What is digital transformation? Definition, examples & importance

Digital transformation was already vital to surviving in the ever-evolving digital economy and meeting the ever-increasing customer expectations it generates. But the environment of constant change driven by COVID-19 made business transformation more relevant than ever, shrinking the transformation timeline from years to weeks, according to Gartner.

The importance of digital transformation isn’t under question. But how to do it well often is—especially transformation supporting greater customer-centricity.

Digital transformation isn’t just about “bringing efficiency to outdated business operations” or “reducing operational costs.” That’s table stakes. Successful transformation starts with bringing value to those that matter the most: your customers.

Read on to learn what digital transformation is—and more importantly, how to keep your customer at the center of it.

1. What is digital transformation?
2. Digital transformation examples
3. Digital transformation and customer experience
4. Main areas of digital transformation

Digital transformation examples

• IT modernization, like cloud computing

• Reskilling employees

• Implementing digital tools like artificial intelligence (AI) to free employees to focus on tasks requiring creativity, problem-solving, and more human skills

• Using design thinking to discover and resolve pain points in the customer journey

• Revamping processes to adapt to customers’ needs

• Moving to a remote-first workspace

Digital transformation vs. digitization

Plenty of companies today boast about undergoing digital transformation, but what they usually mean is digitization.

A digital transformation initiative involves change at the organizational level—change that generates breakthrough value. Digitization refers to more modest initiatives, according to Gartner, such as putting services online or plugging a new technology into a legacy business model.

What is the connection between digital transformation and customer experience?

“Digital transformation and customer experience are part and parcel,” said Bruce Hartwell, VP, Customer Experience Systems, Zendesk.

Not so many years ago, Hartwell explained, customer experience used to be large call centers in a central location or two.

That’s not so much what it is anymore.

“Now, customer experience encompasses dispersed knowledge workers, especially in our highly remote world,” said Hartwell. “Businesses need tools to pull a dispersed workforce together, so the fact they’re dispersed is invisible to customers.”

But high performing customer experience teams didn’t all of a sudden decide quality systems and tools were necessary because of COVID-19, according to research by Zendesk and ESG. Adapting based on changing customer needs was already built into their culture because forward-thinking leaders armed their companies with technologies to be agile and embrace transformation.

Thus, the shift to remote work resulting from COVID-19 is a driver in the direction business was already headed.

“We were already in an environment where a business needs to interact with customers on a personal level, on their preferred channels, in what language they speak, and from any geographic location—without monolithic systems,” Hartwell said.

The real, evergreen driver for customer experience transformation, according to Hartwell, is businesses cannot exist unless they have the presence and ability to engage with customers quickly, easily, transparently, and personally.

“Large call centers and expensive technology with multiple years of implementation doesn’t get you that,” Hartwell said. “Systems and processes that enable you to be agile and pivot on a dime get you that.”

The 3 pillars of digital transformation

Three core components form the basis for digital transformation:

1. People
2. Process
3. Technology

We spoke to three Zendesk experts to learn about each element.

1. People

Customer-focused transformation starts with your people—the employee experience and the customer experience are intimately linked.

Here are some key steps for bringing your people along with transformation.

• Discover the who, what, where, and why

  
  Transparency is key to business transformation that resonates with people. But when leaders share information before they’re confident, they can instill doubt in employees.
  That’s why the first step of the people-side of transformation is to discover what’s changing, why you’re changing, when it’s taking place, and who it impacts.
  Those who the transformation will impact are stakeholders, according to Dana Otto, Senior Manager, Change Management, Zendesk.
  Stakeholders often include employees, their managers, training teams, HR business partners, or vendors. People who champion the transformation or approve it can be stakeholders, too.
• Evaluate how people feel about the transformation

  
  Business transformation starts top-down, but it shouldn’t be a one-way street.
  It’s essential to open a feedback loop and talk to stakeholders directly.
  Once you know how people feel about the change, it’s easier to plan communications, training activities, and manager support.
  For example, if you’re bringing AI to your customer service department and agents are worried about losing their job, managers need to communicate that jobs aren’t at risk.
  “People may not be able to change the change, but if you can make them feel like their voices are heard by addressing their concerns, it helps them move along with transformation,” said Otto.

  
  “If you can make people feel like their voices are heard by addressing their concerns, it helps them move along with transformation.”Dana Otto, Senior Manager, Change Management, Zendesk

• Communicate “the why” upfront

  In a survey of senior managers, 65 percent said communication was most important for leading a team through change.

  
  Yet a common mistake organizations make when undergoing business transformation is failing to communicate why they’re changing, according to Otto.
  “People should always know what the why is, whether it’s connected to an OKR or company goal,” said Otto. “They may not like the change, but if they understand the why, they’ll hate it a little less.”
• Build a transformation roadmap around awareness and preparedness

  
  A successful transformation roadmap ensures people are aware of what’s changing and prepared to make that change, explained Otto.
  Awareness focuses on communications, and preparedness on training enablement. A comprehensive plan incorporates both parts.
• Continuously measure success

  
  The people-side of transformation is challenging to measure because humans are unpredictable and difficult to quantify, explained Otto.
  It helps to make measuring success a constant in your transformation strategy, not the final step. Undoing new ways of doing work is harder than proactively making adjustments.
  Otto uses surveys and interviews to continuously measure awareness (how aware people are of what’s changing and why) and preparedness (how equipped people are to make the change) to ensure both aspects improve over time.

2. Process

Customer-focused organizations don’t transform to add technology for its own sake. They do so because it supports processes that genuinely benefit those they’re serving.

When rethinking business and operating processes, here are tactics to keep your focus on the bigger picture: how to deliver breakthrough value to your customer.

• Know thy customer

  
  To unlock impactful change, customer-centric organizations take an integrated approach, linking customers’ needs to transformation.
  “Businesses need to be clear on who buys their products and what their customers need,” said Nishanth Babu, VP of Product Growth and Monetization, Zendesk. “This involves continuously looking for customer feedback.”

  
  “Businesses need to be clear on who buys their products and what their customers need.”Nishanth Babu, VP of Product Growth and Monetization, Zendesk

  
  In fact, research revealed organizations best prepared to transform for COVID-19 had processes in place that enabled them to act on customer feedback and use it to adapt to customer needs quickly.
  Customer feedback can be indirect—like purchasing behavior or how customers use your product or service and direct—like pain points customers share with agents or via NPS surveys.

  When looking at feedback, ask yourself:

  
  What do your customers need you to improve, and how can you improve it to realize transformation goals?
• Deliver simplicity to customers

  
  A business process might coordinate sophisticated behavior of people, systems, and information behind the scenes, but your customers don’t have to know that.
  The outcome of any process should be a simple one for customers—whether that means designing for a pain point or streamlining the supply chain.
  “A lot is going on in customers’ personal lives and the world,” said Babu. “A business should ask itself: ‘are we making things as simple as possible for customers?’”

  
  “A lot is going on in customers’ personal lives and the world. A business should ask itself: ‘are we making things as simple as possible for customers?’”Nishanth Babu, VP of Product Growth and Monetization, Zendesk

• Use data in context

  
  Companies often undergo digital transformation to help them do more with data—building processes that enable them to translate analytics into outcomes.
  But data has to be contextual to be customer-centric.
  Take Vimeo. It built a process for product teams to use customer support analytics to ensure product changes are contextual and relevant to those they impact.
  “Any data tells you something. But if you want to get to the root cause of an issue and drive big, impactful outcomes, you need to take a step back and not look at data in isolation, but from a 360 view,” said Babu.

  
  “If you want to drive big, impactful outcomes, you need to look at data from a 360 view.”Nishanth Babu, VP of Product Growth and Monetization, Zendesk

  
  In the past, legacy systems and processes left data in silos, making it hard to see the full story and leading to disjointed, inconsistent customer experiences. But now, businesses have tools, like CRM software, to build processes that connect data dots across support, marketing, product, sales—the entire customer journey.
  “Data is more impactful when a business looks at the entire customer journey, focuses on the big picture, the story data is telling, and how it affects the overall business,” said Babu.
• Build personalization into your culture

  
  When it comes to digital transformation, companies often throw around buzzwords like “personalization” and “customization.”
  Personalization is key to a winning customer experience—76 percent of customers expect personalization, including interactions over their preferred channels, engagement tailored to account type or status, or recommendations based on purchase or search history, according to our 2020 Trends Report.
  But processes that foster better-personalized experiences aren’t built overnight.
  “Personalization is the ideal state, but it’s not the starting position for most businesses. Fundamental change has to be made, and foundations built,” explained Babu. “If you’re an early-stage startup, you can get it right from the beginning. But if you’re changing a product or business model that’s been around, it’s more of a change to the culture. That’s a gradual journey.”
  That means it can’t just be support that’s thinking about customers. Every department has to keep the customer in the orbit of their processes.

3. Technology

Organizations that master customer-focused change prioritize the quality of their customer experience tech stack, meaning it’s an enterprise-wide investment decision, according to Zendesk and ESG’s research.

Few things are more frustrating than technology that doesn’t do its job well. That’s why resilient businesses invest in best-of-breed tools.

“CX technology is a nominal investment that gets you a huge amount of payback if done right,” said Hartwell. “But if not done right, it’s a nominal investment that can cause pain all your marketing and sales dollars aren’t going to get back.”

Here are strategies for getting the technology piece of the digital transformation puzzle right.

• Focus on time to value

  
  When businesses thought of digital transformation previously, systems that cost millions of dollars and take years to implement typically came to mind.
  But innovative organizations are proving generating transformation value shouldn’t have to take years, or even months.
  “The age-old idea of building a large, expensive, complex system doesn’t work in this pivot-quickly world,” said Hartwell. “I can spend less money, leverage value right away, and then invest in my infrastructure incrementally to continually drive that value.”

  
  “The age-old idea of building a large, expensive, complex system doesn’t work in this pivot-quickly world.”Bruce Hartwell, VP, Customer Experience Systems, Zendesk

  The lesson?

  
  Make value a focus throughout the digital transformation journey and beyond it to sustain and grow the value of the transformation.
• Build an ecosystem

  
  Businesses should think of their tech stack as an ecosystem of tools or an architecture of systems that fit together, according to Hartwell.
  “Businesses need to be in a position where they aren’t building a system, but an ecosystem of systems plugged together like so many Lego bricks,” said Hartwell. “In the future, each of these solutions will be SaaS and cloud-based, specialize in a particular area that it does very well, and all talk to each other.”

  
  “Businesses need to be in a position where they aren’t building a system, but an ecosystem of systems plugged together like so many Lego bricks.”Bruce Hartwell, VP, Customer Experience Systems, Zendesk

  
  And if one solution doesn’t work out, businesses want to have the flexibility to replace it without rebuilding the whole environment. “It’s literally pop out the Lego brick and pop in a new Lego brick,” said Hartwell.
  In other words, businesses that master transformation create an environment that allows them to be nimble. They view technology as a tool helping them meet business goals instead of a system driving how they run their business.
• Invest in tools for a distributed workforce

  
  The future of work will be a hybrid of in-person and remote environments, according to Hartwell, with the latter the predominant model.
  “The old concept of building an expensive corporate location isn’t going to be mainstream,” Hartwell said. “No one is amazed when you walk into a room and turn on a light switch anymore. Similarly, sitting in your home office and talking to coworkers via a virtual setting will be normal.”
  This means a business’s tools need to carry it in that direction. Companies should look for systems supporting:

  Interactivity

  
  Teams need always-on, highly interactive tools to engage with colleagues and customers digitally as if they were sitting next to each other.
  This includes tools that enable teams to collaborate and interact with customers in real-time, such as through lag-free video conferencing, and asynchronously, such as through messaging channels.

  Flexibility

  
  Flexible systems enable employees to work anywhere without the business having to build and maintain its own data center.
  Cloud-based software operates and stores data on remote servers, giving companies flexibility in how—and where—they use the service.
• Make tech invisible

  
  The best digital tools just work—customers (and employees) don’t have to think about them.
  Technology can make things effortless. But it can also complicate matters when not integrated with existing systems.
  Take chatbots. When they work, customers get fast, personalized responses, and the technology behind the scenes is invisible. When they don’t, the technology sticks out like a sore thumb.
  When you put your car in reverse, you don’t think about all the components making that happen; you just expect it to happen. The virtual world is similar, according to Hartwell.

  Hartwell said there are two sides to expanding the invisibleness of technology:

  
  Businesses need to make technology invisible to customers on the front-end and ensure teams using that technology on the back-end don’t have to overthink it either.

  
  Think about customer service software. If customers have to be transferred between departments or repeat themselves because channels and context aren’t connected on the back-end, it’s a frustrating process for both customers and agents.
• Strengthen customer-centric agility

  Why is digital transformation important?

  
  Digital transformation is important because it enables an organization to grow in new and innovative ways, react to changing market conditions, and handle future disruptions.

  
  Early transformers, now household names like Amazon, change toward things customers want and away from products or services it turns out customers don’t need.
  “Most people think of agility as being quick to do something, which is true, but agility also means being quick to react to get incremental value,” said Hartwell.

  
  “Most people think of agility as being quick to do something, which is true, but agility also means being quick to react to get incremental value.”Bruce Hartwell, VP, Customer Experience Systems, Zendesk

  
  In other words, having an agile mindset helps drive quick wins and incremental value supporting the more extensive transformation goal.
  “Your business needs change. If you invest heavily in a single tool or platform and your business goes in a different direction, it’s costly to tear that out and start over again,” said Hartwell.
• Engage customers where they are

  
  Engaging with customers via emerging technologies like social media is one way to provide the low-effort experiences customers expect.
  Today’s customers want to communicate with brands the same way they do with friends and family: in a way that’s convenient, personal, and interactive.
  That’s why messaging has the highest customer satisfaction score of any channel, with a CSAT of 98 percent, according to our State of Messaging Report. Messaging is a customer favorite because of its multimedia and rich capabilities and messaging apps such as WhatsApp and Facebook Messenger that meet customers where they are.
  In fact, Gartner predicts that 80 percent of customer service organizations will have abandoned native mobile apps in favor of messaging for a better customer experience by 2025.
  “The good old days of submitting a ticket via email and waiting for an answer are long gone,” said Hartwell. “Customers need the ability to reach out on the most convenient channel and get a fast answer, interactively.”
• Use AI in conjunction with humans

  
  Over 60 percent of businesses have already implemented AI for a reason.
  AI and machine learning enable businesses to scale with less, understand big data, and build better customer experiences—but only when they use it to augment their people.
  In the customer service world, support teams can pass repetitive customer requests to a chatbot so they can focus on more engaging tasks that require the human touch. From a marketing perspective, AI can seep through massive amounts of customer data so marketers can provide customers with better-personalized experiences.

  So remember:

  
  Don’t look at AI as a means to reduce headcount.

Put your customer at the center of your digital transformation strategy

Digital transformation is a challenging yet necessary journey.

But if you keep your focus on your customer as you reimagine how people work, processes that support them, and technologies they use, generating breakthrough value becomes easier.

A customer-orientated mindset is what takes an organization from a digital transformer to a digital leader.