Digital transformation equips companies with the data, tools, and know-how to navigate the competitive landscape and come out on top. While digital business transformation can benefit everyone, select industries have taken the lead, fully embracing digital initiatives to gain a competitive edge.
In this article, we’ll explore the impact of digital transformation on the finance, software, hospitality, healthcare, and retail industries. We’ll cover real-life, sector-focused digital transformation examples, but first, let’s establish a baseline understanding of digital business transformation.
To do so, we’ll cover:
- What is digital transformation?
- Why digital transformation is important?
- The benefits of digital transformation
- The challenges of digital transformation
What is digital transformation?
Digital transformation involves a complete tech makeover for your business, utilizing the latest technology to generate, appropriate, and deliver value to stakeholders.
To fully understand the definition of digital business transformation, it's essential to differentiate between digitization, digitalization, and digital transformation. While these are related, they represent different levels of engagement.
- Digitization is the first step of digital transformation, where companies transition from analog to digital (such as replacing paper data collection with digital forms)
- Digitalization is the next layer, where previously isolated business processes become digital (such as process management)
- Digital transformation is the final stage, where companies undergo a profound technological transformation, resulting in a new digital business model
Why digital transformation is important?
Increasing competition, changing customer behaviors, and a shift to remote and hybrid work are the reality of today’s workplace. On top of that, the need for data-driven decision making pushes digital business transformation as a top priority, even as pandemic concerns subside.
Gone are the days when manual work, single-channel experiences, and limited data were enough to succeed.
To boost sales and stay ahead, automation, personalization, and data-driven interactions are no longer optional extras, but essential for achieving success in our digital age.
Benefits of digital transformation
Digital transformation’s benefits reach across your business’s value chain and include:
- Increased operational efficiency
- Improved customer experiences
- Cost savings
- Enhanced data insights
- Better collaboration
1. Increased operational efficiency
Automate mundane tasks and streamline workflows. Allow teams to perform tasks more efficiently by focusing on complex, strategic, or creative work rather than time-consuming manual tasks.
2. Improved customer experiences
AI, chatbots, and data analytics reveal customer preferences, giving insight to tailor customer experiences. For instance, purchase data allows businesses to recommend products and services that anticipate customer needs, generating a seamless flow of touchpoints.
3. Cost savings
Cloud computing and automation can reduce human errors, minimize downtime, and cut overhead costs, leading to a healthier bottom line.
4. Enhanced data insights
Automate data collection and analysis to eliminate time-consuming, error-prone manual tasks. Improve decision-making capabilities using accurate trends, patterns, and correlations.
5. Better collaboration
Improve asynchronous communication through collaboration software. Enable teams to share ideas and feedback effortlessly, while using storage platforms to make resources, files, and documents more accessible.
Challenges of digital transformation
While digital transformation has plenty of upsides, adopting digital initiatives comes with hurdles.
Challenge 1: Legacy systems
Outdated technologies create compatibility issues when merging existing systems with new software. This impacts a company’s ability to digitally interact and improve user value.
Challenge 2: Data management
Companies new to digital business transformation are often flooded with new data, stored in different formats and locations. Handling large datasets can be overwhelming and challenging to manage during digital transformation.
Challenge 3: Resistance to change
Employees, stakeholders, and customers may resist digital transformation, feeling intimidated, apathetic, or hesitant to embrace new work methods. This can lead to delays or failures in digital business transformation.
5 industries most impacted by digital transformation
With the groundwork established, let’s dive into the impact of digital transformation on five key industries. These digital business transformation examples show how to tackle the opportunities, benefits, and challenges of digital transformation in:
- Financial services
The financial services sector is plagued with complex legacy systems, outdated processes, and overall risk-averse culture.
However, the rise of fintech startups and customer expectations has forced rapid modernization — the global digital banking market is projected to reach $30.1 billion by 2026, with a compound annual growth rate (CAGR) of 15.7%.
Given the recent upheaval in the banking world, we’re going to look at two companies that have created security through digital business transformation initiatives: Societe Generale and KeyBank.
The first among KeyBank’s main digital transformation initiatives was modernizing its legacy systems. How? Using a cloud-first approach and data analytics for real-time insights — leading to data-driven decisions and personalized customer experiences.
The company also developed a mobile app (for account management tools, investment services, and personalized advice) and a virtual assistant (for basic customer questions and transactions).
“Deploying analytic solutions and technology in a competitive way across our customer base assures that we'll have a place in the long-term future of banking. We've been here for 200 years and we'd like to be here for 200 more. I think this is the crux of our ability to do that.”
- Ben Sabloff, KeyBank Executive Vice President of Enterprise Analytics
Societe Generale, one of Europe’s biggest banks, also doubled down on cloud-based digital business transformation.
Partnering with Microsoft and Nutanix, Societe Generale employed a hybrid cloud infrastructure to optimize IT spending, scalability, and data security. They also leveraged AI and ML to develop their virtual assistant (SoBot), providing additional information and facilitating customer transactions.
To keep their digital momentum going, Societe Generale formed a dedicated team for their digital initiatives, accelerating new products and services on a rolling basis.
Digital transformation in software
Customers rely on software to push digital transformation — it’s no surprise the industry has been one of its greatest beneficiaries. Beyond this, digital business transformation also impacted how the industry operates.
Agile development has pushed quicker, more collaborative software delivery, while new business and distribution models have kept software teams responsive to customer demand.
Two subsectors of software were primarily impacted by the data boom in digital transformation: cybersecurity and artificial intelligence (AI).
Cloud computing, the Internet of Things (IoT), and emerging technologies have made businesses vulnerable. These aren’t easily dismissed concerns, as the average cost of a data breach hit $4.35 million in 2022.
Companies have invested heavily in cybersecurity measures (e.g., encryption, multi-factor authentication, access control) at every stage of their digital transformation journey. Businesses worldwide spent $150 billion on cybersecurity in 2021 — a figure growing by 12.4% every year, according to McKinsey.
AI is no longer a catchall buzzword thrown around in tech circles — it’s a high-demand asset for digital business transformation. Thanks to its versatility, companies get several benefits from AI:
- Automation: Frees people from monotonous work
- Data analytics: Identifies patterns, solutions, and potential outcomes
- NLP: Enables sentiment analysis for intelligent and helpful solutions
- Machine learning: Extracts meaningful information from data
Given these capabilities, AI adoption has skyrocketed and doesn’t plan to slow down. According to IBM, 35% of companies report using AI in business, with an additional 42% exploring AI. As a result, the AI market is projected to expand at a CAGR of 37% until 2030.
Digital transformation in hospitality
The hospitality industry’s tech stacks were deeply ingrained, slow moving, and resistant to change. This all changed with the pandemic’s onset, jamming a decade of digital adoption into a few years.
Mobile solutions, online booking systems, and chatbots generate a flurry of benefits:
- Easier customer reservations
- Increased access to information
- Improved contact between staff and customers
- Personalized guest experiences
- Smoother inventory management
- Enhanced interdepartmental communication.
In contrast to our previous example, we can show the severe repercussions of delaying digital business transformation with one company: Southwest Airlines.
In December 2022, Southwest Airlines experienced one of its biggest operational meltdowns, resulting in the cancellation of over 15,000 flights.
Its inadequate IT infrastructure led to ineffective cross-functional communication — improper flight scheduling, crew assignments, and coordination of authorities.
This $220 million loss prompted Southwest to create a $2 billion dollar plan to transform its customer experience. This involves vast digital transformation initiatives — switching to the cloud, streamlining operations, and using enhanced data analytics.
Digital transformation in healthcare
Naturally, the pandemic impacted the healthcare industry — companies had no choice in embracing digital transformation to improve efficiency, patient outcomes, and cost savings.
Telehealth, wearable technology, and mobile health apps created a new reality in healthcare access, creating real-time health monitoring, and recommendations for patients unable to access doctors.
AI also played a role in enabling proper care, with health professionals leveraging it to analyze patient data and identify patterns. This led to the emergence of AI healthcare, with global revenue expected to grow to $34 billion by 2025.
Digital transformation in retail
Online shopping, social media, and mobile commerce pushed the retail industry into a new era, with seamless, omnichannel customer experiences becoming the status quo.
Retail companies now use digital technologies to reach customers on their preferred channel, re-engage them across touchpoints, and provide targeted offers. These strategies are proving effective — average omnichannel customer spending is 4% and 10% higher in-store and online, respectively, compared to single-channel spending.
Lululemon, the Canadian athletic apparel brand, is a shining example of digital transformation embrace.
Lululemon experienced significant sales growth and expansion with digital business transformation early in the pandemic, increasing its brand value by as much as 40%.
The company focuses on seamless cross-channel customer experiences, using AI and ML to:
- Enhance search
- Personalize recommendation capabilities
- Understand customer preferences
Not only did this improve average customer value, but it also made the Lululemon brand notorious for easy product navigation.
These approaches grew the company’s digital sales by 157%, fueling its expansion into new markets.
Digital transformation in a nutshell
Digital transformation can be a competitive strength or critical vulnerability amidst the current dynamic market changes. The digital business transformation examples show us the impact of transformation on operations, customer fulfillment, competitive adjustments, and decision making — now, these benefits are being sought by every industry.
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