What is digital transformation?
Digital transformation is the process of transitioning an organization’s operations to completely digital systems to better meet brand and customer needs. Throughout this process, digital technologies become infused throughout the brand’s core strategy, allowing marketing, sales, product, customer service, operations and finance teams to work together more effectively and provide more engaging products, services, and customer experiences.
It’s a strategy that has seen significant acceleration during the COVID-19 pandemic as homebound or socially distancing consumers became not only digital-first, but “digital-everywhere” too. Businesses have been forced to embrace digital transformation efforts and learn how to deliver value to customers who can only be reached online. In fact. many of the digital-first businesses that thrived during the pandemic offered seamless customer journeys despite the many fragmented channels that their customers use.
Why we care. Marketers, in particular, need to align their strategies and operations with these transformation efforts to keep up with changing customer expectations and demands.
Marketing technologies are a key driver of digital transformation, empowering marketers to facilitate seamless digital interactions with customers. Yet this type of innovation is not easy to implement. Many companies struggle to put the right skills, structure, and processes in place to drive digital transformation success. Fortunately, the introduction of “low-code” tools, marketing technology replacements, and an increasing brand commitment to improved customer digital experiences has made this process more achievable.
In this piece, we’ll dive deep into digital transformation to answer the following questions:
- What’s driving digital transformation growth?
- How does digital transformation start?
- What skills are needed for digital transformation?
- What role does technology play in digital transformation?
- What are some of the benefits of digital transformation?
- What are some of the challenges to digital transformation?
- What is the future of digital transformation?
Estimated reading time: 12 minutes
What’s driving digital transformation growth?
Customers are craving seamless, connected experiences more than ever before, forcing many brands to ditch older methods of marketing in favor of new tactics. But many factors make this transformation easier said than done. Changes in customer behavior due to the pandemic, the restrictions on third-party data collection, and rapidly evolving digital technologies make it difficult for some organizations to adapt.
Here are some of the other top drivers of digital transformation today.
Organizational changes. The pandemic shifted the way companies work. Many brands are rethinking their organizational structures; some are moving to remote-first cultures while others are changing the ways their marketing and sales teams conduct campaigns. To ensure these changes don’t interfere with customer experience or affect product/service quality, more companies are adopting digital platforms to consolidate tasks and better connect departments.
Changing customer expectations. COVID-19 and its repercussions have exacerbated the need to meet customer expectations. Customers have high standards for brands – they expect personalized online shopping options, customized email and text messages, product recommendations and more – and marketers need the digital tools to meet them.
Marketing automation. Increased demand for personalization has paved the way for higher levels of marketing automation platform adoption. These tools can provide marketers with key customer data insights while simultaneously deploying numerous marketing tasks at scale across all digital channels.
Given these trends, it’s clear that before the pandemic, digital transformation was a great way to improve customer engagement. Since the pandemic, it has become a necessity for any organization trying to stay competitive.
How does digital transformation start?
Digital transformation starts with a business strategy. Product, service, marketing, and sales goals provide the basic framework and necessary information to support the organization’s customer experience objectives. The executive team then sets the tone for creating alignment and an achievable digital transformation plan that can adapt quickly to changing marketing and technology trends.
Successful digital transformations happen because of two things: communication and involvement. Change does not succeed if it’s forced on people, so it is essential to get buy-in across the organization. Digital transformation needs to be rolled out with the support of the people operations — the employees who make things happen on a daily basis and are closest to the customers. Being clear about processes, roles and responsibilities is central to scaling digital activities. After all, managing data to enhance customer experiences is a lot of work.
Sometimes digital wins don’t come easily, and innovation often happens more slowly than expected. In the retail sector, for example, e-commerce sales in 2021 only accounted for 13.2% of total purchases. However, e-commerce has become the driving force for brand engagement with customers, innovating television advertising and in-store experiences across industries.
For these reasons, many organizations use an agile strategy to begin their digital transformation. Agile refers to the ability to create and respond to change. It is the way many companies are now approaching — and succeeding — in the uncertain business environment caused by the Covid-19 pandemic. Agile organizations stress collaboration over silos, which is an important element in managing data and creating new digital processes. Embracing change, setting priorities, and making adjustments on the fly are also critical to success. The pandemic has shown that plans change, so businesses must be flexible, rather than static or unchangeable. Ultimately, it’s important to remember that digital transformation is not a “one-and-done” type of initiative: there will never be that one moment when the organization can say it’s over.
What skills are needed for digital transformation?
Executing digital transformation depends on having a staff with strong digital skills who can manage a marketing machine that is always on. For marketing leaders, that means a team that can deliver the organization’s end goal: a compelling and seamless customer experience.
Here are some of the skills marketers are expected to have.
Prioritize and target audiences. Too many campaigns waste hundreds of media dollars on the wrong audiences. Marketers today must be able to use digital transformation tools to generate data-based buyer personas and target audiences with the highest expected ROI.
Coordinate orchestration. With so many digital channels available, marketers need to employ innovative strategies to reach customers on each one. They’re required to coordinate marketing efforts with other digital initiatives to ensure these audiences enjoy seamless experiences.
Create data-driven content. Customers respond well to content that speaks to their needs, so marketers need an effective way to pull relevant data to aid their content creation efforts. It’s common to see more of these specialists well-versed with CDPs and other data collection tools.
On the marketing operations side, employees must be accountable for the smooth running of the marketing technology stack, including:
- Designing and managing internal workflows and processes.
- Operating marketing software (as administrators).
- Running and implementing campaigns.
- Researching and recommending marketing software tools.
- Analytics and measurement.
Not every company has the internal resources to successfully manage digital transformation. If that is the case, an agency partner can provide the digital services needed to support the organization.
There are also digital transformation specialists like Publicis Sapient, which re-evaluated its talent levels and approach to better assist clients in their digital transformation efforts. Its executives sought people with the right skills, as well as the right mindset and experience. According to CMO Teresa Barreira, the company was hiring for “diversity of thought, diversity of experience and – really important – diversity of background.” As a result, it expanded to 150 employees, with about 70% being new to the agency (two years or less).
These transformative efforts have the potential to improve brand performance in a variety of industries. The key is to work with specialists that can recognize digital opportunities and guide your organization toward actionable solutions.
What role does technology play in digital transformation?
Digital transformation strategies cannot be separated from the tools needed to execute them. Many organizations continually evaluate their technology stacks, given how rapidly the technology changes. According to The MarTech Replacement Survey 2021, 67% of marketers replaced a marketing technology application in the past 12 months. Most upgraded from one commercial solution to another, and the upgraded solutions were exactly the kinds of technologies needed to begin digital transformation during the pandemic.
Empowered with more advanced toolsets, marketers are embracing innovative forms of advertising, including digital out-of-home (DOOH) programmatic that can be integrated into omnichannel strategies. Two-thirds of media decision-makers activated new DOOH campaigns in the past 18 months, and more than 80% will recommend DOOH for their media plans over the next 12 months.
But the combination of rising demand for digital capabilities and a shortage of developers with coding skills has created a huge need for applications that are accessible to marketing end-users. Many of the tools that businesses adopt during digital transformation are “low code” or “no code,” meaning they enable organizations to build sophisticated processes with little or no coding experience.
This “democratization of data” is one of the most important aspects of digital transformation because it makes data easily available to people who aren’t data scientists or in the IT department. It’s been especially popular following the onset of the COVID-19 pandemic: According to research from the Harris Poll and Salesforce, 71% of small and medium businesses reported they survived by turning to digital applications.
Digital transformation fuels data democratization by providing team members with the digital resources they need to address ever-changing customer needs. It also helps brands solve data challenges by bringing in more viewpoints and perspectives – not to mention additional hands available to tackle big projects.
Still, data access is the means to an end, and the goal is to use digital transformation to improve customer experiences and increase customer engagement. Viewed through this lens, the benefits of data democratization include the following:
- Stronger ability to identify customer intent: Driven by AI-powered tools, data democratization provides a wider range of insights into customer intent. Multiple departments can analyze and leverage data, using different philosophies and approaches.
- Greater operational efficiency: Data democratization backed by low-code or no-code tools allow businesses to house data in a single and accessible location. In addition to making data access more convenient, this approach facilitates compliance with data privacy regulations and data standardization, which increases accuracy and targeting relevance.
- Improved customer experience: The organization’s understanding of customer needs increases as more departments have access to data. Channel preferences, along with buying histories, enable sales and marketing teams to personalize messages and customer support.
What are some of the benefits of digital transformation?
One of the main reasons organizations undertake digital transformation is the fear of falling behind their competitors. Digital transformation investments are forecast to reach $6.8 trillion by 2023 and grow at a 15.5% compound annual growth rate (CAGR), according to technology research firm International Data Corporation (IDC). At the same time, IDC projects that 75% of all global organizations will have a comprehensive digital transformation roadmap.
Organizations that have embraced digital transformation have experienced a number of tangible business benefits, including:
- Greater operational efficiency.
- Higher levels of revenue.
- Improved new product quality.
- Stronger network infrastructures.
- Reduced costs.
- Higher marketing ROI.
Each of these digital transformation benefits contributes to better data governance, as well as compliance with government regulations, such as GDPR and CCPA, which are meant to safeguard consumer privacy. As organizations shift away from third-party data strategies and move toward using their first-party customer data more efficiently, many have also experienced an increase in customer trust and engagement.
For example, Domino’s is using digital to transform the brand from a pizza delivery company to an experience company. Domino’s original 30-minute delivery campaign opened the door to digital success via its “pizza tracker.” Customer insights are collected through social media, smart assistants, and wearables, then analyzed to provide enhanced customer personalization. The goal is to build brand loyalty by offering operational transparency, while also reducing real and perceived delivery times.
AGI, a B2B food infrastructure company operating in 102 countries, found that going digital has completely transformed its customer relationships. The company historically employed field salespeople, as well as in-person meetings, training, and trade shows to market and sell its products. The COVID-19 pandemic put an end to those live events, forcing AGI to adopt webinars and online learning to connect with prospects and customers. Online engagement skyrocketed, and the company enlisted Apply Digital, a Vancouver-based digital agency, to help consolidate its branded digital properties and ramp up content development. Today, AGI’s marketing technology stack includes Salesforce, Optimizely, Bynder, and Hubilo.
What are some of the challenges to digital transformation?
Although the COVID-19 pandemic accelerated many organizations’ digital transformations, it also created some obstacles. With changing customer preferences, marketers have been forced to focus on short-term acquisition goals, rather than long-term customer retention. In the process, data quality has emerged as a key issue. According to the 2021 Nielsen Marketing Report: Era of Adaptation, 41% of marketers at large companies view their data quality as a challenge. Data silos are another common problem in digital transformation because of the sheer volume of customer data that most organizations now gather and house. With more touchpoints in the average customer journey, it is nearly inevitable that every SaaS tool in the marketing technology stack is creating a new silo of data.
Not all companies are confident about their digital transformation efforts. It’s difficult to layer a digital transformation strategy on top of a complex marketing technology stack. Fortunately, low-cost SaaS solutions have made it easier to purchase and experiment with new tools, and marketing teams have deployed hundreds of software products across their organizations to acquire, engage and retain customers.
Yet digital transformation efforts that are underway don’t always create the unified customer experience that companies are seeking. To avoid setbacks, marketers must create objectives and develop a roadmap that will help their organizations meet digital transformation goals.
What is the future of digital transformation?
Digital transformation efforts aren’t a one-and-done undertaking – they’re vital for any brand’s hope of digital success going forward.
Here are some of our predictions for the future of digital transformation.
Responsible AI. AI solutions have been used to enhance marketing campaigns for years, but more brands are seeking responsible solutions to address the technologies’ issues. Companies such as Google and Microsoft are already leading the charge with calls for more AI regulations, but there’s still a lot of work to be done. Bias and other unintended consequences can cause great harm to customers and brands, so more data scientists and developers will likely focus on creating more effective safeguards.
Low-code tools. Rather than relying solely on teams of technology specialists to transform their organizations, many brands are adopting low-code tools to empower their marketers. These allow team members to implement complex frameworks and solutions with little to no coding experience. These capabilities are helping low code pave the way for greater digital transformation.
Zero-trust security implementation. More and more companies are adopting remote-first work environments, which means there’s an even greater need for cyber security solutions. Enter zero-trust – a new security framework built on the principle that no user should be trusted by default. Instead, brands can grant permission based on user context and proper authentication, making their networks more secure and building trust in their infrastructure.
Virtual and augmented reality. The advent of VR and AR technologies – spurred on by major brands like Meta – has the potential to change the way brands interact with customers. Our world is more dependent on digital technologies than ever before, and the capabilities of VR and AR platforms – such as product showcases or work collaboration – make it a must-have for brands looking to take their campaigns to the next level.
Empathy as an engagement strategy. Increased consumer data privacy legislation, coupled with calls for greater personalization, means marketers need to make empathy a cornerstone of their campaigns. Customers want to interact with brands that understand their values and needs, and in our ever-changing world, failure to do so could lead to less engagement.
Rapidly evolving technologies, the COVID-19 pandemic, and a whole host of other forces affecting society have made digital transformation an imperative, not optional. By paying attention to customer needs and forecasting trends in behavior, marketers can stay ahead of the curve with informed digital transformation efforts.