According to its main approach, digital transformation can be divided into 4 distinguishable types: business model transformation, business domain transformation, business process transformation, and cloud transformation. On top of that, it encompasses a multitude of tools ranging from conventional CRMs and cloud solutions to the forefront of AI and machine learning.
But what are the main differences between types of digital transformation, and how do they manifest in real-world scenarios? In this article, as we delve into the types of transformations, we unravel their essence, showcasing not only their theoretical underpinnings but also providing tangible digital transformation examples from industry giants like Netflix, Amazon, McDonald’s.
Digital Transformation Definition
Digital transformation involves the strategic incorporation of cutting-edge technology into existing business procedures. The primary objective is to revamp outdated processes, elevate customer experience, and cultivate innovation for the future.
The avenues for digital transformation are diverse, utilizing various resources and technologies. While conventional tools such as CRMs, cloud solutions (explore our proficiency in cloud technology here), data analytics tools, and process automation software are considered more standard, AI and machine learning take center stage in driving advanced forecasting, customer service, and decision-making.
What are the Types of Digital Transformation?
Despite the existence of an overarching common goal of all digital transformation processes, there are vastly different ways in which this goal can be achieved. Your business may focus on expansion into other markets or, instead, completely change the way your service is delivered without expansion.
Thus, there are 4 major identifiable types of digital transformation:
- Business Model Transformation
- Business Domain Transformation
- Business Process Transformation
- Cloud Transformation
Business Model Transformation
A business model transformation is a scenario where a company seeks to overhaul a segment of its business by digitizing a product or service that was traditionally delivered through alternative means. This process places a spotlight on innovation and encourages thinking beyond conventional boundaries to enhance overall business outcomes.
Companies typically embark on a business model transformation when leaders identify an opportunity to reshape how consumers acquire or utilize a product or service. It may also be triggered by the strategic moves of market competitors, prompting the company to align itself with similar trends.
Crucial factors to consider during a business model transformation include avoiding excessive reactivity, as well as the potential need to hire employees with new skill sets or provide retraining for the existing workforce.
Business Domain Transformation
Domain transformation involves surpassing the conventional limitations that currently define a brand’s markets and potentials – essentially when its leaders decide to venture into a new market.
A company might undergo a domain transformation if it has developed software to automate processes and decides to market this software to other companies, thereby establishing a new revenue stream. Alternatively, motivations such as challenges from competitors or technologies that make it challenging to sustain the current business plan are also quite common.
Business Process Transformation
Business process transformation aims to simplify and enhance internal operations – streamlining throughput time, reducing costs, and minimizing errors. This typically involves the automation of manual procedures through investment in new software and R&D.
And while introducing a new system might be appealing, leaders should also consider various factors before implementing new applications. For instance, they need to assess implementation timelines, change management strategies, and the urgency of the change.
On top of that, this transformation can have implications for external vendors and customers. Revisions to processes like accounts payable may alter the way invoices are submitted, necessitating effective change management for both internal employees and external stakeholders.
Cloud Transformation
What is cloud transformation? It essentially aids organizations in transitioning their information systems to cloud computing environments. This process can manifest in diverse ways – for instance, a company may opt for a complete transfer of its infrastructure to the cloud or choose to migrate only specific applications, data, or services.
Cloud yields numerous advantages, such as more streamlined data sharing and storage, accelerated time-to-market, and better organizational scalability and flexibility.
Cloud transformation strategy may vary – some organizations opt for the public cloud, utilizing a third-party data center managed by a cloud provider; others establish their cloud computing infrastructure internally, known as a private cloud. And there is also a third approach – many adopt a combination of both models, resulting in a hybrid cloud for their infrastructure.
Digital Transformation Examples by Types
From theory to practice – now let’s look into the specific digital transformation examples according to each type. This way, we’ll be able to understand the reasoning companies had for choosing this or that method and see what results they have achieved thanks to that.
Business Model Transformation Example – Netflix
In the early 2000s, the entertainment industry was firmly anchored in traditional cable television and DVDs. At the time, Netflix was part of that industry as a DVD-by-mail rental service, however, as streaming technology was gaining traction, the company saw an opportunity to redefine how audiences consume content.
In 2007, Netflix introduced its streaming service, allowing subscribers to watch content on-demand, which provided them with unprecedented flexibility. They also expanded their service globally, transcending borders and reaching audiences in over 190 countries, turning Netflix into a global entertainment powerhouse.
On top of that, they leveraged data analytics to analyze user preferences, providing personalized content recommendations, and embraced the binge-watching phenomenon by releasing entire seasons at once, allowing users to consume content at their convenience.
Business Domain Transformation Example – Amazon
A compelling illustration of domain transformation is evident in the journey of the online retail giant, Amazon. Before 2002, Amazon had gained its revenue through selling music and videos, but then they entered a new market domain with Amazon Web Services (AWS).
What facilitated Amazon’s foray into this domain was the digital capabilities it had developed in storage, computing, and databases to support its core retail business. This, coupled with an established network of relationships with numerous growing companies in need of computing services, paved the way for eventual success. Now, AWS is the leading cloud computing and infrastructure service and contributes nearly 60% of Amazon’s annual profit.
Business Process Transformation Example – McDonald’s
Traditionally known for its quick-service model at physical locations, McDonald’s recognized the need to embrace digitalization to enhance their customer experience and went for a massive process transformation in the 2010s.
After a couple of years of conceptualization and development, McDonald’s launched its mobile app in 2015, allowing customers to browse the menu, customize orders, and make payments from their phone. This not only streamlined the ordering process but also introduced a new level of personalization. McDonald’s also introduced self-service kiosks in physical locations, mirroring the mobile app’s functionality. Customers could now place orders with greater customization, further reducing wait times and increasing order accuracy.
At the same time, McDonald’s upgraded its drive-thru experience by implementing digital menu boards. These boards dynamically adjusted based on factors like time of day and popular menu items, promoting upselling.
Cloud Transformation – University of Bristol
With a vision to extend educational accessibility beyond traditional boundaries, University of Bristol officials also sought to leverage digital tools. The goal was to cater to a broader audience, reaching well beyond the 28,000 students attending in-person classes annually.
For that purpose, university executives chose a cloud technology solution, laying the foundation for expanded online education. This decision aimed to enhance commercial appeal and offer learners the freedom to attend courses regardless of their location.
Online courses were introduced, not only making education accessible worldwide but also facilitating collaborations with international bodies. This enhanced the university’s research capabilities and strengthened partnerships with various organizations.
OMI’s Digital Transformation Services for Enterprises
Digital transformation can take place in more ways the one – you may focus purely on refining your internal processes, you may reassess your current product, you may tap into new markets, or even simply adopt a cloud technology Giants like Netflix and McDonald’s have done that and reaped many rewards – and there’s hardly any reason why you shouldn’t try either.
If you want to protect yourself against unwanted risks during your digitization, consider reaching out to a team of digital transformation experts – our insights and know-how will make this process seamless and smooth.