The Importance of Enterprise Digital Transformation

Digital transformation has become a strategic imperative for enterprises. To keep up with and capitalize on rapid technological advancements, your organization needs to streamline operations, reduce costs, and empower employees to embrace change.

However, the digital transformation journey is complex and requires organizations to manage the accompanying changes effectively. By integrating digital transformation change management, leaders and change practitioners can focus on the technical and people side of change.

This combined approach leads to digital transformation success, which helps your organization seize new opportunities and stay competitive in a dynamic market.

In this article, we explain enterprise digital transformation and its benefits and challenges. We also highlight the critical role of change management and how it drives successful adoption.

What Is Enterprise Digital Transformation?

Enterprise digital transformation is the integration of digital technology and products into an organization. It fundamentally reshapes and optimizes operations, workflows and value delivery. As well as the process and technical changes, enterprise digital transformation requires a cultural shift, as it involves individuals changing the way they work and their daily routines.

As John Chambers, the former CEO of Cisco Systems, said, "At least 40% of all businesses will die in the next ten years... if they don't figure out how to change their entire company to accommodate new technologies." 

Leaders and change professionals across industries agree with this sentiment, with participants in our Best Practices in Change Management research ranking technology and digital transformation as the top expected change.

Top 5 Expected Changes By Industry

Examples of digital transformation include implementing automation, integration, artificial intelligence (AI), machine learning, and upgrading analog systems to digital. These changes are essential for businesses of all sizes, from startups to multinational enterprises.

The impact of digital transformation varies depending on the company’s size and the scale of change. Introducing new software is a big change for both startups and enterprises, but the change initiative for the enterprise will be a lot more complex because hundreds of employees and multiple sites and teams have to learn and use the new technology.

This is why a structured change management approach is vital for an enterprise digital transformation to achieve positive business outcomes and realize the intended benefits.

Benefits of Digital Enterprise Transformation Solutions

Digital enterprise transformation enables businesses to use technology to their advantage. With it, they can stay competitive by meeting change market demands effectively. Well-executed digital transformation, supported by the right digital tools and technologies, can provide the following benefits:

• Improved operational efficiency – Organizations can optimize workflows, reduce human error, and improve overall business performance by automating manual processes through digital tools like ERP systems, RPA (Robotic Process Automation), and cloud solutions. GE Appliances' (GEA) digital transformation is a great example of how digital changes can positively impact different areas of an organization. Their transformation started with 3D scanning in 2016 and more recently it led to end-to-end digital engineering that improved their product quality, performance speed and innovation.
• Data-driven decision-making – Advanced technologies for predictive analytics provide actionable insights into business operations, customer expectations and market trends. These data-driven insights allow leaders to make informed, real-time decisions to improve strategic planning, operational effectiveness and employee experience.
• Better customer experience – Through digital transformation, organizations can adopt personalized and data-driven approaches to cater to customer preferences. Businesses can offer responsive customer support and tailored services through AI, chatbots and omnichannel platforms, leading to higher customer loyalty.
• Increased agility and scalability – Digital solutions, like cloud-based infrastructure and server systems, allow enterprises to adapt quickly to market changes and scale operations on demand. This agility is crucial in a competitive, fast-paced business environment.
• Optimized costs – Transitioning to digital tools and cloud solutions reduces the need for expensive on-premise infrastructure and maintenance. Automation also minimizes operational expenses, delivering significant long-term cost savings.
• Increased innovation – Digital transformation allows businesses to experiment with emerging technologies like AI, IoT and blockchain. This innovation opens up new opportunities for companies to differentiate themselves in a competitive marketplace.

Reaping these benefits is crucial for enterprises to thrive, and more organizations are prioritizing digital transformations. In fact, 84% of companies said that digital transformation was a core pillar of their business strategy.

Effective change management is a critical success factor for enterprise digital transformation. It bridges the gap between digital innovation and human adoption so organizations can achieve long-term success.

Enterprise Digital Transformation Examples

Here are three real-life examples that highlight the importance and benefits of combining change management and enterprise digital transformation services: 

1. SURA Asset Management

SURA Asset Management, a Latin American subsidiary of Grupo SURA, is a financial services leader specializing in pensions, savings and investments. The company manages assets worth $131 billion (2.6 trillion pesos) and serves over 19 million Latin Americans.

SURA took on multiple large-scale digital projects to deal with regulatory changes, digitize its pensions department, and revamp its product sales strategy. SURA's leadership identified change management as vital for the success of these projects and partnered with Faculta, now Prosci Latin America, to build its enterprise change capability.

By adopting a structured approach to change management, SURA succeeded in its critical projects. It gained 2.3 million new customers and reduced client turnover by 44%, saving 14 million pesos.

2. UKG

UKG, a product of a merger between Ultimate Software and Kronos in 2020, is among the world's leading human capital management (HCM) cloud companies and serves over 80,000 organizations.

After the merger, the two companies' systems for sales, customer service, and billing operated separately. To fix its scattered operations, the company created "UKG 1," a large-scale system integration project that involved over 1,000 individuals.

With the help of Prosci Certified Change Practitioners, UKG implemented the Prosci Methodology and supporting models, tools and resources to help individuals prepare for and adopt the new integrated system.

While the integration project is ongoing, UKG is already seeing massive results. With integrated systems, employees can consistently provide great service to customers and attract new ones. When UKG Community, a platform for customers, was launched, over 56,000 users logged in 45 days after going live.

3. Insurance provider

A Fortune 500 provider of supplemental insurance serving over 50 million people worldwide was struggling to maintain its change management capabilities. Its core change team was shrinking, but the number of initiatives grew. It also dealt with change saturation, which increased employee resistance and lowered adoption rates.

To tackle these challenges, the company formed a centralized change management function and digital transformation strategy, and launched the "Building Change Capability" initiative in partnership with Prosci.

The insurance company hosted multiple Prosci Change Management Certification Programs to certify employees and help them become proficient in applying change management best practices.

The company also utilized Prosci's solutions for organizations, like the Change Portfolio Workshop, the Integrating Agile and Change Management Workshop and the Prosci Train-the-Trainer Program.

By leveraging Prosci tools and resources, the company improved from a score of 2.41 to 3.56 on the Prosci Change Maturity Model within a year, indicating its progress in becoming a change-ready organization.

This has led to multiple successful change initiatives, including the shift to remote work in 2020, the launch of a new agent enrollment platform, and the deployment of a central quality management system (QMS).

Enterprise Architecture Digital Transformation Challenges

Digital transformation involves changing the organization's basic architecture—the underlying systems, processes and structures that support operations. These dramatic changes come with equally significant challenges, including:

• Budget constraints – Your organization may struggle to justify the high upfront costs required to transform legacy systems and implement new technologies. To acquire the funding and resources, change teams and business leaders must work together to present a strong business case that highlights the benefits of transformation. 
• Resistance – Employees and managers may resist using new technologies and workflows because they don’t understand the change, are anxious about changing job roles, or are comfortable with current systems. As a practitioner or change leader, you need to uncover and address barrier points and their root causes to prevent resistance.
• Skill gaps – During transformation, people have to develop specialized skills in cloud computing, AI, data analytics or cybersecurity. To ensure they learn and use new systems effectively, change teams can use targeted training programs.
• Integration issues – Integrating the latest digital solutions with older systems can be complex. Poor integration causes delays and inefficiencies. The change team must collaborate with IT employees and other impacted individuals to carefully plan and implement the integration.
• Organizational silos – When departments operate in silos, it makes it harder to coordinate and implement holistic enterprise-wide changes. As a practitioner or change leader, you need a comprehensive and unifying change management approach to prevent scattered efforts. You can also build a program to increase organizational change capability.

Effective change management is essential to overcoming the challenges of digital enterprise transformation. Let's examine how change management helps implement a smoother transition.

Change Management for Successful Enterprise Digital Transformation

Change management plays a key role in planning, executing and evaluating digital enterprise transformation solutions. It helps organizations navigate change while aligning their people, processes and technologies. Here's how:

Defines clear objectives and vision

Your digital transformation journey begins with establishing a clear vision and definition of success. Here, you work with leaders and stakeholders to:

• Understand the key business drivers and opportunities that demand change.
• Align the transformation initiative with your overall strategy.
• Define a shared definition of success.
• Set smaller, specific and measurable business objectives that lead to success.

Change management helps you create a roadmap that guides your efforts and provides a benchmark for success.

Engages sponsors

Engaged leadership and sponsorship are vital for the success of digital transformation. Sponsors include the primary sponsor, who authorizes and leads the change, and other sponsors who champion the change across different areas in the organization.

Our research shows that sponsors struggle to allocate time and resources to participate actively in the change and they underestimate the people side of change.

Sponsor Challenges

As a practitioner in a change team, you should engage with sponsors to help them manage their limited time and resources. This includes creating a Sponsor Plan together to plan and schedule their activities in advance. You must also be selective of the tasks you want sponsors to carry out, with a focus on time-critical and high-impact activities.

By activating sponsors early, you can ensure they are committed and visible participants. This leadership will help drive the cultural transformation needed to embrace new technologies and processes.

Apart from senior leaders and executives, you must also engage key stakeholders to ensure they are aligned and committed to the change. You can use tools like the 4 P's exercise (Project, Purpose, Particulars, People) to document and communicate the case for the transformation. Combining tools with a detailed communications plan can increase alignment, clarity and consistent messaging across departments.

Assesses needs and opportunities

Assessing your current state is essential to identifying gaps hindering digital transformation for enterprises or discovering opportunities to smooth the transition.

For a digital transformation, the change team must work with IT and other impacted individuals to evaluate the technology infrastructure, business processes and organizational culture.

You can use the Prosci Change Triangle (PCT) Model to examine the four critical aspects of change success: success, leadership/sponsorship, project management and change management. An effective transformation project is strong in all four areas.

Prosci Change Triangle (PCT) Model

To set a baseline for project health, you can use the PCT Assessment. This assessment also helps identify risks and opportunities so practitioners can create action plans to improve project health. You can track progress and maintain momentum using the PCT Assessment throughout the transformation process.

Develops a robust strategy for change

There are two change management strategies integral to enterprise digital transformation. The first strategy is at the portfolio level or program level and guides the entire transformation process.

Practitioners use a structured, scalable approach, like the Prosci Methodology, to create their overarching digital transformation strategy. Then, they develop strategies to manage the individual projects within the portfolio or program.

For example, adopting AI technologies includes a portfolio of multiple projects. The overarching strategy defines how each will be implemented and used across departments and functions. Then, the change team creates a plan and describes the strategies for managing each individual project.

Your digital strategy also needs plans to manage and help people adopt change at the individual level. To do this, practitioners use the Prosci ADKAR® Model. It helps people through the change process by enabling them to achieve Awareness, Desire, Knowledge, Ability and Reinforcement.

Practitioners enable people to move through these five elements, which cover how they learn about and understand the change, motivating them to participate in it, and learning and using the new skills to implement the change for the long term.

Prosci ADKAR Model

By implementing this model, you can prepare, equip and support employees through the transition. This creates a resilient culture where employees have the opportunities, skills and mindset to embrace change and innovation.

Leverages technology and data

Change management methodologies enable organizations to use digital products and data effectively during an enterprise transformation.

For example, assessments can identify areas where automation will have the most significant impact. Change management strategies help implement this automation by ensuring employees understand and adopt new workflows. These strategies provide individuals with the necessary training and support to transition smoothly to automated systems, avoiding confusion and preventing resistance.

Successful transformations build the foundations and processes for future change. For example, implementing the latest data management tools is a digital transformation that enables an organization to predict future trends and implement smaller change projects to adapt to them.

But, without proper change management, organizations struggle to sustain the improvements from the initial transformation over time, so later projects may also fail. Implementing reinforcement activities, like performance monitoring, rewards and feedback can lead to a culture of innovation and continuous learning, which is crucial for ongoing success.

For more insights and strategies on building enterprise change capability, explore the Prosci Resource Center for change management and digital transformation.

FAQS

What is the first step in a digital transformation journey?

The first step in the digital transformation process is to define a clear vision and definition of success. Start by understanding the reason for the change (new opportunities, existing risks, market conditions, diversifying revenue streams, customer expectations).

Change professionals work with leaders to assess the current state, identify problem areas, and define goals that align with your business strategy.

Why is digital transformation important for businesses?

Digital transformation is vital for staying competitive. It simplifies and optimizes internal processes, increasing efficiency and cost savings, improving customer experiences, and enabling businesses to adapt quickly to market dynamics. 

How can businesses measure the success of digital transformation initiatives?

Change teams and leaders track key performance indicators (KPIs) to measure the success of digital initiatives. Example metrics include performance improvement, customer satisfaction, revenue growth and employee engagement.

How does digital transformation impact employees?

Digital transformation initiatives can cause anxiety for employees because they alter operational processes, job roles and responsibilities. This uncertainty, the lack of awareness about the reasons for change, and the need to learn new skills can lead to resistance behaviors. Effective change management prevents resistance by supporting and communicating clearly with employees.

Use Prosci Enterprise Digital Transformation Services for Success

Digital transformation is reshaping the business landscape, and to succeed, you need more than just technology. You need to focus on change adoption at an enterprise level. This means implementing a structured change management approach that empowers every individual within your organization to embrace new ways of working.

Successful change relies on engaging people at every level. Join us on a journey to unlock the full potential of your digital transformation with Prosci and change done right.