monthly active users, average time spent using the solution, retention rate, and adoption rate. If those metrics are decreasing, your target users aren’t connecting to the solutions, so additional training and support are needed. 

Customer experience: Customer experience is key to building a loyal customer base. Measuring how they’re engaging with and using your platform or product is crucial for long-term success. Metrics relating to customer experience can be collected via surveys or analytics tools. 

Popular customer experience metrics include but are not limited to: 

• Customer satisfaction
• Net promoter score (NPS): How likely the user is to recommend the service to someone else they know 
• Engagement and conversion
• Website traffic
• Subscription and signups

However, your company shouldn’t try to track all KPIs at once. Narrow down the metrics based on your organization’s expectations – What do you want to accomplish with these changes? Which KPI would best demonstrate your wanted outcomes? In addition, analytic tools will provide great assistance in tracking these KPIs and creating meaningful reports. 

Measuring added values: To decide whether a digital transformation strategy brings success to your organization, you must first define what “success” looks like – apart from classic criteria such as return on investment and cost reduction. Due to the arbitrary nature of this aspect, it can be challenging to define value-based metrics. A few examples may be:

• Decision-making speed
• Changes in brand perception
• The number of change advocates
• The percentage of users/employees who recognize and agree with the vision of the digital transformation strategy. 

How to tailor your digital transformation strategy – Step-by-step

How can leaders and senior executives navigate their digital transformation journey and define specific action plans that guarantee success? The following 7 steps suggested by Forbes outline how business leaders can effectively embrace innovative initiatives.

Step 1: Align digital initiatives with your business mission and vision statements

Revise your mission and vision statements and figure out how digital technologies can help realize them. 

Step 2: Ensure your current business strategy is still relevant

Digital transformation may significantly impact your existing business strategy – including:

• Long-term goals
• Action plans
• Customer value proposition
• Products and/or services
• Business processes

Therefore, sometimes, adjusting and even challenging your current plans is necessary, but keep in mind that the core focus remains adding value for your customers. 

Step 3: Enlist priority projects 

After thoroughly understanding internal processes and service offerings, business leaders can make a list of digitization use cases to be prioritized based on their level of urgency. It could be revamping a database, launching an automated accounting solution, or incorporating generative AI into a marketing strategy.

One recommended method is to choose one, two, or three projects that are smaller in scale and can be quick-win ones to test your digital transformation ability without posing great risks. These quick-win projects will yield valuable lessons and insights for your larger ones.  

Step 4: Skill auditing and planning

For a digital transformation strategy to succeed, the importance of human expertise is undeniable. Therefore, your organization needs a general skill audit to pinpoint skill gaps and address how they will be resolved. Popular approaches to bridging the gap include additional hiring, upskilling, partnering with external experts, and so on. 

Step 5: Build a list of success metrics

The list of criteria to measure your digital transformation strategy’s success can include both tangible metrics (such as visitors, task completion time, engagement time, etc) and more subtle ones (such as changes in perception). You should identify precisely what impact(s) you expect from the project and develop relevant metrics. 

Step 6: Establish ethics and governance basis 

Digital transformation strategies can easily be challenged by concerns about data governance and data ethics. Therefore, more and more organizations are creating their own ethics advisory boards or involving external experts. These experts will help create a framework for handling change, resolving ethical challenges, and implementing changes across the organization. 

Step 7: Choose the technologies you need

A solid outline of business strategy, goals, vision, and success measures will make it easier to pinpoint the most suitable tools to deliver the desired outcomes. This approach is much more advisable than going straight to the long list of available digital solutions without understanding your business challenges and having the right talents. 

Key aspects to consider when building a digital transformation strategy 

Apart from a comprehensive step-by-step guide, the core drivers of a successful digital transformation strategy also include three key aspects: effective leadership, committed staff, and solid tech infrastructure.

Visionary leadership for a successful digital transformation strategy 

Leadership is the core driving force behind any successful digital transformation strategy. Leaders are expected to thoroughly understand the plan’s underlying goals and execution strategies. In addition, since they cannot succeed alone, leadership is also about collaborating smoothly with their juniors and executives. Leaders need to oversee and make sure their team is working toward a shared objective with their best endeavors. 

Here a 5 typical traits of an excellent digital leader that will help navigate an excellent digital transformation strategy: 

• Being customer-centric and making sure the business development is fueled by customer needs
• Having solid knowledge of technologies and how they can be integrated into the business’s processes
• Possessing a strong sense of purpose and vision and the ability to communicate it to their members
• Being agile and adaptive and always willing to embrace uncertainty or disruptions
• Adopting a data-driven approach to decision-making 

Maintaining excellent tech talent retention for a successful digital transformation strategy

It is becoming increasingly challenging to find excellent IT hires and retain them for a digital transformation strategy. Outstanding candidates choose an employer for reasons beyond income (though this is still a major factor). They also look for a working environment that helps sharpen their skills and accelerate their development as an individual. Therefore, business leaders are advised to rethink their office culture and encourage the active participation of tech talents in executing strategic goals, instead of treating them like “code writers”.  

In addition to new hires, experienced leaders now focus on a more flexible approach: upskilling their current tech talent. With favorable conditions such as providing additional training, your organization can foster the formation of interdisciplinary knowledge that is needed to leverage new technologies. 

Infrastructure enhancement to power a digital transformation strategy

Finally, a digital transformation strategy is unlikely to be successful if the organization’s existing system and infrastructure are inadequate. 

Many business leaders choose to move their entire systems to a new platform – such as cloud. However, not all organizations are willing to move their entire system to the cloud due to concerns about its complicated, effort-intensive nature and data protection. Deloitte’s 2023 article proposed an increasingly popular approach – mainframe modernization with the help of digital technologies – such as AI and Big Data. They leverage these tools to extend the capabilities of their existing mainframe systems, whose indisputable advantages are longevity, high and steady performance, and high availability. This approach also minimizes the risks of data loss or disruptions.

Closing remarks

A successful digital transformation strategy is a combination of clear visions, measurable goals, detailed action plans, and sufficient technologies. While it can be a time-consuming and effort-extensive, process, tailoring a detailed plan will help your business navigate toward achieving digitally powered success in an ever-changing market.

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