Digital Transformation: A Practical Definition

Author's Note: The following is an excerpt from "Construction Is Lagging In Digitization LET’S GET UNSTUCK," a research e-book produced by Adelante SCM and published by Command Alkon (a Talking Logistics sponsor).

What is so new about digital transformation? Haven’t we been using the internet, Web, email, and other digital tools for decades in our business? Wasn’t that what "e-business" was all about in the late 90s?

Those questions always come up when discussing digital transformation, and the reality is that digital transformation is not new; it has been going on for decades, dating back to the dawn of the computer age and the rise of the internet and Web.

Then why all the fuss today about digital transformation?

The short answer is because many companies and their trading partners, especially in the heavy building materials (HBM) and construction industry, have not advanced very far on the digital transformation journey. They still rely on paper-based, manual processes; they lack electronic connectivity with most of their trading partners; their data quality is still poor (inaccurate, incomplete, and/or not timely); and they have failed to modernize their IT systems.

For years, companies have been able to succeed despite these shortcomings, but as the pace of change has accelerated, as customer requirements have become more demanding, and as competitive pressures have intensified, companies are struggling to keep up. Simply put, the old ways of working are no longer aligned with the new rules for success, which are centered on having the ability to make smarter decisions faster and on delivering an enhanced customer experience profitably.

If you do an online search for "digital transformation definition," you get about 133 million results, including the following examples:

Digital transformation is the application of digital technologies to fundamentally impact all aspects of business and society (Source: InfoWorld)

Digital Transformation is application of digital capabilities to processes, products, and assets to improve efficiency, enhance customer value, manage risk, and uncover new monetization opportunities. (Source: CIO)

While these definitions are valid, they are also too broad and high level, especially for executives who are trying to grasp where and how to get started or move forward on this journey. Therefore, we propose a more grounded and practical definition:

Digital transformation is taking action to:

• Eliminate waste from the value chain, which includes eliminating manual and paper-based business processes;
• Break down the silos between functional groups and IT systems and enable true collaboration and intelligence sharing between them;
• Integrate electronically with all trading partners, preferably in a cloud- and network-based platform, using modern technologies such as APIs and web services;
• Treat data as an asset and develop processes and a governance structure to manage data quality;
• Leverage network-based business intelligence, optimization, and analytics tools to convert data into actionable intelligence.

That is, digital transformation is taking action to solve these long-standing issues that add cost, complexity, and inefficiencies to supply chains.

For additional details about these five principles, along with some assessment questions, please download the research e-book "Construction Is Lagging In Digitization LET’S GET UNSTUCK."