What are the 4 main areas of digital transformation?

Digital transformation is here to stay. This is because, in such a globalized and changing world, digital native companies have better adaptability, resilience and drive higher levels of productivity. 

In fact, for 2025 digital transformation in oil companies is expected to reach an annual growth rate of 7.5%, according to the study of Frost & Sullivan.

But how do you drive digital transformation effectively? 

You start with a needs assessment. What is the business trying to achieve, why, by when and so forth? What are the available alternatives? What is the payback for the investment both in terms or contribution margin but also in terms of opportunity costs.

Also, it is necessary to take into account the 4 areas of digital transformation:

• business process transformation
• business model transformation
• domain transformation
• cultural transformation

In this article, we will delve in detail into each of these areas, in addition to explaining the concept of digital transformation.

The 4 key areas of digital transformation

Any company that wants to embark upon a digital transformation journey must take into account the four types of digital transformation challenges.

The transformation of business processes consists of finding those business procedures that can be automated. This not only reduces the impact of the human factor, but also frees up human resources to be used in other, more creative areas.

Some of the processes that can be automated are:

• The pre-selection of CVs in job searches.
• The automatic payment of invoices 
• The management of employment contracts
• The management of e-mail marketing campaigns

Another process that can be automated is data processing, with tools such as Apache Storm, Cassandra and Cloudera. Automating data processing not only reduces the human error factor, but also has other benefits such as increased form processing speed and easier to find relevant information, such as data about your customers. 

2. Business Model Transformation

This area refers to transforming a traditional business model into a modern one, based on the implementation of digital technology. It is a necessity that responds to the paradigm shift in the business world, which is evolving by leaps and bounds. 

In addition to this, the COVID-19 pandemic and the global economic crisis force us to rethink business models and find new ways to adapt them to the current economic situation.

However, for the new business model to be more effective, it is necessary to focus on the customer experience, not on the profitability of your company. This is because your customers may not adapt to the changes, products and services, you bring to your company. 

A company that understood very well the importance of transforming the business model is the Spanish company Sanitas. This health insurer noticed its customers' need to simplify medical visits and the review of test results, among other medical procedures. For that reason, they implemented video call consultations. This allowed them to bring healthcare closer to many more people, no matter where they are.

3. Domain Transformation

This is an area that in many cases is not given the relevance it deserves. It consists of a brand that is successful in one area and expands into other areas. For example, a fashion brand might expand into fashion-as-a-service (e.g. Rent the Runway), music, streaming industries and so forth. Recently, Lululemon Athletica acquired in-home fitness company Mirror as it provides a natural value chain extension and moves what may be considered a traditional company further along the digital domain.

One of the main benefits of domain transformation is that it offers companies opportunities to create new value for their brand, as we will see below.

One of the clearest examples in this area is Amazon. The platform started out as a virtual bookstore that overtime has grown into one of the biggest marketplaces. 

In 2011, Amazon launched its Amazon Prime streaming platform and included it with Amazon Prime subscription. Then, during 2016 Amazon split Amazon Prime Video from Amazon Prime, launching it as a single platform. 

In turn, during 2014 it bought the Twitch platform for 970 million dollars, and thus became one of the leading platforms in a market with competitors such as Netflix, HBO Plus and Disney Plus.

But it did not only expand into the streaming market. In 2006, the Amazon Web Services platform came into operation. This allowed it to enter the cloud services market and compete with brands such as Microsoft Azure and Google Cloud Platform. The results are there for all to see: in 2021 it achieved its highest market value, reaching 469 million dollars. 

4. Cultural Transformation

As we mentioned earlier, the implementation of new technologies is only one of the four pillars of digital transformation. The other key aspect is cultural transformation within the organization, so that both managers and employees can quickly adapt to the changes.

First, the culture of a company could be defined as the set of attitudes, goals, behaviors and practices that define the employees and managers of a company. Culture is built from a number of different factors. Among them are:

• The people hired
• The processes that are part of the company
• The values upheld