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What Is Digital Transformation and Why Does It Matter?

digital transformation

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. No successful marketer can overlook the digital space, 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 a bit above my pay grade; 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 helpfully divides it into three segments: digitization, digitalization, and finally digital transformation.

Digitization

As you’ll see, these three stages progress in chronological order—the first two stages are necessary to reach the point we find ourselves today. In the past, everything was on paper. In the even deeper past it was mostly etched into clay or stone tablets, but either way the ancient Romans and colonial Americans certainly weren’t using 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 manually 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 easier to do. It’s still a huge deal, though, because when we’re talking about efficiency, I don’t just mean saving a few seconds 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—and even the work they were doing.

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 than having to drive to a store and hope they have the movie you want to watch. 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 like New York City or London, taxis are everywhere even today. 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 two years.

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 2020 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 worked through 2020 should be shocked by either number.

And now, as we move into 2022, we’re seeing that a lot of what changed hasn’t gone anywhere. Rather than “back to normal,” we’ve held onto a lot of these changes because they work. We realized that we didn’t really all have to be in the same building to do great work, so working remotely has become more natural than ever, and businesses have responded by delivering long-term hybrid work solutions that allow for in-person collaboration as well as independence. That’s just one example, but the point is: the way we work was changed by the pandemic, and it’s not changing back.

These paradigm shifts in how we work 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 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 a right direction.

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 amazing things. 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 lost out in the weeds, if you can.

Embrace adaptability and agility

In a way, this is really the whole game right here. 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 wears a few hats—writer, editor, and European soccer expert—but his passion is content creation. When he's not crafting thoughtful content, he's coaching high school running, watching the Mets, or talking up Indianapolis to anyone who will listen.