What is Digital Transformation?
Digital transformation is the process that an organization applies to integrate and grow digital technologies in all areas of the business. A digital transformation program fundamentally changes a business’s operating processes, improving productivity and speeding new technology adoption initiatives in the future. Using innovative digital technologies such as machine learning within transformation projects helps meet modern customer demands and market competition.
What are the benefits of digital transformation?
Digital transformation is the implementation of new digital technologies and processes to meet modern business expectations. Organizations must have the ability to adapt fast to technological advances, time-to-market pressures, supply chain disruptions, and customer expectations.
Digital transformation is not a new business term, but rather a way to describe a fundamental digital shift that allows a business to operate from a new, modernized standpoint. Thanks to this major shift in business operations and cultural mindset, there are significant benefits to the business.
The following are some benefits of digital transformation initiatives.
Improve productivity
Technologies like cloud computing can save time and improve efficiency in all types of business operations. For example, implementing a cloud-based chatbot across file systems helps employees find the answers to existing business questions. Similarly, performing data analytics with machine learning across existing business data can help make informed predictions and reach business goals faster.
Improve customer experience
Customers now expect continuous service availability across multiple digital channels, with websites and communication systems that are easy to use on mobile devices. Digital transformation goals that directly affect customer experience include:
- Developing mobile applications and mobile workflows
- Tracking and fulfilling orders faster by adopting smart sensor technology
- Engaging with customers in real time by adopting artificial intelligence chatbots
- Improving customer support and service by using automation workflows
Improve user experience
Employees within the business can match customers in their user experience and expectations. By developing internal systems that help employees perform better, make fewer manual mistakes, and connect to the right systems, services, and people faster, organizations enhance user experience.
Enhancing user experience leads to more positive and engaged employees, reduces attrition, and makes your organization a more desirable workplace for potential hires.
Reduce operational costs
Investment in digital technologies can significantly reduce ongoing operational costs. By optimizing existing business processes, digital transformation can reduce expenses on equipment maintenance, logistics and delivery, energy expenditure, human resource expenditure, and customer support expenditure.
Cost savings are achieved by:
- Removing or substituting specific resource-intensive workflows
- Reducing expenditure on infrastructure and equipment by replacing them with managed services and cloud computing
- Automating tasks with technologies such as workflow automation, artificial intelligence (AI), intelligent sensors, and smart devices
Competitive advantage
By innovating within the business, organizations can gain a competitive advantage within their industry. With productivity gains, lower operational costs, and improved customer and user outcomes, the company becomes more effective at its core business goals. It enhances positive outcomes for employees, partners, and customers.
What are some common digital transformation initiatives?
Businesses seeking a digital transformation often start with business process optimization and automation, and progress to artificial intelligence initiatives for decision-making, information gathering, and personalization. With the right data optimization strategies and analytics tools, organizations can now capitalize on the business data they have been accumulating.
The goal of any digital transformation program is to enhance the business through new technologies.
What is the difference between digitization and digital transformation?
Digitization is the process of converting the physical aspects of your business processes and workflows into digital form. Converting non-digital or physical things into a digital format allows a computer system to utilize this information.
For example, you can convert paper forms that customers fill out into digital forms that they complete online. You can use the digital data for analytics and business intelligence. In business, digitization initiatives could include projects such as modernizing legacy systems, automating paper-based or manual processes, or moving a scheduling system online.
Digitization alone is not transformational, but it is an important step in the digital transformation journey. Digital transformation has a much broader scope that creates a larger shift within the organization.
What are the key features of a digital transformation program?
To help facilitate a successful digital transformation strategy, the transformation should occur across all aspects of the organization. Consider these key areas of a digital transformation program.
Innovation
Digital transformation and innovation are closely related but are not the same. Innovation is the idea generation process that drives business transformation. Creating a space of open communication, collaboration, and creative freedom encourages employees to experiment with transformational technologies. After an idea has been prototyped and tested, you can choose to implement the concept on a large scale within the digital transformation program.
People
Employees should feel supported in the adoption of transformational technology. New digital business models are successful only if employees learn and embrace them. You can achieve this through a combination of training programs, attracting the right hires, and retaining existing talent by creating opportunities for them to grow within their roles and the company.
Change
Digital transformation efforts create change in all parts of a business. Phase-based, strategic planning is crucial to avoid confusion and delays due to unexpected changes. The right digital tools and environment must be in place before embarking on a successful digital transformation.
Leadership
Business leaders should be proactive, organized, and communicative in all digital transformations. Leaders must plan, explore technologies from multiple scenarios and stakeholder angles, and inspire teams in technology uptake.
Culture
When digital transformation leaders progress through the previous five stages, a culture of digital innovation emerges. With enthusiastic employees eager to deliver the best practice customer experience, digital transformation initiatives rapidly expand and succeed.
Customer experience
Customer-centric business innovation is one of the key motivators of digital transformation. Adopt an emerging technology only after exploring it fully within the context of the customer’s journey, behavior, and expectations.
What are the types of digital transformation?
There are four main types of digital transformations that any organization can adopt.
Business process
Process transformation looks at innovative ways to improve existing internal and external workflows. New technologies often change and improve processes radically to achieve better business outcomes.
For example, Volkswagen Group used Amazon Q Business to map 4,000 unique job descriptions to 3,200 job roles in their global template system, efficiently finishing the project within timelines and creating an Amazon Q app to draft a solution in just one day.
Business model
Business model transformation involves reinventing an existing business model using modern technology. It aims to offer core business services in new ways or through different channels to increase revenue growth and customer reach.
For example, Jacaranda Health in Africa supplies timely, reliable, and culturally responsive health information to expectant mothers. After building an SMS-based helpdesk service called PROMPTS, they quickly realized the SMS volume was growing beyond the capacity of a team of people. Instead, Jacaranda built a new business model to answer 10,000–12,000 questions daily using culturally responsive AI and AWS cloud technology.
Business domain
Domain transformation occurs when a business successfully captures a new market segment or domain. You can achieve this by focusing on transformation projects that expand offerings instead of just improving existing ones.
For example, to help customers move from a blank page to digital design faster, Canva built generative AI tools with Amazon Bedrock, empowering users to generate text with Magic Write, generate images, get help from a chat assistant, and search through a gen AI recommendation system. By embedding generative AI tools within its product, Canva positioned itself as a leading DIY multimedia creation service for generative AI, not its original use case of user-generated content.
Organization
Organizational transformation involves completely reinventing the organization or its internal culture, with a focus on delivering the highest value to customers. This approach helps organizations get ahead of the competition and meet business goals faster.
For example, Thomson Reuters is a leading provider of business information services. Thomson Reuters sought to stay at the forefront of responsible digital innovation by developing Open Arena, a self-service enterprise artificial intelligence and machine learning platform, using AWS. Thomson Reuters has evolved this initial concept into a purpose-built generative AI platform to democratize access to generative AI models and help its employees use AI safely and securely on innovative projects.
What are some key technologies in digital transformation?
Modern and emerging technologies are key drivers of a digital transformation program.
Often, an internal group develops a prototype business system to solve a specific problem using one of these technologies. When the prototype’s results are compelling and applicable to other business areas, these technologies can create an imperative to roll out the technology to the wider business.
Here are some key technologies that are instigating wider business transformations.
Cloud computing
Migrating on-premise hardware, software, and workloads to the cloud is a key goal of many digital transformations. Organizations recognize the value in shifting to scalable, on-demand, integrable, and modernized cloud computing resources and services.
Remote workforce infrastructure
The remote and hybrid style of work requires significant technology infrastructure to run efficiently, securely, and reliably in real time. Systems and tools such as mobile device management, virtual private networks, and cloud-based identity and access management (IAM) are all required to support this style of work.
Advanced analytics
Data accumulation happens throughout the business, across regular files and applications, and through network and security events. By integrating data sources and running advanced analytics over complete data sets, organizations can identify hidden efficiencies, vulnerabilities, and new business insights.
Generative AI and Agentic AI
Generative AI and agentic AI are becoming more commonplace in modern businesses. Generative AI uses internal data to help internal users and customers find business information faster, produce company assets and deliverables more efficiently, and enhance productivity across the organization. Agentic AI can perform specific roles and steps enhanced by generative AI, and combine with other agents for advanced, multi-stage, and multi-role internal workflows.
Modern security and compliance
Cyber security and compliance are considerations for every organization. Manual processes and disparate tools make security and compliance difficult and reactive rather than proactive. Modern security and compliance solutions such as Cloud Security Posture Management (CPSM) unify security operations for centralized oversight of digital security.
What are the different stages of digital transformation maturity?
There is no clear path to transformation, and every company is different. The following six stages are a suggested guideline for digital transformation maturity and success.
Stage 1—Status quo
In the first stage, businesses continue to operate as usual and maintain the status quo without awareness of changing customer requirements and technological advances. Lack of digital initiatives can drive any organization into obsolescence. It is critical to move into the next stage as soon as possible.
Stage 2—Active
In the second stage, businesses become more aware of the need for digital optimization. They recognize current challenges and the need for a digital transformation initiative. Different departments start attempting to solve the same problems in various ways. Although this stage involves more curiosity than the previous stage, it lacks focus and unity. Organizations must find a way to move beyond this limited stage to achieve digital transformation success.
Stage 3—Intentional
Digital transformation begins when a business moves to the intentional stage. During this stage, key digital leaders and change agents emerge and start testing new technologies. These people seek formal approvals from company executives to lead the change. Business culture can become a roadblock at this point, and leadership must actively encourage an innovation culture to transform further.
Stage 4—Strategic
In the fourth stage, an organization achieves cultural change, allowing individual groups and departments to work collaboratively. Key stakeholders create a focused strategic roadmap to achieve successful digital transformations. Stakeholders plan different aspects of the change, like ownership, research, effort, and investment.
Stage 5—Targeted
Businesses in the fifth stage begin implementing the digital transformation strategy outlined in the previous stage. The business has a cross-departmental team of innovators who identify critical activities that are required in the coming months to years to achieve successful digital transformation. New digital projects, infrastructure, and initiatives begin to take shape.
Stage 6—Adaptive
Businesses that make it to this stage have a digital transformation framework in place to deal with all future customer and business requirements. Digital transformation becomes an integrated part of the business, and teams can pursue innovative technological paths with ease. Digital transformation projects are accelerated and repeatable in a sixth-stage organization.
What is a digital transformation strategy?
A digital transformation strategy is a detailed plan for implementing short-term and long-term digital transformation in any organization. It takes into account the following components:
- Leaders who initiate and drive the transformation
- Investment and financial planning
- Key performance indicators (KPIs) to measure the return on investment (ROI)
- Digital tools and processes that support the transformation
- External resources and third-party experts
- The impact of transformation on customers, employees, and the market
- A digital transformation roadmap with key dates, responsibilities, and checkpoints
Here is how to develop a digital transformation strategy.
Align the digital transformation with your business goals
Digital transformation project planning should center around your organization’s overall plans and not on a particular technology. Your key focus areas help determine the KPIs, keep the transformation measurable, and accelerate time to value.
Develop a proof of concept
Starting initiatives can show measurable results in six months or less. Develop initial strategies that demonstrate ROI and attain leadership buy-in. Early prototypes are gradually tweaked and scaled across the organization while integrating the lessons learned.
Map out technology implementation
Digital transformation involves several tools you can use to bring change to the organization. The following are some examples of digital transformation technologies:
- Cloud technologies, especially migrating to cloud computing and cloud storage
- AI and machine learning, plus agentic AI for data analytics and decision-making
- Security and identity solutions to achieve compliance and security goals
- Monitoring, observability, auditing, and visibility tools for real-time operational intelligence across the organization
- AI-powered contact center technology for customer service
- Internet of things, like smart sensors and intelligent devices that automatically connect to the internet and collect data
Introducing these technologies can create a major shift in the ways that employees work and that customers interact with your organization. Where necessary, partner with companies that have existing experience in deploying these new technologies.
Collect feedback and refine the digital transformation strategy
It is important to include strong feedback loops in your digital transformation project plans. By collecting regular feedback from stakeholders, you can make sure everyone learns from the experience and grows dynamically, while refining transformation processes. As digital transformation is a lengthy activity, introducing checkpoints in your timeline gives you an opportunity for flexibility to make changes if required.
A case study in digital transformation
As part of a five-year digital transformation strategy, VPBank aimed to become a multi-purpose bank focused on implementation and innovation through advanced technology and comprehensive financial solutions. To achieve this vision, it embarked on a journey to migrate critical workloads to Amazon Web Services (AWS) and enhance its employees’ AWS skills, enabling them to effectively use the cloud.
VPBank embarked on its cloud transformation journey in 2023 and successfully migrated 28 applications from on-premise infrastructure to AWS Cloud within just 11 months, ahead of schedule. The bank also implemented AWS Elastic Disaster Recovery for 78 critical workloads, marking a significant milestone in its first year of digital transformation strategy.
To sustain this success, the company continuously trained employees by working with AWS Training and Certification through AWS instructor-led training sessions, hands-on learning events, on-the-job training, and shadowing opportunities facilitated by AWS consultants. This approach enabled VPBank to develop in-house expertise, ensuring its employees could fully leverage AWS capabilities.
What are digital transformation frameworks?
A digital transformation framework is a blueprint for change management in any organization that is undergoing a digital transformation. A framework is a tool that guides all levels and departments of the organization through the change.
A framework supports digital transformation by outlining recommended practices and processes to perform the following:
- Analyze the impact of change across all areas of the business
- Manage the change effectively and efficiently
- Plan the steps to implement the transformation
- Identify metrics to measure the benefits of the transformation
- Clarify ways to progress along your digital transformation journey
How can AWS help with your digital transformation?
AWS offers a wide range of innovative digital technologies for consideration in your digital transformation journey. With cloud computing at the forefront, augmented by the latest innovative AI solutions, and prescriptive guidance for migration and integration, there is help at every step of your transformation. As digital transformation trends evolve, AWS services can become key business imperatives.
The AWS Migration Acceleration Program (MAP) is a comprehensive initiative designed to help organizations accelerate their cloud migration journey while reducing costs and risks. The program provides customers with proven methodologies, tools, and expert guidance to streamline their transition to AWS. MAP also uses a proven three-phased framework (Assess, Mobilize, and Migrate and Modernize) to help you achieve your migration goals.
Experience-Based Acceleration (EBA) allows organizations to use hands-on, agile, and immersive engagements to speed up digital transformation and cloud value realization. EBA helps you build cloud foundations, migrate at scale, modernize business, and innovate for customers, with a proven learn-by-doing working model that seamlessly scales to drive business value.
Get started with your digital transformation on AWS by creating a free account today.