Digital Transformation Strategy: The Ultimate Guide for 2023

You don’t want your business to be left behind.

You don’t want to sit idle while your competitors create the next business innovation.

And you definitely don’t want to be complacent.

This is where digital transformation strategies come in. A digital transformation strategy is a comprehensive plan to integrate technology into all parts of an operation, creating a fundamental change in the business.

This strategy is the difference between those who make the trends and those who desperately follow them, trying to keep up.

We’ll do a deep dive into digital transformation strategy, including what it is, why it’s so important, and how to implement it step-by-step.

We’ll also address your possible fears and clear up misconceptions along the way.

Ready? Let’s jump in.

Quick Summary:

• Digital transformation strategy is quickly becoming vital to securing a business’s place in the future.
• Digital transformations that fail often lack the essential keys to success.
• Digital transformations aren’t just about technology and generating profits but also creating a forward-thinking, resilient culture in your organization.

Part 1: Understanding the “What” and “Why” of the Best Digital Transformation Strategies

Here, we’ll give you an introduction to digital transformation strategy that’ll lay the foundation for the principles and exact steps to follow. We’ll clear up some important terms first.

Then, we’ll cover trends that are driving innovation in this space. We’ll explain why your business needs a digital transformation strategy and who to involve in one.

Let’s get started with some relevant terms.

The Differences Between Digitization, Digitalization, and Digital Transformation

Digitization, digitalization, and digital transformation might sound like Silicon Valley jargon. But knowing the difference between them will help you strategically leverage technology to drive your business forward.

And don’t worry — it’s all fairly simple.

Let’s define each of these terms one by one.

Digitization is the process of converting analog information into a digital format.

Here are a few examples of digitization:

• Transferring data from physical forms into spreadsheets
• Scanning paper documents into PDFs
• Filling out a digital signature

Digitalization is the process of leveraging digital tools to streamline your business.

It takes things a step further than digitization, using digital technologies to change a business model and provide revenue growth, value, and more opportunities.

Here are a few examples of digitalization:

• Shifting from email to more collaborative communication tools, like Slack or Microsoft Teams
• Holding video conferences instead of in-person meetings
• Automating HR processes with software solutions

Digital transformation is the adoption of technologies to fundamentally change the entire organization.

It’s not just about integrating digital technology into existing processes — it’s about completely changing how your business operates and delivers value to your customers.

Even more, digital transformation is a change in culture that requires organizations to continually challenge the status quo and become comfortable with failure.

Think of digitalization, digitalization, and digital transformation as steps on your digital journey:

• Step 1: Digitization (converting to digital)
• Step 2: Digitalization (streamlining your processes)
• Step 3: Digital transformation (enacting a holistic change in your business)

Trends That Are Driving Digital Transformation

There’s a lot of buzz around transformation. After all, global spending on digital transformation strategies is soon poised to break $2 trillion.

Here’s what’s driving this increase:

#1 The rise of remote and hybrid work

The new normal of hybrid workplaces has been one of the most pervasive trends driving digital transformation.

Statista surveyed US workers in 2022 and found that over half were working in a hybrid situation during the last quarter.

Working from home has forced businesses to tap into technology and digital tools or risk hamstringing their productivity and collaboration.

With the shift to hybrid, companies today need tools for:

• Virtual meetings
• Online project management
• Remote access to work resources
• And more

That’s why Zoom, Slack, and Microsoft Teams (among other tools, (including hybrid workplace management solutions) have become so commonplace.

#2 The availability of new technologies

The constant evolution and availability of new technologies is another key driver of digital transformation.

The main technologies spurring innovation include the following:

• Artificial intelligence and machine learning – for example, Netflix and Spotify recommend content based on user behavior.
• Cloud computing – for example, Dropbox and Adobe Creative Cloud give employees remote access to resources.
• The Internet of Things (IoT) – for example, manufacturing industries use IoT for predictive maintenance to reduce downtime.
• 5G technology – for example, Tesla and BMW use 5G to send autonomous vehicles real-time data about their surroundings and potential hazards.
• Digital reality technologies (AR/MR/VR) – for example, Ikea uses augmented reality to allow customers to visualize how different pieces of furniture would look in their homes.

These aren’t just technologies. They’re also enablers of digital transformation — opening up new opportunities for innovation, efficiency, and customer service.

#3 The ability to make data-driven decisions

As stated in a Harvard Business Review Analytic Services 2021 briefing paper, “…it’s never been more crucial for organizations to use data and analytics to inform their next best move.”

That’s because the proliferation of data has exploded.

Companies are increasingly leveraging data analysis to:

• Drive decision-making
• Gain insights into their customers and employees
• Personalize experiences
• Innovate products and solutions
• Manage risk

Why Your Business Needs a Digital Transformation Strategy

Funding for digital initiatives continues to rise. In fact, global spending on digital transformation is forecast to hit over $3 trillion by 2026.

As such, it’s crucial to be on the leading edge of transformation so your business can stay ahead of the curve.

The benefits of incorporating digital transformation include the following:

• An enhanced customer experience, such as personalized digital marketing or 24/7 customer service
• Better efficiency and productivity by automating tasks, reducing errors, and speeding up processes
• Agile business creation by ensuring new business models quickly respond to market changes and incorporate new advancements in technology
• The attraction and retention of talent by bringing in the modern workforce through innovation and a tech-forward approach

You need a comprehensive roadmap to achieve those benefits — that’s your digital transformation strategy.

Here’s why this business strategy is so important:

• It provides clear direction, ensuring your investments aren’t misguided or wasted.
• It helps establish business priorities, letting you focus on the areas that deliver the most value.
• It helps manage risk since you’ll be able to identify, anticipate, and mitigate it.
• It helps measure progress by giving you a standard to measure your progress against and adjust as needed.
• It facilitates buy-in by helping to communicate the purpose and benefits of the transformation to your employees.

The Importance of Digital Transformation in the Remote and Hybrid Work Era

Digital transformation is especially important in the wake of new work trends.

It serves as the infrastructure that enables businesses to adapt and thrive in the new realities of how we do business. Ultimately, it makes hybrid and remote work not only possible but also highly advantageous.

As Satya Nadella, CEO of Microsoft, said,

Hybrid work represents the biggest shift in how we work in our generation. And it will require a new operating model, spanning people, places, and processes.

The companies that lead the way during this pivotal shift in work will have the upper hand in future success. Those that lag behind may struggle to catch up.

An effective transformation allows hybrid workplaces to:

• Remotely collaborate
• Streamline their virtual project management
• Elevate their employee satisfaction
• Remain at the forefront of growing trends

Read our full article on the most prominent digital transformation trends for 2023.

Who Should Be Involved in a Digital Transformation Strategy?

In short, just about everybody.

The creation of your strategy, though, will fall into fewer hands. Top executives — the CEO, CIO, etc. — will play a critical role in defining the vision and strategic objectives. And they’ll have the final say on overall strategy, investments, and priorities.

But they’ll need help from there. They may appoint a digital transformation officer or team to oversee the transformation.

The IT department will help with know-how and practicalities, and various business leaders will bring their expertise to the table.

Once the strategy is created, involvement best practice is to bring in stakeholders across the organization for their input.

HR will play a significant role in managing the people and cultural aspects of the workforce transformation.

So, to sum it all up:

• Leadership will drive the vision and strategy.
• IT will implement the technologies.
• HR will manage the people element.
• Frontline employees will provide insights into customer needs and adopt the new technologies and processes.

It’s also beneficial to involve customers in the digital transformation process. This will help ensure that the process meets their needs and expectations.

Pro-tip: If you want your transformation to succeed, including HR in your strategy creation is critical. They’ll manage the people and cultural aspects, such as training and facilitating organizational change.

Ben Grinnel, an HR expert with North Highland Consulting, says,

Without the workforce properly prepared in advance to engage, transformation efforts are dead on arrival and a waste of money.

It’s about bringing together diverse perspectives to develop a comprehensive and effective strategy that drives the organization forward.

Part 2: The 5 Pillars of a Successful Digital Transformation Strategy for Remote or Hybrid Work

The shift to working from home brings with it unique challenges and opportunities. That’s why tailoring your digital transformation strategy to remote or hybrid work is crucial.

Your strategy should hinge on the following key pillars:

Clear Objectives and Business Outcomes

Remote or hybrid work setups can sometimes make maintaining a unified vision and set of objectives challenging. Teams are spread out across time zones with no shared physical presence.

But these work environments also present opportunities to redefine what success looks like in today’s business world.

Historically, businesses have measured success with performance metrics.

Traditional measures of success include the following:

• Sales numbers
• Conversion rates
• Customer satisfaction scores

These are, of course, still vital. But the shift toward remote work demands a broader definition of success — one that involves striving for both business excellence and a healthy, engaged workforce.

The Right Tools

Hybrid and remote work require the use of digital tools for collaboration, communication, and productivity.

The problem today is less a matter of finding usable tools than it is figuring out which tools are the best.

Organizations can even incorporate so many tools they become counterproductive — a phenomenon called “tool sprawl.”

That’s why it’s important that any digital tools you use cater to your overall vision. It’s also best to find tools that offer multiple functionalities and integrations so that you don’t create technological silos.

For example, OfficeRnD Hybrid is a fully embeddable hybrid work solution that provides app-less experience.

Data-Driven Decision Making

When teams don’t share one workspace, decision-making can get complicated. However, digitizing operations and using digital tools can generate real-time data to provide valuable insights that support informed, data-driven decisions.

This shift toward remote work can, in fact, foster a more robust, data-driven culture.

Balance of Technology and Human Aspects

It’s important to remember that the right technology serves as an enabler of — not a replacement for — human interaction and engagement.

For hybrid and remote work environments, the challenge is to balance technology use with maintaining a strong human element. This balance is vital because, at the end of the day, businesses are about people — your employees, your customers, and your partners.

Technology can help through virtual team-building activities and one-on-one video calls.

But balance also means establishing boundaries around work and personal time. Remote work environments can blur those lines without a healthy work-life balance.

A Security-Focused Culture

Remote and hybrid work can expose organizations to greater cybersecurity risks due to the increased use of personal devices and home networks. Therefore, it’s essential to foster a culture that takes digital security seriously.

For example, you should:

• Invest in secure technology and infrastructure
• Provide employees with regular cybersecurity training
• Develop policies and procedures that prioritize security

A strong security culture not only protects your business from potential threats but also helps you build trust with your customers since they know their data is safe with you.

Part 3: A Step-by-Step Guide to Implementing a Digital Transformation Strategy

Not all digital transformation projects are wildly successful, for a number of reasons. Executives polled in KPMG’s 2022 Technology Survey cited a lack of key skills, the high cost of adding necessary talent, and risk-averse culture as the biggest obstacles to digital transformation efforts.

The good news, however, is that the following six factors can raise your chances of success:

1. Clear strategy and goals
2. Company-wide commitment
3. Tapping into your best talent
4. Having an agile governance mindset
5. Tracking progress against clear metrics
6. Using technology that fits the business’s needs

Keep these success factors in mind as you go through the four essential steps to creating your transformation strategy.

#1 Create a Vision for Transformation

Before you embark on your transformation journey, you need to know the current state of your business.

That means taking a good look at your existing processes, tools, and technologies.

You may find that certain processes that work in an office setting don’t translate well to a remote context.

For example, physical document storage might need to be upgraded to a cloud-based solution to ensure secure and accessible data storage.

So this first step is all about assessing where you are and where you want to go.

Here are some questions to ask yourself as you’re forming your vision:

• What are the current pain points in our operations?
• What does a successful future look like for our business?
• How can digital technology help us address our business challenges and achieve our future goals?
• What changes in the organization will be required to reach that vision?
• How’ll the transformation impact our employees, and how can we support them throughout it?
• What metrics can we use to measure our transformation’s success?
• What steps can we take to create a culture that embraces change and innovation?

#2 Choose and Implement Your Digital Tools and Technologies

With your vision in place, it’s time to select the relevant technologies. The tools you choose should arise from the vision you created in Step 1.

Consider the specific needs of your team, especially your remote and hybrid employees.

Examples include communication tools, project management software, and security solutions.

Implement your tools in a thought-out, well-executed fashion by doing the following:

• Researching the tools
• Running pilot tests
• Rolling out new technologies and training your employees on them

Remember that adding more tools doesn’t always equate to more productivity. It’s about choosing the right tools that will integrate well with each other and enhance — not complicate — your workflows.

#3 Engage Employees in the Transformation Process

Engaging your employees is key to ensuring your transformation strategy’s success. This is particularly relevant in remote and hybrid work environments, where change can feel even more isolating.

Provide regular updates to, and encourage feedback from, your staff.

Ultimately, your strategy should be to offer support to your employees throughout the transformation.

You can do this by:

• Communicating the change
• Involving your employees in the process
• Providing support and training materials to your employees

#4 Measure the Success of Your Digital Transformation Strategy

In this final step, it’s essential to continuously measure the success of your digital transformation strategy. That might involve tracking productivity levels, customer satisfaction scores, cost savings, or other key performance indicators that align with your objectives.

Remember that traditional measures of success may not fully capture the impacts on employee productivity, engagement, and well-being.

Lastly, keep in mind that your digital transformation is a journey, not a destination. Regularly assessing your progress helps you make any necessary adjustments and continue to evolve your strategy.

This iterative approach will keep your strategy relevant and effective in an ever-changing business landscape.

Part 4: Addressing the Fears and Misconceptions of Starting a Digital Transformation

Starting a digital transformation journey is no small feat — it’s a complex process that can stir up numerous fears and misconceptions.

Here, we’ll address those fears head-on, clear up misconceptions around transformation, and offer advice on how to determine the right time to transform.

Common Fears of Beginning a Digital Transformation

Here are just a few concerns many companies have regarding digital transformation — and how they can combat them:

The cost of transformation

Many organizations worry about the significant costs associated with implementing a digital transformation strategy.

The cost of digital transformation will depend on the size of your organization, your IT team’s capabilities, and any IT consultants and advisors you need to bring in along the way.

Create a comprehensive budget plan to help you with these costs. In it, be sure to include expenses for the following:

• New technologies
• Training
• New hires
• Potential productivity losses
• Consulting fees

If you have a remote or hybrid team, also incorporate the costs for data security and remote digital resources.

Then, determine the expected returns on those investments. These returns may come through productivity gains, reduced travel, or ending an office lease.

Explore cost-effective, cloud-based solutions, or consider phased implementation to spread out the cost.

Once your expenses and investments are mapped out, you can plan accordingly — or adjust the plan to ensure a profitable business outcome.

Disruption to current operations

The disruption digital transformation can bring to daily operations is often daunting, as it’s easy to imagine everything falling apart during a major change.

Fortunately, careful planning and clear communication can minimize this possibility.

Adopt a phased approach to implement changes gradually, and use project management tools to keep track of progress and issues in real time. These tactics are especially beneficial for teams that are spread out across different locations.

Employee resistance to change

Change can be hard. To overcome resistance to a transition, do the following:

• Involve your employees early in the process
• Clearly communicate the benefits of the transformation to your employees
• Provide ample training for your employees

You should also anticipate staff needs and account for varying digital literacy levels. Encourage feedback and active participation throughout the transformation process.

AI and job losses

Automation, while efficient, often raises fears regarding job loss. Address this by proactively retraining or upskilling employees for new roles that emerge as part of your company’s digital transformation.

Communicate openly about the changes, and support your employees through the transition.

Recognizing and addressing fears regarding automation and job losses is crucial to ensuring a smooth, successful, and long-term digital transformation.

Dangerous Misconceptions About Digital Transformation

Unfortunately, digital transformation comes with many harmful misconceptions. Let’s discuss (and clear up) a few of them.

Digital transformation is just about technology

While adopting new technology is part of a digital transformation, it’s not the only component.

Digital transformation is as much about people and processes as it is about technology. It involves changing organizational structures, culture, and operations to effectively leverage new technologies.

Digital transformation happens quickly

Many believe that digital transformation is a swift, one-time process. However, it’s often a long-term journey. The changes are gradually implemented and continuously adjusted.

Digital transformation requires ongoing commitment from all levels of the organization.

Digital transformation is only for large corporations

Some people believe that only large corporations need to undergo digital transformation.

But even a small business can leverage digital technologies to improve their operations, customer experiences, and decision-making abilities.

Digital transformation is all about cutting costs

While digital transformation can lead to cost savings through improved efficiency, this isn’t its primary goal. The main aim of digital transformation is to create value for customers, employees, and the business at large.

Digital transformation is up to the IT department

While the IT department plays a critical role in implementing new technologies, digital transformation should be a company-wide initiative.

It requires buy-in and participation from all departments to be successful. Leadership, in particular, needs to drive the vision and strategy for it.

How Do I Know It’s the Right Time for a Digital Transformation?

The need for innovation is a constant in today’s dynamic business environment. So, if you’re pondering digital transformation, now might be the right time to begin the process.

Here are some sure signs your organization is ready for a digital overhaul:

• Your business processes are inefficient: If your processes are cumbersome or slow, it’s time to optimize through digital means.
• Your customers’ needs are changing: As customer expectations shift in the digital era, it’s crucial to adapt through technology-enabled solutions.
• Your remote workforce is expanding: An increase in remote work demands a reassessment of your current digital capabilities to ensure seamless collaboration and productivity.
• Your competition is innovating: If rivals are leveraging digital technologies to gain an edge, that’s a wake-up call for your business to avoid getting left behind.
• Your data is underutilized: Untapped data is a missed opportunity. Leveraging data analytics can unlock valuable insights for your business.
• Your existing technology is outdated: An obsolete tech stack can limit your business growth. Upgrade to contemporary digital solutions to fuel your company’s efficiency and innovation.

Part 5: Examples of Success in Digital Transformation

Real-world examples provide the best insights. In the final portion of this guide, we’ll take a look at how four globally recognized companies successfully reimagined their operating and business models through digital transformation.

Microsoft

Once mostly known for Windows and its Office apps, Microsoft was on the verge of losing its stronghold in the wake of significant changes made to the internet and mobile devices.

When Satya Nadella became the CEO in 2014, he helped Microsoft launch a digital transformation strategy. This strategy included not only technological advancements but also a complete cultural shift. It was grounded in developing a “growth mindset” across the organization, fostering a culture that embraced change, innovation, and continuous learning.

Central to Microsoft’s transformation was the development of Azure, the company’s cloud-based service platform. Azure transformed Microsoft into a leading player in the cloud computing market.

Nike

Nike wasn’t struggling before its digital transformation. But the company was peering into a future where e-commerce would be king, and they didn’t want to be left behind.

After several years of repositioning itself, Nike’s transformation led to record-breaking numbers, and Nike became a direct-to-consumer brand. The team placed customer experience at the core of their strategy.

Nike also used advanced data analytics to launch a hugely successful app — an app that offers much more than e-commerce capability. It also connects users to the wider sports community, providing workout guides, event updates, and personalized training plans — ultimately establishing a stronger relationship between the brand and Nike customers.

Walmart

Retail behemoth Walmart faced increasing competition from e-commerce giants in the early 2010s.

To sustain and grow, the store implemented a comprehensive digital transformation strategy. They integrated their online and offline retail experiences, developed advanced inventory management technologies, and used data analytics to improve customers’ shopping experiences.

Walmart now provides a seamless, efficient experience whether customers shop online or in-store.

LEGO

In the early 2000s, LEGO was on the brink of bankruptcy.

However, they didn’t just survive — they thrived by embracing digital transformation, diversifying their traditional plastic brick toys into digital offerings like video games and movies.

A key aspect of LEGO’s transformation was creating a captivating online customer experience. They used social media platforms to engage with their customers and effectively turn their fortune around.

For a more detailed look, check out our article on some successful digital transformation examples.

Digitally Transform Your Business Today

We’ve covered a lot of ground here. But you now know the exact steps and success factors that’ll help you lead your company into a brighter future.

Armed with this knowledge, you can start crafting your strategy today!

And while you’re at it, make OfficeRnD Hybrid part of your organization’s digital transformation strategy.

Hybrid work requires the right software. That’s why you want to have all the tools and resources you’ll need for your hybrid operation in one place. OfficeRnD Hybrid is a game-changer for collaborative scheduling, meeting room and desk booking, and so much more.

Start for free with OfficeRnD Hybrid!

FAQ

What are the key elements of a digital strategy?

The key elements of a digital strategy include having clear goals, the right technologies, and a method of tracking your success.

What is a digital transformation roadmap?

Your transformation strategy guides your digital transformation roadmap. The roadmap is the necessary steps to get you to your vision.

What makes a successful digital transformation?

In addition to a thorough and clear strategy, one of the biggest factors for success is a commitment across the entire leadership team.

What is the biggest enemy of digital transformation?

The biggest enemy of digital transformation is resistance to change — which is often rooted in a lack of understanding about the benefits of such a transition.

What are the 4 Main Areas of Digital Transformation?

The four main areas of digital transformation are:

• Business Process: This involves the use of digital technologies to modify or create new business processes, culture, and customer experiences to meet changing business and market requirements.
• Business Model: It includes the transformation of business models to adapt to a new digital reality, often involving a shift towards service-based or platform-based models.
• Domain: This area focuses on the ability to digitize and exploit new digital business domains, often leading to the creation of new types of products and services.
• Cultural/Organizational: It involves changes in organizational culture, including the adoption of a digital-first mindset, agile methodologies, and a culture of continuous learning and adaptation.

What is an Example of a Digital Transformation Strategy?

An example of a digital transformation strategy is the adoption of cloud computing. This strategy involves moving data storage and processing from on-premises servers to cloud-based platforms, which can offer greater scalability, flexibility, and cost-effectiveness. It often includes the use of Software as a Service (SaaS) applications for business processes such as customer relationship management (CRM), human resources (HR), and enterprise resource planning (ERP). This transformation can lead to improved collaboration, data accessibility, and operational efficiency.

What are the 7 Principles of Digital Transformation?

1. Customer Centricity: Prioritize customer needs and experiences in all digital initiatives.
2. Leadership: Strong leadership is required to drive digital transformation and foster a culture of innovation.
3. Agility: Embrace agile methodologies for faster, more responsive project development.
4. Workforce Enablement: Equip employees with the right digital tools and skills to succeed.
5. Operational Efficiency: Use digital technologies to streamline operations and reduce costs.
6. Culture and Innovation: Foster a culture that encourages innovation and risk-taking.
7. Digital Technology Integration: Seamlessly integrate digital technologies into business processes to create value.