What is a successful digital transformation

Blog 10
There is no single digital transformation model that can applies to all businesses. Different conversion goals lead to different results. So what will a successful digital transformation business look like?

1. What is digital transformation - the correct understanding

1.1 What is digital tranformation

“Digital transformation” is a phrase that is no longer strange to us. It has gradually appeared and created a great influence in all aspects of our life. Digital transformation has shaped the way businesses (even Governments) access technology solutions.

However, the concept of Digital transformation is still not clearly defined. It seems that business models of companies are not the same and produce results in different ways, so there is still no consensus on having a common definition for digital transformation. Even so, their form has been markedly hierarchical over the course of development, so it is important to understand their nature and how they affect the business model.

(Digital transformation has gradually shaped our lives)

 

1.2 What is it about?

In general, “Digital Transformation” is completely different from “Digitalizing”:

  • “Digitalizing” is the process of modernizing and converting conventional systems to digital systems (such as converting documents from papers to soft files, converting analog to digital broadcasting...). Consists of two small processes: Converting data into digital form (Digitization) and Exploiting digital data (Digitalization).
  • In the other aspect, “Digital Transformation” is to collect the data obtained from the “Digitalizing”, and then analyze, evaluate, transform that data to create new values.

Extending the above explanation, it can be understood that "Digitalizing" is an inevitable part of the "Digital Transformation". "Digitalizing" focuses on exploiting digital tools or digital platforms, this method simply adds a tool to serve the operating model of the business and does not change the core of the business.

On the other side, "Digital Transformation" is the next step to bring the stable pieces from the "Digitalizing" into a new business model. It creates a unified whole that is linked with each other from factors such as approaching customers, management, manufacturing, distrubuting, etc. into a completely new system, which meets the needs of customers.

A successful digital transformation model is when the entire business model is completely operated by the digital platform, creating superior value than the old one.

(Progress of Digital transformation)

 

2. Digital tranformation trends

As mentioned, business model of companies are not the same. So it appears that companies will have different digital transformation plans. Digital transformation actually includes many internal processes, with separate tools suitable for each type of process. So what are the popular tools for digital transformation?

2.1 Cloud computing

Cloud computing is the on-demand delivery of IT resources over the Internet with a pay-as-you-go policy. Instead of buying, owning and maintaining a data center or a server by yourself, you can access the services like software applications, databases, and more through the Cloud. This approach helps synchronize systems at a lower cost than the old way.

(E.g diagram of Cloud Computing)

Cloud is a key technology in Industry 4.0. With the emergence of new technologies and platforms increasingly dense, it is essential to have a environment in which to leverage those resources.

 

2.2 Internet of Things (IoT)

Internet of Things (IoT) is a concept that refers to the connection between different devices to form a giant connected network. Those devices are no longer limited to laptops, phones, tablets, etc., but any entity that has the ability to connect to the Internet can become a part of IoT. From smart watches, smart homes, high-tech robots, cars, and even TV, refrigerators, traffic light poles, etc. if integrated with connected circuits, can also become an IoT element.

(Any device with ability to connect to the network can become an IoT element)

So, what’s the benefits? Most notable is the ability to access and manage all devices at once:

  • All items in the smart home can be controlled through an app on your phone.
  • A business can operate all of its production machinery with a single control panel.
  • A city can control the entire electrical system, water supply and drainage system, lighting system, security camera, etc., all concentrated in a single management center. 

This system will improve the communication between devices, the processing time for tasks will be shorter. The Automation will cut down on redundant, saving operators effort and money.

 

2.3 Enterprise resource planning (ERP)

Enterprise Resource Planning is a system that includes the functions and tools used to plan the resources of an organization or business. Those resources could be:

  • Manufacturing and Materials Planning (MRP)
  • Supply Chain Management (SCM)
  • Project Management System (PMS)
  • Customer Relationship Management (CRM)
  • Human Resource Management (HRM)
  • Financial Risk Management (FRM)

Depending on the specific purpose, an ERP system can be larger and perform more functions than the list above. Each specific administrative need will usually come with a software tool to simplify the process.

(E.g diagram of an ERP system)

 

3. Successful digital transformation models

For most companies, business digitization is the driving force behind business growth. Digital transformation opens up opportunities to reach target customers and reduce costs, creating a huge difference in profits compared to the previous way of working.

More than that, for some businesses, digital transformation is not only to increase profits, it is also a vital goal for that company to exist.

it's not rare cases where companies refuse to change when the digital economy started, leading to the bankruptcy of that company. But there are also businesses that are extremely keen and see the way to really "burst" and become a leader in this market.

 

3.1 Netflix

Netflix – a famous online video streaming platform, is a competitor to other giants such as Disney Plus, Hulu, Amazon Prime Video, HBO Max, etc. But they only entered the market 15 years ago. Before that, Netflix was once an unknown company in this field.

Starting as a DVD rental company, although they steadily growing with loyal customers, but did not achieve a big breakthrough. Until 2007, when Youtube gradually became more and more popular. Netflix has realized the potential of playing video from conventional player devices to an online environment with services that can be released 24/7. At that point, they opened up a fertile market that very few businesses at that time could exploit.

(Netflix has changed their business model from selling DVD to streaming video online)

Since then, Netflix has completely restructured the way the company operates, focusing all of its resources on bringing its services to the digital platform. After that, they’ve achieved record growth like no other in their industry could, step by step they’ve turned into a giant just by capturing the exact moment of digital transformation:

  • April 2011, Netflix has over 23 million subscribers in the US and over 26 million subscribers worldwide.
  • In April 2014, Netflix reached 50 million global subscribers, operating in 41 countries, with a US video streaming market share of 32.3%.
  • In 2018, Netflix reported profits of up to 1.21 billion USD. With revenue at $15.8 billion, up about 116% from the previous financial cycle. Shares of Netflix are trading at over $400, and Netflix's market cap has reached $180 billion in June 2018. Enters the ranking of the largest US companies (Fortune 500), which holds position 261 on the sales-based chart.

As we can see, if Netflix was not perceptive and did not takes the advantage of the opportunity to move their products to the digital platform, they will never achieve the success like it is today. This decision has helped Netflix to grow dramatically and create momentum to become a market leader.