Chapter 2: 5 Benefits of Digital Transformation

If you’ve read Chapter 1 of our digital transformation guide, we’ve mentioned that in order for companies to move on to the next growth stage, they will need to undergo transformations. However, you need to weigh the pros and cons because a digital transformation process is an ongoing process, and resources are limited, so you need to carefully consider what needs fixing now and what can be fixed later.

There are many benefits from successfully implementing digital transformation, with the end goal of increasing profits. 80% of organizations that have completed digital transformation report increased profits. We’ve summarized the benefits of digital transformations into 5 categories:

1. Data-driven decision-making
2. Productivity
3. Company culture
4. Innovation
5. Company branding

Data-driven decision-making

Digital transformation consolidates information from different departments in one place. This has several benefits.

The first benefit is security since you can better control who has access to what information.

The second benefit is data accuracy. Since all data are integrated, you do not have to worry about different departments having different numbers for the same sets of data. Oftentimes, data among departments are irreconcilable due to time difference and human errors.

The third benefit is that all data are real-time, thereby allowing you to make better strategic or operational decisions faster. Traditionally, it takes weeks or months for companies to identify problems and find out their root causes. However, when your information is consolidated, you can start analyzing them on the same day they happen.

The fourth benefit is the depth of the data collected. Since data collection happens automatically, you can collect more data that help you identify problems better. For example, when your sales teams do not achieve their targets, you have the data of whether it is so because they lack qualified leads, or they are bad at converting them into customers, or if they simply do not make enough effort.

Productivity

Digital transformation improves productivity in two different ways. The first way is through business process optimization. At each stage of the customer lifecycle and operational processes, there is often potential for improvements which has a direct impact on profits. However, these optimizations are often unseen unless you take the time and effort to identify them.

The second way is through automation. By automating repetitive tasks, employees can save a lot of time, allowing them to focus more on things that matter more. A study conducted by Xerox found that businesses can save 528 hours per employee per year simply by digitizing their data collection efforts. That is equivalent to 3-4 months of doing nothing in a year, per employee! Imagine if this time is used to improve business processes, introduce new products and services, or improve company culture. Moreover, data will be much more accurate since human errors are taken out of the equation.

Company Culture

By providing employees with the right tools to automate work, provide data, and unite the different divisions, digital transformation encourages a better company culture. There are many types of company culture, and we will discuss a few of them that require digital transformation.

The first culture is the culture of productivity. By providing employees with tools to automate work, it helps them to be efficient in their work, and it will become a habit over time. The right talent management tools will also help transform employee appraisals to be more objective since employees’ productivity can be quantitatively measured and objectively compared with others in similar positions.

The second culture is the culture of being data and result-driven. We’ve seen many companies who fail to identify the real source of problems due to lack of data, and therefore come up with solutions that do not solve the real problems. We’ve also seen many companies with employees who seem to always be busy but do not bring results. By providing them with data, they can see the results of their efforts, and they can identify impactful activities in the future, and prioritize activities that bring high impact yet require low effort.

The third culture is the culture of openness. With integrated systems and data across departments, coupled with good leadership, it helps foster the unity to work together towards a common goal. We’ve seen many companies with departments blaming each other for problems since “it is the other department’s responsibility.” Bureaucracy, office politics, and favoritism are some of the problems that happen all the time. Nobody wants to work in companies like these.

Innovation

No company can grow without change because market conditions change. Competitors get better, customer expectations change, and employee expectations change. However, we found many companies unable to adapt, thinking “if it worked last time, it should work now and forever.” The fact is that many long-time companies fail because of their inability to adapt to changes to conditions, regardless of how many years they have been in business. In fact, the longer they are in business, the more likely they are to resist changes.

Digital transformation makes companies more agile, because it improves the speed and efficiency to get things done, and it provides the data required to identify what needs to be improved. So companies can identify the right problems, come up with the right solutions, and deliver the solutions quickly. Due to the increased efficiency, companies can innovate with their current employees without the need to hire new teams.

Company Branding

We will be talking about two types of branding: Customer branding and employer branding.

Customer Branding

You can improve your company brand through improving your customer experience throughout their whole customer lifecycle journey. You can deliver more seamless, intuitive experiences for your customers spanning from email communications to user portals, digital products, and even the way you reach out to new prospects. Customers nowadays have higher expectations for digital experiences and customer experience (CX) has become the new battleground for brands.

Employer branding

Employer branding is getting more and more important nowadays, since the success of companies in Stages 3 and above (refer to Chapter 1) heavily rely on having great people. In fact, the success of a digital transformation process is also heavily reliant on having great people (as will be discussed in Chapter 3). However, great people are hard to come by, and they are picky since they have many career options other than your company.

How does digital transformation affect employer branding?

Firstly, great people are looking for challenges for their personal growth. They do not like doing repetitive administrative tasks since they can’t grow that way. They want to do things that matter. When there are systems and procedures in place, coupled with the help of technology and the availability of data, they spend less time on administrative tasks and spend more time on solving problems. In addition, proper personal development programs are also helpful to speed up growth and improve retention. Lastly,

Secondly, great people want to see the results of their efforts. They want to see the data to know that what they are doing actually brings the company forward.

Thirdly, great people want good leaders. There is a common phrase:

 “People leave managers, not companies.”

In Gallup’s comprehensive 2015 study, they found out that:

“75% of people quit their job to get away from their manager at some point in their career”

There are 4 types of bad leaders:

1. Marionette – Managers who just follow orders and play safe to preserve their position
2. King Kong – Managers with superiority complex who don’t respect their employees and making them feel inferior
3. Superman – Managers who make all decisions solo, ignoring feedbacks, and taking all credits
4. Taskmaster – Managers who micromanage, solely focus on the bottomline, and does not provide motivation, guidance, and support

It is important for bad managers to know their weaknesses and how to improve themselves in order for great people to thrive in your company.

Despite the many benefits of digital transformation, many companies fail their digital transformation efforts. According to a McKinsey study, 70% of all digital transformations fail. We shall learn why they fail and what we can do to increase our success rate in the next chapter.

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