Digital transformation leads to creating processes that deliver opportunities for robust value-creation that go farther and wider than just cost savings. However, reducing business costs has been a major challenge for many companies owing to surmounting customer data and evolving customers.
Statista predicts that between 2020 and 2023, the value of companies spending directly on digital transformation is projected to reach a total of US $6.8 trillion.
The pandemic has further made it mandatory for businesses around the world to digitize faster and automate processes. Digital transformation today is possible in all three vital areas of business: operations, management and strategy.
| Technology in Operations |
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| Technology in Management |
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| Technology in Strategy |
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However, an important variable in digital transformation strategy is the percentage of cost savings. A successful digital transformation must be able to save 40% of the overall costs, anything less will be inefficient for the entire organization.
Examples of enterprise technologies that aid in digital transformation |
Digital transformation must start with customers first
With data analytics in hand, more companies today are concluding that customers are the heart of their digital transformation. That’s because these companies can delight their customers right from where they are through use of smart digital tools. This is what the businesses believe:
| 63% of Organizations say | 67% of CEOs say | 41% of CEOs say |
| An excellent customer experience as measured by customer satisfaction scores equals success. | Agility is the key to business success. Slowing down will lead to bankruptcy. [KPMG] | AI and Machine Learning will improve data governance and data analytics capabilities. [KPMG] |
When an organization takes initiatives that put customers first, it boosts the confidence of the C-level executives and board members that ultimately drives more investments in the business. This happens because it is easier to create business cases for digital transformation projects that are customer-centric.
Digital maturity drives revenue
The true value of digital transformation is often gained at a mature level where the key drivers of the organization are digitized completely. Deloitte Insights’ recent survey established a connection between financial performance and digital maturity. The survey further stated that the more digitally mature an organization is, the more likely it is to achieve targets of-
- Customer satisfaction
- Product quality
- CSR
- Diversity and inclusion
- Long-term financial performance
- Gross margin
Deloitte’s latest study also found a strong connection between the digital maturity of an enterprise and its net revenue and net profit margin. The following graphic establishes a strong case for digital maturity in the attempt of digital transformation:
Key aspects of reducing costs through digital transformation
Businesses always work on the principle: maximize profits, minimize gains. When it comes to digital transformation, cost reduction is definitely one of the key drivers.
Here are some ways digital transformation can be achieved with the objective of reducing costs and bringing about deeper customer experiences:
1] Centralizing software: Businesses must centralize the entry of information from each touchpoint in the organization so that this information is accessible to the entire company in real-time. This saves both time and money.
2] Cloud hosting and migration: Several businesses today have switched to cloud storage and cloud computing. Cloud-based systems have contributed to saving 50% compared to conventional infrastructure management.
3] Automation tools: Leveraging from automation tools that cut down mundane tasks leads to fluid and efficient management.
4] IoT for better maintenance: Companies must leverage the Internet of Things (IoT) that helps implement systems that equip each machine to communicate all the variables for the purpose of analysis. This enables companies to anticipate maintenance and decrease interruptions, leading to decreasing the overall maintenance costs. Machine learning today is transforming the way businesses function and aiding in maximizing profits while revolutionizing business operations.
5] Inventory management software: This is another area of the business that can be easily automated through reliable software without hiring personnel, leading to savings.
6] Payments and collections management: Management software that includes work order control tools facilitates a detailed analysis of the day-to-day budgets at every touchpoint. This reduces errors.
7] Sales/leads management: A lot of the energies of sales personnel go into the management of leads manually, and keeping a record of good and bad leads. Sales management software such as Salesforce CRM etc help in not only managing leads but also provide valuable insights into customer’s mind.
8] Stationary and administration: Document managers and collaboration tools aid in making the information centralized. This saves the cost of stationary significantly.
9] Team management tools: Today applications such as Slack, Asana, Basecamp etc are commonly used by startups, enterprises and large organizations to manage tasks, teams and projects efficiently.
10] Shipping and logistics: Technological tools can help in saving shipping and logistics costs by efficiently managing points of purchase, delivery and transportation. Apart from shipping and logistics service companies, many other businesses need such software for efficiency in their operations.
How does digital transformation save costs?
A digitally mature business can do wonders when it comes to delighting customers. That’s because such a business is able to save the energy of its team and channelize it more creatively towards strategy, marketing and improving customer experience. The costs that are saved in mundane and unproductive tasks through digital transformation, can be utilized towards customer acquisition. However, ideally one must aim beyond the obvious digital transformation benefits.
Here are some broad ways to demonstrate how digital transformation saves different types of recurring costs within a business:
# 1 Reducing margins of error
Businesses incur exorbitant costs due to human errors, and we are not just talking about accounting. There’s a tonne of activities related to sales, marketing, promotions, advertising or operations that can be expensive should there arise any errors. Digital transformation reduces such errors by up to 90%.
# 2 Reducing machine and employee downtime
Missed deadlines or downtimes can cost any business greatly. With automation and digitization, businesses can reduce breakdowns, automate customer care or technical support through a digital transformation agency and increase productivity.
# 3 Better negotiation with suppliers
Supply chain management is another area that can get expensive for businesses if they are not equipped with the right information about work orders, purchases and other operational costs. With technology, the business gets equipped with an organized database of suppliers and supply chains. This enables the business to negotiate with national and international suppliers better.
# 4 Energy costs
Digital technology helps in compliance with maintenance schedules and keeping systems and equipment in optimal conditions. This saves the company in its energy bills significantly.
# 5 Personnel costs
Several processes within personnel management can be automated with digital technology. Right from recruitment to training, in-house promotions, HR management – the company can save significantly on its overheads on people.
# 6 Increased agility
Digital transformation makes organizations more agile when it comes to time to market. This accelerates innovations, improves delivery of the projects/products and services and brings in better customer satisfaction. By hiring a digital transformation agency, a lot of load can be shed off from the in-house personnel making them more efficient.
How to get the best digital transformation for your company?
To undergo digital transformation completely, partially or in parts, it’s important to consider the following questions:
- What’s the larger goal in bringing about a digital transformation?
- What are some of the unproductive/redundant processes in your business?
- How will digital transformation delight your customers better?
- What are some manual tasks that incur exorbitant monthly costs?
- What kind of revenue growth are you expecting through the digital apps or tools that you wish to install?
If you wish to keep your company ahead of the competition, it’s best to embark on a journey of digital transformation. Today companies that have automated unproductive tasks and adapted technological ways of handling business operations can engage their customers better. We can help your company smoothly transition through our digital transformation consulting. Do talk to us.
