Digital Transformation: What's Next?
The COVID-19 pandemic accelerated digital transformation for companies around the world. As commerce moved almost entirely online, most businesses had to adopt some form of digital technology.
So, what does digital transformation mean today and what will it mean for business tomorrow? What new technologies are changing the game, and how has the promise of Web3 and the metaverse changed the playing field?
The State of Digital Transformation
The idea of digital transformation refers to companies transitioning from old-school analog to modern digital technologies. A simple analogy is a doctor’s office transitioning its patient records from paper to digital files.
"Over the last 10 years, 'digital' has moved from being a tool in the IT or marketing department to the core DNA of every modern business," said Justin Hochberg, CEO and founder of VBG (Virtual Brand Group), a specialist in metaverse branding and marketing. "Whether you’re a Fortune 1000 company or a challenger [direct-to-consumer] brand, you use some form of digital marketing, digital asset management, digital supply chain management, digital communications with your consumers — and digital collaboration with your employees (like Slack), just to provide a few examples."
Deloitte defines digital transformation as "the essential bridge between the business of today and the business of tomorrow." The consulting firm says it is about becoming a digital enterprise, that is an organization that uses technology to continuously evolve all aspects of its business models.
What this means is that digital transformation enables organizations to be ready today for the commercial realities of tomorrow by using technology to continuously evolve and adapt every aspect of their business models and practices.
“Digital transformation is the integration of technology into all areas of a business, changing how businesses operate and deliver value to customers, providing 360-degree visibility into all aspects of the business," said Ritu Kapoor, chief marketing officer at Lob, an automation platform provider. "Today, businesses are challenging the status quo and managing culture shifts in order to create resilient, agile businesses."
Digital transformation bears so much importance on a company's ability to compete over time that there is now a rush to the finish line. Leaders understand that if they don't act now, they run a high risk of being displaced by industry leaders and early adopters of digital technology. In fact, the pace at which digital transformation is evolving is such that digitally transformed organizations are expected to contribute to more than half of global GDPA by 2023, according to a recent report from Statista.
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The Data-Transformation Connection
The onset of digital transformation occurred as companies sought to more effectively use the increasingly large, diverse and complex volumes of structured data (i.e., traditional databases) and unstructured data (i.e., text documents, emails, videos, audio) they generated. Such a vast amount of data could not be easily managed using traditional data management practices, thus giving rise to the need for more advanced, digital alternatives.
Data and transformation go hand in hand. The technologies and processes used to aggregate, store, organize and generate actionable insights from the vast amount of data that comes from a business is pivotal to successful digital transformation. With the astronomical amount of data that is being produced through the use of IoT devices and applications, there is a huge incentive for companies to gain control of data now in order to prepare for what’s to come tomorrow.
According to Larry Fisher, CEO of digital marketing agency Rise Interactive, many companies have already successfully put the foundational elements of digital transformation in place. They have already invested in websites, created self-service models for customers to transact on their terms, created social media presences and developed communication models to build relationships with customers digitally.
“The next phase of digital transformation is about integrating a company's digital ecosystem with the right data framework to empower leaders to make decisions based on customer needs. It's moving from disparate and standalone systems to a connected, smart view of what's happening in your business,” Fisher said.
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Digital Transformation and Web3 Technologies
Web3 is still in its infancy, but it is poised to change the ways organizations connect with customers and, as a result, the way they approach digital transformation. There are four core features of Web3:
- Decentralization: Because information is discovered based on its content, it may be stored in multiple locations at the same time and, as such, become decentralized. The data that is continually generated through Web3 technology will be monetized by the users through decentralized data networks.
- Openness: The Web3 network will allow participants to interact directly without going through a “trusted” intermediary. Anyone will have the ability to participate without authorization from a governing party. Web3 applications will run on blockchains, decentralized networks — or both.
- AI and ML: Web3 applications will be able to understand language through technologies that are based on semantic web concepts and natural language processing. In addition, they will use machine learning to gradually improve their accuracy.
- Ubiquitous connectivity: Information and content can be accessed by multiple applications, as well as internet-connected devices. This means the data can be viewed as “headless.”
Digital transformation, like most aspects of IT, is continually evolving to incorporate new, more sophisticated technological developments. Today, most digital transformation strategies include some focus on Web3. Yet, because Web3 is still in its early stages, companies should ensure they first have all of their foundational bases covered before jumping into these uncharted waters.
“As new technologies like Web3 and the metaverse emerge, these are additional data points that companies need to consider when creating a centralized view of their customers and delivering them experiences that foster long-term positive brand relationships,” said Fisher. “I'd argue that brands diving headfirst into digital transformation today should first focus on having the right data foundation in place for the majority of their touch points with customers, and only once that framework is established, think about expanding into new activations like the metaverse.”
Because digital transformation is also about preparing a business for what comes tomorrow, companies are proactively considering how their customers will interact with them in the future.
“Digital transformation today, at its core, is still about changing your business operations to meet your customers where they are and where they will be in the future, but there is a lot more focus put on the individual at the end of the transaction, as well as how that individual will be engaged with a business’s new Web3 compatible digital experience,” said Dom Profico, executive vice president and CTO at digital consultancy Mobiquity.
Related Article: Why Web3 and Web 3.0 Are Not the Same
Entering the Metaverse
The metaverse is often considered to be a part of Web3, but there are differences. First, the metaverse does not depend on the core features of Web3 described above. It also relies heavily on the use of AR, VR and virtual worlds. Many of the virtual worlds that are a part of the metaverse depend on cryptocurrencies, crypto wallets and other Web3 technologies, so the two concepts interconnect but they have different implications for business.
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“Metaverse has taken over the very minds of technology leaders, and many want to know how the metaverse or Web3 fit into their new digital transformation journey," said Profico, who says his company is often asked if the digital transformation work being done today will be easily convertible to Web3 in the future.
"This shows the speed with which these concepts have spread and become part of the business culture," he said.
Metaverse environments such as the Sandbox, Roblox, Decentraland and Horizon Worlds all provide companies new opportunities for growth, customer interaction and sales. For those reasons, the process of digital transformation now includes digital twins, virtual land, AR and VR, and aspects of the virtual economy.
“Consumer-centric technologies are changing the game today. Anything that makes work easier for the consumer or business is gaining traction — mobile, cloud, IoT, low-code automation platforms, augmented reality,” said Kapoor. “Innovations in Web3 and the metaverse are connecting the digital world with the physical world and creating new, immersive channels to connect with consumers, removing the need for centralized intermediaries."
In Kapoor's view, companies will want to have a presence in the metaverse to meet the consumers where they are, but digital transformation is key here, too.
"To be successful in this environment, businesses will need to restructure teams and technology to optimize processes and interpret and respond to data,” Kapoor said.
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The Birth (and Future) of the Digital Workplace
Practically overnight, the COVID-19 pandemic changed the way companies conduct business, forcing them to embrace the remote workplace to remain operational. This move was responsible for the rapid adoption of digital technologies we now use daily.
There were initial concerns over the long-term sustainability of this remote work model and the level of productivity that can be achieved having employees work out of their bedrooms — all of which have now been debunked. A report from Great Place to Work Institute measured employee productivity from March to August 2020 and compared it to the same six-month period the previous year. Results showed that productivity actually improved while working remotely.
Over half of the US workforce whose jobs can be accomplished outside the office now work remotely all or at least the majority of the time, according to research from the Pew Research Center. And with a growing focus on employee well-being and enablement, digital transformation strategies have emerged front and center for business.
“Prior to COVID, digital transformation was largely about getting to the cloud, unifying your customer experiences and presenting an omnichannel face to the world," Profico said. "Throughout COVID, and even now as we hopefully continue to return to a semblance of normal, there is even more urgency to transform, but the underlying needs of customers have changed the focus on safety, and making sure customers are comfortable in their interactions with your brand have really become the focus."
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Where to Next?
Technology has been evolving at the speed of light these past few years. Web3 and the metaverse are now here, albeit in their infancy, and the way companies conduct their business and go to market has transformed significantly.
And we're not done. There is a lot more on the tech horizon, and companies must keep up to remain relevant. To do so, digital transformation journeys must include comprehensive data strategies, plans for web3 and the metaverse, and agile technology for the remote and hybrid workplace. Companies must ensure that even if they don't yet adopt the latest trends in technology, they at least remain aware of developments and how they can affect and potentially disrupt them in the (not-so-far) future.
About the Author
Scott Clark is a seasoned journalist based in Columbus, Ohio, who has made a name for himself covering the ever-evolving landscape of customer experience, marketing and technology. He has over 20 years of experience covering Information Technology and 27 years as a web developer. His coverage ranges across customer experience, AI, social media marketing, voice of customer, diversity & inclusion and more. Scott is a strong advocate for customer experience and corporate responsibility, bringing together statistics, facts, and insights from leading thought leaders to provide informative and thought-provoking articles.