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People throw around the term “digital transformation” these days, but there’s not much agreement on what that term means. Originally, the value in the term was that it conveyed the need to engage in a fundamental shift in the way we think, work, and manage our organizations in response to digital trends in the competitive environment. While the need for fundamental change remains, the overuse and misuse of this term in recent years has weakened its potency.
What Is Digital Transformation?
Perhaps the most common understanding — that digital transformation is about the implementation and use of cutting-edge technologies — is likely the most misguided. It’s not hard to find a company that has implemented a new digital tool or platform just to have it remain unused by employees or unable to deliver the intended transformative impact on the business.
Another understanding of digital transformation is that it involves organizations using technology to do business in new and different ways. This definition of digital business is certainly better, but it remains incomplete. For example, many companies are adopting new talent models in response to digital trends. Employees engage in two- to three-year “tours of duty,” engaging in one project or role for a certain period of time, at which point they transition to a new role inside the company or outside in order to continually develop different skill sets. These efforts are clearly and intentionally designed to allow the company to cultivate diverse talent in a rapidly changing digital world, but they don’t involve implementing or using new technology at all.
The best understanding of digital transformation is adopting business processes and practices to help the organization compete effectively in an increasingly digital world.
This definition of digital transformation has two important implications for managers: First, it means that digital transformation is fundamentally about how your business responds to digital trends that are occurring whether or not you initiated them, like them, or want them. Much of the need for digital transformation is outside your control. It involves adapting to how your customers, partners, employees, and competitors use digital technologies to change how they act and what they expect. Whether and how your company responds to those digital trends is the key question facing managers.