Just as the Industrial Revolution marked the history of mankind by initiating a process of profound socio-economic transformations, Digital Transformation will mark the beginning of a new cycle of changes.
Digital Transformation, a topic much discussed today, is more than the adoption of new technologies in business — it is understood as the integration of digital technologies in all areas of a business, allowing the new potential for growth, optimization and innovation to be explored. It is called a transformation because it is a strategic way of thinking about information: not only as a warehouse, but as potential to generate value that can transform operational processes, products, services or even the business model of a company.
Digital transformation has become possible thanks to a combination of factors:
- Data availability: huge volumes of data are being accumulated, due not only to increased data storage capacity, but also to instrument and collection technologies (sensors, cameras, microphones, biometrics readers, etc.);
- Computational processing capacity: computer processing capacity has been developed at the pace of processor evolution, provided for by Moore’s law (with computational power doubling every 18 months), and has recently been expanded with the provision of cloud services and the use of Graphics Processing Units (GPUs), which process large amounts of data in parallel;
- Data analysis: new analytic tools allow patterns to be inferred in data and relationships between variables to be identified (descriptive analysis). Artificial Intelligence and machine learning algorithms learn from the data, identifying similarities and making predictions (predictive analysis).
The combination of these three ingredients paved the way for Digital Transformation. The large volume of data accumulated in recent years and the great increase in processing capacity favored the advancement of research in Artificial Intelligence, in particular machine learning using neural networks, enabling the performance necessary to obtain satisfactory results in applications such as voice recognition, image processing, translation, online marketing, rating of feelings etc.
How Digital Transformation happens
Major transformations do not happen overnight — typically, they occur over a long period of time, divided into several, progressively more sophisticated phases. In practice, Digital Transformation can be seen as an example of the typical process of innovation and design: iterative, cyclical and continuous.
Within Digital Transformation, an opportunity for improvement is defined as a solution to a real business problem, which can be both an improvement in the customer experience or a response to an internal problem of the company, and by the metrics used to assess the impact of this solution.
To identify the starting point of the transformation cycle from a portfolio of opportunities, a company should prioritize opportunities whose prerequisites are available or easier to access, especially data — including data acquisition, pre-processing and integration.
Another important aspect to consider is the harmony between this opportunity and the structure of the company. All of the involved parties must be committed and engaged in the work-flow and decision-making.
Once an opportunity for improvement is selected, an analysis process leads to the specification of a solution (or experiment). This solution or a prototype is then implemented and tested. Based on metrics, the solution results indicate the next iteration of the project or the transition to new opportunities, starting the next transformation cycle.
Building off of the results of the previous steps, each new iteration offers an opportunity for the company to learn about customers, its internal processes or the business itself, resulting in better products and services, improving practices and redesigning strategies.
Digital Transformation in companies
Companies are able to generate, collect and store large amounts of data, both about their production processes as well as internal and external operations. To this large mass of data are added information from third parties and data obtained through mergers or acquisitions. Thus, the use of Artificial Intelligence can offer the company an opportunity to differentiate itself and defend its business.
However, it is worth noting that the use of data raises ethical questions that should be adequately addressed. It is expected that new regulations will be created in the coming years. In each case, relevant aspects need to be addressed, such as privacy, data quality, integration, ethics and the possibility of bias in the predictive model.
Beyond the portfolio of opportunities, data and technology, people are equally as important to the success of Digital Transformation. Insecurity and natural resistance to change can become significant obstacles to transformation, since they can change the way people interact, their tasks and impact work demand.
Digital Transformation changes processes and the way things are done. In some cases, it requires internal reorganization and a deep understanding of the business and needs of the company and its customers. Human capital and a culture of engagement can facilitate the breaking of barriers and enable successful implementation of Digital Transformation.
This process is more natural when the company has a culture that favors learning and experimentation. Thus, employees will feel more prepared and safer for a less traumatic adaptation.
Although it is data-centric and based on the use of digital tools, Digital Transformation is guided by a continuous effort to generate value, not by technology itself. The dynamics of building the first projects brought up new ideas, continuing the transformation motion and driving the iterative cycle of Digital Transformation.
Since it is a type of innovation that occurs at the level of the organization, through Digital Transformation, a company can define a new market niche and innovate incrementally or even redefine the nature of its business, its mission, vision, values.
Several factors can drive Digital Transformation in a company, such as: improvements in customer experience; opportunities and demands in new markets; competitive pressure; regulatory compliment; proactive investment to resist disruption; business performance decline; and, internally, we can mention the evolution in employee behavior and preferences.
Faced with the current scenario — with the newly arrived pandemic caused by COVID-19 — the demand for new models of operation, new services and experiences has accelerated. Companies that can identify opportunities within this scenario and respond quickly will come out ahead. Therefore, the strategy to success is to be able to experiment and learn quickly. In this universe of possibilities, the bottlenecks are management, human resources for implementation and creativity.
Much like previous technological revolutions, Digital Transformation will be a divisive milestone of major changes in the world economy. It will have significant impacts on work and society as a whole. New opportunities will be created, but many jobs will be extinguished. Challenges must be addressed and worked to mitigate undesirable effects, predictable or otherwise.
Thus, Digital Transformation can happen in a myriad of ways. Several sectors have benefited from it. Virtually any industry can take advantage of learning from data to transform its processes and businesses. The fact is that, when faced with this reality, rethinking the company in the light of this innovation process can be a condition for a business to survive.