This blog post was updated on August 15, 2024

It was originally published on August 15, 2020

What Is Digital Transformation?

Digital transformation commonly is defined as the adoption and implementation of digital technology to translate business processes into a digital format, creating new products, services, and operations, or modifying existing ones.

However, digital transformation is much more than mere adoption of digital technology. It doesn’t mean simply transforming non-digital or manual processes into digital processes. Rather, it involves materially changing how a business operates and delivers value to its customers. Digital transformation essentially changes your way of doing business and, in some cases, it can fundamentally change your business model.

For many companies, especially those that have been in business for a long time, digital transformation involves moving away from traditional, tried, and tested business processes and adopting new methods, technologies, and practices. But what does digital transformation mean in practice, and what does it look like when applied in a small business environment? That’s exactly what we will explore in this blog post.

So, let’s dive in…

Simple Digital Transformation Examples

We often hear about the digital transformation journeys of large enterprises. The term "digital transformation" is frequently mentioned, and it can feel overwhelming, especially when you read about how giants like Netflix and Lego have revolutionized their operations. But what does digital transformation look like for small businesses? Let's explore some straightforward examples that show how even modest changes can make a big difference.

Example 1 - Embracing the Cloud

One of the most common and impactful examples of digital transformation is the adoption of cloud computing. When a business shifts from relying on traditional desktop applications to cloud-based solutions, it’s undergoing a form of digital transformation. Platforms like Microsoft 365 and Google Workspace (formerly G Suite) have rapidly replaced many on-premises software solutions, enabling teams to collaborate virtually, work remotely, and improve productivity.

While moving to the cloud might seem like a small step, it represents a significant evolution in how businesses operate. Consider the journey from physical files to digital documents, and now to cloud-based systems—this progression has fundamentally changed the way businesses manage information and collaborate.

Example 2 - Leveraging Chatbots for Customer Interaction

Chatbots have transformed the way businesses, including small ones, engage with customers. These AI-driven tools allow businesses to provide 24/7 customer support without the need to hire additional staff. Thanks to advancements in natural language processing, even small businesses can implement chatbots to handle customer queries, process orders, and provide information in real-time.

With chatbots, companies ensure that no customer is left waiting for service. They enhance customer engagement and provide valuable insights into customer behavior through interactions. Importantly, implementing chatbots doesn’t require a massive investment—there are affordable, off-the-shelf solutions available from tech giants like Facebook and Microsoft, as well as from smaller vendors.

Example 3 - Streamlining Operations with Automation

The digital age has brought unprecedented efficiency, but with it, more tasks, tools, and software to manage. Often, these tools function in isolation, requiring manual input across different platforms, which can lead to inefficiencies.

Automation solves this problem by connecting disparate applications and enabling them to communicate with each other. For instance, you can set up an automated workflow where a specific action in one application triggers another action in a different application. This "If X happens in Application A, do Y in Application B" approach streamlines processes, reduces manual effort, and enhances overall efficiency.

Beyond operational efficiency, automation can significantly improve customer experiences. For example, you can use automation to send personalized onboarding emails to new customers, ensuring a smooth and welcoming introduction to your service.

These examples clearly illustrate how digital transformation is changing the way small businesses operate and deliver value to customers. However, it’s important to remember that digital transformation is not a one-time project. As technology evolves, continuous efforts are needed to stay competitive and keep pace with these changes.

Why Should You Focus On Digital Transformation?

We’ve all heard the cautionary tales of Kodak and Blockbuster. These once-dominant companies failed to integrate new technologies into their business models and ultimately couldn’t keep pace with the evolving market. Their reluctance to embrace digital transformation led to their downfall, demonstrating that even well-established businesses with substantial resources are not immune to technological obsolescence.

For small businesses, digital transformation isn’t a threat; it’s a significant opportunity. It levels the playing field, enabling them to compete more effectively with larger enterprises. 

Cloud computing is a prime example of how digital transformation can benefit small businesses. By adopting cloud solutions, small businesses can scale their IT infrastructure quickly, affordably, and with greater ease than ever before. The cloud reduces the need for physical storage, saves on space and power, and minimizes maintenance requirements.

Furthermore, the cloud offers unparalleled speed of deployment and flexibility. This means businesses can experiment and iterate on new ideas without committing to significant capital expenditures. Small businesses that leverage cloud computing can swiftly adapt to changing trends and compete with larger enterprises, even if they have fewer resources.

In essence, digital transformation enables small businesses to operate with the agility and innovation needed to thrive in a competitive landscape. By embracing new technologies, they can enhance efficiency, reduce costs, and improve customer experiences, positioning themselves for sustained success.

What Are The Digital Transformation Challenges For Small Businesses?

1. Lack Of Resources

Lack of resources is a major problem that perpetually hounds most small businesses. Whether it is the capital or talented employees, small businesses often struggle to allocate them to the research, development, and implementation of new technologies. But this “lack of resources for new technologies” is a poor argument because technology is no longer a peripheral department rather it has a central role in business. When you invest in digital transformation, you aren’t investing in technology rather you are investing in the sustainability and growth of your business.

2. Traditional Business Model

Just as businesses are creating opportunities for the creation of new technologies, new technologies are in turn creating new business opportunities. Just look at what social media messaging platforms have done for customer support and video streaming has done for production studios. It is no longer sufficient to use technology to facilitate the achievement of your business goals. Organizations now need to mold their business around technology and accommodate the changing technology landscape by re-imagining their business models. 

Business owners need to embrace a new role for their IT department in driving big changes in how they operate as well as to, possibly, re-imagine their entire business model to keep pace with the changing technological landscape. The breakneck speed at which technology is changing has brought about a new age of technological Darwinism on steroids- you either evolve rapidly or perish.

3. Resistance To Change

Whenever you introduce something new, it is common to face resistance to change from employees at all levels. Change is even more difficult if major business processes or the business model requires an overhaul. Fear of uncertainty and failure is often a big cause of this resistance to change. As digital transformation will take you into new, uncharted territory, it is important to get comfortable with failures because not every transformation will get you the expected results.

Therefore, in addition to the adoption of new technology, digital transformation also requires changes in leadership style, work culture, and encouragement of innovation. Getting your employees on the same page will help ease the transformation process. Make sure that all your employees understand the reasoning behind your digital transformation strategy, why it is necessary, and what their role will be in the transformation process. Open communication and transparency are excellent tools for tackling resistance to change.

4. Lack Of Initiative

Businesses that are doing well often settle into a comfort zone. They tend to think that if things are going well then there’s no need to change. Another reason for the lack of innovation is group-think. Business owners usually look at what others in their industry are doing. And to maintain conformity, they continue doing what everyone else is doing. But things are constantly changing- the market, the technology landscape, the needs and preferences of the consumers. Businesses need to take initiative to keep pace with the external changes.

By now, I believe you understand what digital transformation is and why it’s important for your business. Digital transformation isn’t just about making your business buzzword-compliant. It actually has the potential to transform your business. If you are still not convinced, check out this story of how Dominos used technology to turn its fortunes around.

How To Get Started With Digital Transformation?

The first step towards digital transformation is to understand the potential impact of technology. Don’t ask “How can technology help us do what we are doing faster?” or “How can technology help us do more of what we are doing right now?” Instead, ask yourself “What can technology help us do?” and then design your processes around it.

Changing your entire business around a piece of technology may sound excessive. So let’s come back to one of the most popular digital transformation examples- Netflix started as a mail-order service that disrupted the video rental business. But when digital innovations made wide-scale content streaming possible, Netflix transformed into a digital platform that has successfully challenged cable television networks and production studios by offering on-demand content easily accessible anywhere on personal devices.

The example of Netflix is significant in demonstrating what a game-changer a disruptive technology can be. The disruption isn’t a consequence of the technology itself but it materializes from the fact that people failed to realize the impact the technology was capable of.

In most cases, such a radical overhaul of the business model isn’t even required. You would only adapt your business operations and processes to make the most out of technology instead of looking for technology that can facilitate your internal processes. In addition to thinking about how technology can help you achieve your business goals, also consider what could disrupt your business or upend your success. In other words, you need to shift from a reactive adoption of technology to a proactive pursuit of transformation.

What Can You Do Today To Set The Ball Rolling?

The first thing you need to do is to get out of firefighting mode. The IT team at most small businesses is forever engaged in a constant struggle with existing tech issues. They are so engrossed in putting out tech fires that they hardly ever get time to think about innovation or technological evolution. The second thing is to get a reliable technology partner who can help you prioritize, plan, and execute your digital transformation projects.

In the beginning, pick the low-hanging fruits- for example, migrate to Microsoft 365 or G Suite. After you have a couple of small victories under your belt, you can demonstrate the ROI of your investment in technology to the decision-makers and move on to bigger projects. Digital transformation appears daunting but with careful planning, some initiative, and an able IT partner, you too can leverage the power of technology.

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