Why Businesses Are Undergoing a Digital Transformation
Digital transformation is the use of technology to improve the performance or reach of a business, and it will continue to be an important topic for companies across the globe. Executives in all industries are using digital advances, such as data analytics, mobility, social media, and smart embedded devices (IoT) to change customer relationships, internal processes, and value propositions. Other executives—seeing how fast digital technology expands and evolves—know they need to pay attention to changes in their respective industries.
This past April, at the Microsoft Envision conference, Microsoft CEO Satya Nadella shared some stories about companies that are doing incredible things with technology. He discussed how Virgin Atlantic is deepening its relationship with customers by using analytics to get a 360-degree view of a customer and turn those insights into predictive power to deliver personalization at scale. He also talked about how Ecolabs, a $14 billion global provider of water, hygiene and energy technologies and services, is using a combination of sensors and data to predict the flow of business and automate decisions.
What are the Benefits of Digital Transformation?
Digital transformation can and in some cases has fundamentally changed how businesses operate and how they deliver value to customers. There are a number of reasons that a business may undergo digital transformation, but by far, the most likely reason is that they have to in order to survive.
Recent studies back this up time and time again: The IDC report “FutureScape: Worldwide CIO Agenda 2016 Predictions” emphasized that, "One-third of the top 20 firms in industry segments will be disrupted by new competitors within five years," and that it's a matter of "transform or perish."
But even if business leaders don't believe they have to transform, there are many reasons why they should consider it anyway.
- Their competitors are doing it. According to a Forrester Research report, executives predict that nearly half of their revenue will be driven by digital avenues by the year 2020.
- It will make them more profitable. According to the MIT Center for Digital Business, “Companies that have embraced digital transformation are 26% more profitable than their average industry competitors and enjoy a 12% higher market valuation.”
- It will make them more efficient. Research shows, “Nine out of 10 IT decision-makers claim legacy systems are preventing them from harnessing the digital technologies they need to grow and become more efficient.”
- Their customers will thank them. Whether external customers, or internal employees, people have already largely adopted digital practices in all facets of their lives, from shopping online via their mobile devices to adjusting their home thermostat remotely. They are waiting for businesses to catch up.
What Skills are Necessary for Digital Transformation?
A 2015 study, "Skills for Digital Transformation" carried out by SAP and the Technical University of Munich revealed that gaps in cross-functional knowledge may become a major obstacle for digital transformation. Of those companies that responded to the survey, 83% stated that they are lacking the required skills to drive a successful transformation. In addition, 72% said that their business executives are lacking the technology skills necessary to enable it.
The survey was completed by 81 executives from 16 countries; below are the list of skills that were deemed "highly important" or "rather important."
Some Closing Thoughts
The above finding essentially show that skills in various new technology domains may be needed for digital transformation. Therefore, to explore digitally-enabled business opportunities, companies need to invest in a diverse set of technology skills.
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