The why behind digital transformation

Digital transformation is more than just a buzzword — it’s necessary for every modern business. 89% of large companies globally are undergoing a digital and AI transformation. Still, they’ve only captured 31% of the expected revenue boost and 25% of the expected cost savings. At the same time, costly inefficiencies still exist, many of which could be solved or improved with an effective digital transformation.

Clearly, there is still work to be done on the digital transformation front.

But why does it matter, and why are companies pouring vast portions of their budgets and resources into adopting digital practices and tools? Let’s dive in.

Digital Transformation Cuts Costs

Outdated processes and systems are expensive. When companies have to rely on employees to enter data manually, go through cumbersome processes, or do tasks by hand, it leads to an incredible amount of time and resources for results that are often prone to errors. In the construction industry alone, 80% of projects are late, and 40% are over budget, which costs around $1.6 trillion a year.

Leveraging digital tools and AI helps companies use their resources more wisely, significantly reducing waste and increasing revenue. Research from the Harvard Business Review found that digital leaders in the banking space have averaged shareholder returns of 8.1%, compared to 4.9% for digital laggards. And while digital laggards saw almost no increases (and some declines) in many growth and revenue metrics, digital leaders saw significant boosts. Digital transformation matters because it helps companies maximize revenue and create agile and responsive systems that foster growth opportunities.

Digital Transformation Boosts Efficiency

A lack of efficiency goes hand in hand with the financial waste of outdated systems. As the pace of change increases rapidly, companies simply can’t afford to keep up with the competition. Digital transformation in everything from integrated computer systems for call centers to automated manufacturing and efficient logistics tracking reduces friction, saving valuable time and money.

Not every digital transformation piece brings incredible efficiency savings, but those minor improvements add up over time. Even cutting down customer wait times or delivery routes by a few minutes can add to huge improvements, freeing up employees and companies to take on more customers and have more time for growth and experimentation.

Digital Transformation Enhances the Customer and Employee Experiences

Digital transformation is essential in our age of higher customer and employee expectations and competition than ever before. Customers want convenient, digital experiences, regardless of a brand’s size or industry. When faced with slow systems or can’t access their purchases, accounts, or information quickly through digital tools, they start looking at other options.

Similarly, not having the right tools is a key reason employees leave their jobs. However, with a digital transformation, companies can adopt processes and systems for a faster and more efficient workflow, empowering employees to do their best work and see more rapid results. Companies prioritizing digital experiences for employees see improvements in satisfaction, performance, and engagement. Employees with the digital tools and procedures to work effectively have more time to collaborate, innovate, and build crucial relationships.

Digital transformation isn’t a fleeting trend but something that leaders and businesses can’t afford to ignore. To make the most of your digital transformation, focus on the why and the many significant improvements and long-term opportunities it creates.