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What Is Digital Transformation and Why Does It Matter?

Computer with coding language on screen

If you’re reading a marketing blog, there’s a pretty good chance that you already know a fair amount about the importance of digital marketing in today’s business landscape. It’s not something that any successful marketer can overlook, and that’s been the case for quite a while now. In fact, we’ve reached an interesting point in the history of online advertising—more than anything else, we live in a time of digital transformation.

Never heard that phrase before? No worries. Let’s get into what exactly digital transformation means, and why marketers should care about it—and beyond that, how your own digital transformation can make your business a force to be reckoned with.

What is digital transformation?

One of the most important developments of the past thirty years or so has been the growing and intensifying impact that the internet has had on every aspect of life—politics, business, socialization, dating, learning, and of course marketing. The larger societal effects of this are something that I’m definitely not smart enough to parse; luckily, you’re here for the marketing part.

“Digital transformation” is really only one part of how this bears out. So to really understand digital transformation, first we need to understand something of how the overall process of the digital rebirth of our society works. Salesforce divides it into three segments: digitization, digitalization, and (our subject) digital transformation.

Digitization

As you’ll see, these three stages progress in chronological order—it’s kind of hard to get to digital transformation without the first two stages. In the past, everything was on paper. In the even deeper past it was mostly etched into stone tablets, but it certainly wasn’t on computers. As the computer was invented, popularized, and finally became ubiquitous, one of the more convenient uses it had for businesses was the ability to take those reams and reams of paper records and eliminate them forever. That’s digitization: the translation of things that used to be kept in tangible form to the digital realm.

And it was a massive step forward. Space that used to be filled with filing cabinets stretching into infinity could be cleared. Rather than having to flip through file after file after file to find something that might have fallen under a desk, you can just use a search function to find exactly what you need. It seems like old hat now—and for good reason, because no modern business today would function the way a typical business did in the 1960s—but digitization was a real game-changer.

Digitalization

Digitization allows digitalization: the process of using digital data to increase the efficiency of the work you do, the pace at which you work, and the simplicity of how you do your job. This isn’t reinventing the wheel—it’s just making the job you did yesterday a little easier to do. It’s a huge deal, because when we’re talking about efficiency, I don’t just mean saving a minute here and a minute there. It’s time savings on a scale that allowed businesses to start thinking about ways that they could completely change the way they work.

Digital transformation

And that is now where we find ourselves: the power of the digital age is changing everything. The ubiquity of the internet in our lives has created whole new industries that could not have existed—not in the same way, at least—without it. Salesforce mentions Netflix in their definition: sure, a mail-order DVD service could exist without the internet (for those that don’t remember Netflix’s early days, yes, they used to mail movies to you). It’s not that different from movie rental, just a bit more convenient. But the idea of a streaming video service that can compete with the traditional networks and movie theaters and win is not something that could exist without modern online connectivity and an internet that is woven deep into the fabric of our culture.

Think about ride-sharing services like Uber and Lyft. In a major metropolitan area, taxis are everywhere. You can just stand on a corner and wave your hand around and presto, you’ve got a ride. But if you live in a place like Indianapolis (or even more so, the suburbs), you’re mostly on your own. The mobile app allows a rider to call a car from anywhere—your location services mean the driver can find your precise location even if you can’t give an address, the ability to pre-save payment information means that covering the cost is simple, and GPS tech run through a phone gets you and your driver from point A to points B, C, D, and Z safely.

In short, digital transformation creates whole new ways of doing business, and flips the old ways on their head.

Why is digital transformation important right now?

It’s pretty obvious why this is important in general—your business has to react to the ways in which the internet changes your industry and the world at large, or else you’ll get left behind. But it’s actually more critical than ever before right now, as we speak. Why? Think about what’s happened over the past year.

It’s hard to believe this is possible, but we’ve actually become even more reliant on our phones and on the internet since the beginning of 2020. COVID-19 forced us to stay away from each other, but it didn’t change any of the natural needs we all have as people. We couldn’t go to a restaurant with friends, so we held virtual happy hours via Zoom. We couldn’t just make a random run to the store, so we relied on curbside pickup. And of course, this all applied to business as well. Meetings with coworkers, kickoffs with new clients—all these things got harder, and the solutions were all online. According to a July survey, 59% of IT decision makers said the pandemic was forcing them to pick up the pace of their digital transformation efforts, and global spending on digital transformation was projected to grow by over 10 percent. Nobody who’s worked through the past year should be shocked by either number.

And through this all, we’ve found that maybe some of the ways we’ve been forced into are worth holding onto. You’d be hard-pressed to find a restaurant today that won’t offer some version of takeout, and that’s probably not going away. Basically every 2020 event was cancelled and spun into a virtual event, and the ways in which that made it easier for people to attend (and, therefore, for event promoters to boost attendance) mean it’s unlikely we’ll see many in-person-only events going forward.

The paradigm shifts in how we work that happened in 2020 mean that the pace at which digital transformation is happening and the effects that it can have on individual businesses and industries at large have grown exponentially. It’s more important than ever to think about how these changes affect your business.

How should businesses react to digital transformation?

Because of the nature of digital transformation—that is, the fact that it necessarily requires revolutionary thinking to remake what a business or industry can look like—it’s hard to give a straight answer. Like so much that we talk about as marketers and businesspeople, there’s no silver bullet, no one right answer that makes everything okay in the end.

But there are a number of takeaways that can lead you in the right direction (or one of the right directions).

No matter your size, commit to transformation

It’s easy to say you’re happy where you are. Especially if your business is small, and you don’t have dreams of market domination, you might be content just to keep doing what you’re doing. It’s also easy to say that your larger or enterprise business knows best, and that the market will come to you rather than the other way around. But no matter how big or small your business, digital transformation has to be something you’re thinking about. Whether your budget is massive or quite limited, you need to devote time and resources to thinking about how technology changes affect you, and where you can take advantage of opportunities to build value by changing your angle.

Think outside the box

When you’re thinking about transforming your business, it’s important to make sure that you are thinking about it in a revolutionary sense. Remember earlier, when we talked about the stages of the growth of this digital world? Today is not the day for digitalization, and it’s definitely not digitization. You have to be open to changing everything. Don’t wait for your competition to have The Big Idea and then try to keep up with them. Try new things. Think about the world in a different way. Don’t just try to update what’s already there.

What does your audience want?

How well do you know the people you’re trying to attract as buyers? It’s hard enough to try to innovate, but it only gets tougher when you have no idea what kinds of things people are going to respond to. Do some brand research to find out what people think of you—what they come to you for, what you do well and poorly, where they think you should go next. See what they want from you and your competitors, and try to devise new ways to make that happen. Or find the “next thing”: the thing they aren’t asking for, but comes as a possible next step from what they think they want now.

Business goals come first

Once you start thinking outside the box, it’s easy to get WAY out there. That’s not necessarily a bad thing, because some of the wildest ideas can lead to something amazing. But always make sure you’re keeping at least one foot near the ground, and thinking about what your business goals are. Something like Nexflix’s streaming service makes sense based on where they were before—a video rental business. It’s a game changer, but they’re still playing the same sport. Now, if I were to suggest that Element Three pivot from marketing to a streaming service...that might be less well-received. It doesn’t fit our talents, our abilities, our hardware or software—it doesn’t help us get where we’re trying to go.

You have specific things that you’re trying to accomplish as a business. Digital transformation is a route to find new ways to accomplish those things. Try not to get too out in the weeds, if you can.

Embrace adaptability and agility

In a way, this is really the whole game right here—it’s important enough that it gets to be our conclusion. Digital transformation is all about moving forward. It’s about what’s next, and the future of your business and your industry. So, obviously, in order for you to ride that wave, you have to be ready to change course quickly and smoothly. Embrace it. Enjoy the change, rather than just trying to survive it. Because the change isn’t something you just weather. It’s the thing that’s going to allow your business to thrive and grow, and to evolve into the best version of itself. It’s the thing that’s going to let you leave your competitors in the dust. Change, and digital transformation specifically, will put you on top.

Thomas Wachtel Team Photo at Element Three

Thomas fills a few roles at E3—writer, editor, and resident European soccer expert—but his chief responsibility is content creation. When he's not crafting thoughtful content for the Element Three blog, he's captaining our kickball team, watching the Mets, or talking up Indianapolis to anyone who will listen.