Is digital optimization the new digital transformation?

Over the past few years, digital transformation efforts have been a rather critical investment for companies across the globe. This step has been crucial for them to step into the digital-first, customer-centric era. For many brands that just began their investment in these changes, pandemic was sure one great accelerator that made the need for digital products and services an absolute must. While it is a must, there is no denying that the shift to the digital first model is a long-term plan that requires heavy investment in almost every aspect of business.

This shift and transformation requires one to implement a successful digital strategy – what your customers want, what are they coming back for, and then work towards planning, optimizing and personalizing experiences based on data insights. This itself showcases that digital optimization is one part of the process of digital transformation. While optimization is taking precedence, let’s first understand what digital transformation and optimization are.

Digital transformation is integration of digital technology into every area of a business, changing your fundamentals on how to operate and deliver value to customers. Digital transformation is also a cultural change that the organization goes through by challenging its status quo, experimenting and getting comfortable with failing and trying again.

Optimizing essentially means to make something near perfect, as effective as it can be and fully functional. Digital optimization is a set of practices and tools that help a brand optimize the value of its digital investments – its drivers are focused on sustainable growth, building customer value and driving innovation.

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With the definitions itself we can understand how digital optimization is a subset of digital transformation. However there is a general misunderstanding that digital transformation and optimization are interchangeable or the same. Simply bringing in digital transformation to your business will lead to failure eventually if you fail to optimize your digital channels. A fine example of this is how for the hospitality industry when they move their reservations from in person or over phone to their website is what digitizes their user experience. However when global brands like Airbnb and HipCamp came in, they entirely revolutionized the getaway experience and optimized various digital offerings to make a unique product.

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Considerations to establish and keep in mind for digital transformation and optimization :

While bringing new tech like AI, cloud, AR/VR and so on may seem cool for brands but the reality is these do not really transform your business. These are what will help you optimize the business instead, adding more value to your services and products offered. Here are some consideration or key differences that set digital transformation and optimization apart:

 

A. Digital Aspiration: Every business needs to clearly define their vision and mission statement, their aspiration from their digital strategy. Like a healthcare business may have their aspiration as:

To improve hospital efficiency and services’
Vs
‘To build a virtual hospital and serve its remote customers’

B. Digital Speed: Each business needs to define the speed at which they expect the transformations to be adopted. This conditions your staff and employees to offer executive support to make sure it all happens within due deadlines. Taking the same healthcare example here, here is what their digital aspiration will look like:

‘To improve hospital efficiency and services by reducing 20% of cost in 3rd year and increasing 2x times customer satisfaction in the same period.’
Vs
‘To create a virtual hospital serving remote customers, seeking, say, 25% growth in customer and 40% of customer served remotely by 2 years’

C. Risk Appetite: A business should define which level of risk – whether financial, regulatory, reputational – they are willing to take in their digital journey. This can look at something like this:

‘To not put the health of our customers at risk under any circumstance’ – this means no one messed with the patients in any way
Vs
‘To explore how the new regulation will need to be formulated to accommodate the new legal pointers of remote healthcare’

 

Now, as these examples state, ambition of a brand will define if a business opts for digital optimization of transformation. Whether a brand needs to create a new revenue model or new business model on top of the one existing.

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Here are a new examples of digital optimization and transformation:

Transformation:
A. Selling your digital assets: A brand may decide to sell its competitive algorithmic analysis as a service to its competitors and other business partners. This will act as a key digital transformation move for the brand.

B. Building digital product: When a brand starts to build and sell virtual services that are fed and built by robotics, AI, new emerging tech etc. – this builds digital value that aids to transform the business. Example – a virtual nurse.

C. Serving a different sector: Businesses can use their existing digital assets to serve an entirely new industry as part of their transformation strategy.

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Optimization:
A. Improving revenue: When a business decides to improve its revenue streams – use of analytics can help them reduce costs and offer new insights into how to build on a service ( new or existing) to increase their revenues.

B. Reducing costs: In their digital transformation when brands take their processes and products digital, they tend to adopt new tech and softwares, optimization is when they make use of these adoptions to the max. Example – using 3d printing to reduce production costs and storage costs of limited edition or rare products.

C. Increasing employee productivity: One fine example of optimization is how digital assets can help your employees enhance their efforts and increase their productivity. This can mean use of robot process automation to help automate manual tasks.

These examples can give us a fair understanding on how transformation is more focused building business in the digital world first, and optimization is about making sure each digital asset is performing to the tee, offering variations to aid in improving the existing system leading to increase in employee productivity and making the best possible use of its resources available.

For any business to be successful in our day and age, a mix of transformation and optimization are both essential ends of a digital strategy. Not only this brings you close to your consumers but it also builds your value as a brand that is agile, resilient and willing to adopt and adapt to the changes.

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