What Is Digital Transformation?

Digital transformation is the application of technology to reimagine existing or create new business processes. It is driven by technology trends – such as artificial intelligence (AI), cloud computing, and Internet of Things (IoT) – changing user behaviors.

Is digital transformation the same as modernizing IT?

Digital transformation is about more than updating or adopting new technology. It requires rethinking or reimagining how a business operates, how it competes, and how it serves its users—both externally and internally. 

Organizations pursuing digital transformation often find they need to completely rethink their approach to a process—and not simply try to digitize it. Some need to adopt entirely new operating models to become digitally-led.

What is a digital transformation strategy?

Successful digital transformation hinges on a well-thought-out strategy that's based on answers to fundamental questions such as:

  • Why does our organization want or need to transform?
  • Where and what do we want or need to transform?
  • How do we do it?
  • What is our timeline for transformation?

When formulating a digital transformation strategy, organizations must consider the impact that it will have on their entire operations, not just on the functions or departments targeted for transformation.

The strategy should consider how a digital initiative is expected to impact people, processes, and technology. For example, how would automating a process change jobs—and which ones? How would it impact other, related processes? 

Having solid answers to questions like these can help the organization get buy-in, communicate, and manage digital change more effectively, and increase the likelihood of fully realizing its digital transformation objectives.

What are some digital transformation trends?

The global pandemic forced organizations to make an abrupt shift to remote work and digital operations. According to research from McKinsey, the crisis accelerated the adoption of digital technologies by several years.

Businesses that were already well along their digital transformation journey prior to the crisis generally fared better than companies that were not. A prior investment in digital transformation allowed these organizations to do all or most of the following:

  • Maintain connectivity and collaborate efficiently
  • Make decisions faster and adapt as needed
  • Deploy resources faster and more flexibly
  • Keep critical assets, including data and systems, secure
  • Continue meeting customers' needs and innovating

Many of these organizations now aim to further their digital transformation, while those who lagged are racing to catch up. Crucially, there is growing recognition that digital transformation must be a holistic—not siloed—process. The global pandemic has made it clear that the strategic adoption and application of technology by an organization has a direct impact on its long-term survival.

Can small businesses transform digitally?

A common misperception about digital transformation is that the process is reserved for large organizations. Smaller ones can gain significant benefits from using innovative technologies, like cloud computing and AI, to work smarter, faster, and more efficiently.

In fact, many businesses that thrived amid the disruptions caused by the global health crisis are small to midsize companies that were ‘born digital’. This means they've been adept from day one at deploying digital technologies strategically and using data analytics to drive competitive advantage.

Small businesses that want to transform digitally have a key advantage over larger organizations because they are more agile by nature, which makes change easier. 

The purpose digital transformation

Digital transformation can yield many benefits, including improved and more agile management of IT resources, more strategic use of data, higher productivity, enhanced customer experiences, reduced costs, and increased profitability. These stem from the following outcomes of digital transformation:

Deep and broad visibility

Through digital transformation, organizations apply technology to build new business models, processes, software, and systems, while also unifying and simplifying their IT tech stack. The goal is to bring more connectivity, better visibility, improved insights, and smarter actions into every aspect of the organization—including applications and their real-time performance. 

However, during the global health crisis, many organizations moved rapidly, under pressure, to implement innovation projects and widen their embrace of the cloud. For some, this made their IT environment more complex—with a patchwork of legacy and new solutions—and introduced new risks.

To increase visibility into their entire IT tech stack and ensure delivery of optimum digital experiences, many chief information officers and their IT teams are now working to enable "full-stack observability." 

Full-stack observability

This approach to digital experiences and enterprise technology management combines metrics from the business, apps, and infrastructure to produce a shared common context for operations. Full-stack observability makes it easier to diagnose root causes of issues, optimize resource use, and predict future requirements.

Once achieved, full-stack observability can help an organization link app performance to business outcomes, such as the customer experience and revenue. That insight can help to shape digital transformation strategies and expedite initiatives.

Learn about Cisco Full-Stack Observability>

Power of the network

The network is a strategic resource that can create competitive differentiation in a hyper- connected world. To deliver the type of experiences that internal and external users demand, organizations and their IT teams need the ability to manage the network end-to-end in a dynamic and flexible way.

Traditional approaches to network management are too rigid and don't scale to meet growing complexity. Organizations need to be able to adapt their networks quickly to changing business requirements if they are to flourish in the digital economy. Networks must support an increasingly diverse, hyper-distributed, and fast-changing set of devices, applications, services, and users—including many users who are working anytime, anywhere, and from many types of devices.

As part of digital transformation, organizations are shifting to the next generation of networking: intent-based networking (IBN).

The IBN model

This model builds on software-defined networking (SDN). It captures business intent and uses analytics, machine learning, and automation to align the network continuously and dynamically to meet changing business needs.

With IBN, IT teams can capture and translate intent into policies the network can act on using automation, as well as analytics and machine learning to continuously monitor and verify that the desired intent has been applied and the business outcome is being achieved.

For example, the IT team can prioritize a business-critical application, monitor its performance continuously and, in turn, assure that the application delivers an optimum user experience (i.e. fast response times) by remediating, optimizing, and correcting as appropriate to assure low latency (delay) at higher speeds.

Improved security

Digital transformation provides organizations with the opportunity to rethink and enhance security throughout their IT ecosystem—including in the cloud, in the data center, and across devices and applications. Security solutions must be simple to manage, integrated end-to-end, and capable of:

  • Providing trusted access to any user
  • Extending detection, protection, and response to any device
  • Providing visibility and protection no matter the application architecture
  • Delivering consistent policy and protection wherever it’s needed

Operational maturity

Applications are being used more often and at greater scale across multicloud environments, placing IT teams under pressure to deliver:

  • Consistently excellent app performance and digital experiences
  • Faster app development and deployment
  • More efficient use of resources

IT operations must be more flexible, resilient, and intelligent, with automation being a critical factor in achieving these goals.

A commissioned study conducted by Forrester Consulting on behalf of Cisco found that 80% of IT and operations leaders said their business processes need to become more agile.

By automating processes, workflows, networks, and systems, organizations can increase both operational efficiency and agility. They can work faster, eliminate human error, improve outcomes, and focus their skilled workers on more value-adding tasks.

As an outcome of improved visibility and better insights, automation also forms part of the ‘action’ component within a feedback loop that organizations can adopt to further enhance visibility and insight into their operations:

  • Visibility into app and infrastructure interdependencies
  • Insight from real-time analytics powered by AI to help ensure the right resource decisions for app performance
  • Action through automation that implements decisions and automatically allocates resources in real time

Using such a feedback loop, automated platforms help to simplify operations by streamlining the repetitive IT tasks needed to deploy new business models at scale, such as work-from-home or hybrid workplace. It can also help organizations ensure all components of their new digital services work together optimally.

Automation can also accelerate the network management process and allow IT teams to make changes faster—from months to just minutes in some cases. And it helps lay the groundwork for IBN, which can essentially run and secure itself.

Greater business agility

The pace of change in technology continues to accelerate. This makes business agility essential. A business that is agile adapts quickly to rapid, disruptive change and takes risks designed to increase opportunities and gain or retain competitive advantage.

Digital transformation helps organizations build agility and be ‘future-ready’. Operating in the digital economy requires businesses to anticipate and embrace disruption to stay ahead of it—and ensure that legacy processes and technology do not weigh them down.

The global health crisis has accelerated the pace of change further, forcing many organizations to rethink their business models and significantly condense their timelines for digital transformation and building business agility. 

Learn about business agility>