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At a certain point, companies may need to make a massive change in their processes by undergoing a digital transformation. Some types of transformation may work better for a company than others, depending on an organization's business needs, so leaders should ensure they've chosen the right one.
Changing industry conditions, economic downturns and the desire to become more efficient may all lead a company to embark on a digital transformation. However, any changes to employees' processes can be challenging to implement, so leaders should attempt to make the transition as smooth as possible. In addition, a company may combine more than one type of digital transformation to make the transformation as effective as possible.
Learn about the four different digital transformation types and why selecting the right one is crucial for success.
1. Process transformation
The primary goal of a process transformation is to make internal processes more straightforward and efficient. A company undertaking a process transformation is aiming to reduce throughput time, costs, errors and complexity by rethinking current strategies. Potential results include simplifying or removing steps, improving reporting and minimizing keying errors. An evaluation of the company's existing software is essential for a successful process transformation.
Introducing a brand-new system during a process transformation may be tempting, but company leaders should consider several factors when introducing new software applications during a transformation. First, leaders should examine implementation timelines, change management and the urgency of the change. For example, a new application's implementation may take more than a year, which would require interim measures to resolve potential issues.
Second, SaaS application feature updates occur frequently, so a company's current vendor may now offer previously unavailable features, potentially eliminating the need for a brand-new software system implementation.
Third, this type of transformation may impact external vendors and customers. For example, accounts payable process revisions may alter the invoice submissions process, so change management would be essential for internal employees and external stakeholders.
2. Business model transformation
A business model transformation is a more drastic approach to digital transformation than process transformation. In this situation, a company is attempting to revamp part of its business by digitizing a product or service previously delivered through another means.
A company usually undergoes a business model transformation because leaders see an opportunity to change the way consumers purchase or use a product or a service or because market competitors are moving in a particular direction and the company wants to do the same.
Important considerations for a business model transformation include avoiding being too reactive and potentially needing to hire employees with new skill sets or retrain the existing workforce.
3. Domain transformation
A company undergoes a domain transformation when company leaders want to enter a new market.
Some potential reasons for undergoing a domain transformation include competitors or new technologies making it difficult to continue a current business plan and leaders looking to diversify the organization's portfolio.
For example, a company may undergo a domain transformation if the organization has developed software to automate processes and begins to sell the software to other companies, creating a new revenue stream.
4. Cultural/organizational transformation
A cultural/organizational transformation will usually affect a company significantly and is sometimes difficult to implement because it can require major change for employees.
An organization may go through a cultural/organizational transformation if the company was recently acquired or has experienced a change in leadership. Negative circumstances, like a lawsuit or a negative industry reputation, may also lead a company to undergo a cultural/organizational transformation.