Back when the term was less common, people would often ask me what I meant by “digital transformation.”  Interestingly, as the term has become more widely accepted, people ask me even more, what does it really mean—specifically? 

What Does “Digital Transformation” Mean?

I’m going to give you an answer you might not have heard before, inspired by a quote from the late, great, Jack Welch, legendary CEO of General Electric. 

During Welch’s 20 year tenure as CEO at GE, its stock valuation grew nearly 30x (3000%). So the guy knew a thing or two.

In the 1980’s, long before the term Digital Transformation was coined, Welch said:

“When the speed of change on the outside exceeds the speed of change on the inside, the end is near.”

–Jack Welch, CEO, General Electric

Welch Summed Up Digital Transformation

Digital transformation, at its core, is about changing how your company operates and delivers value to the customer, in order to keep up with the rapidly changing world. 

If you fail to transform, (or to transform fast enough, as Welch warns,) the implications are dire. And in fact, we’ve seen dozens of companies and great brands fall by the wayside these last few years, because they failed to change fast enough to remain relevant. 

This hasn’t been because they didn’t put any focus into digital, but because they failed to understand the full scope of digital transformation.

The Fallacy of Digital Transformation: It’s Not About YOU

This is the fallacy of how most people define “digital transformation.” The term is often used in the context of a program at a specific company—sometimes it's upgrading the ERP platform, redoing an app, or even a holistic overhaul of your customer experience. 

While this all sounds good, “digital transformation” is about something much larger than your company. And in order to do it well at a given company, you need to look at the bigger picture.

Digital Transformation is a profound shift in the world and perhaps most importantly, a massive change in your customers.

Digital is Reshaping Everything and Everyone

Digital has been evolving for decades. We’ve gone from DOS-based IBM PCs to graphical operating systems to the dawn of the commercial internet. But it’s only in the last 10-15 years that we have seen it truly transform the way people live their lives.

Look at almost any daily human activity. From shopping, to finances, to dating, research, finding a job, connecting with friends… these activities have become not just digitally enabled but digitally centric for the vast majority of your customers. And of course, the pandemic only accelerated that transition.

Today, studies show that 70% of people sleep with their smartphone on their nightstand, and nearly a third of subjects in one research study indicated that if forced to choose between their smartphone and their sex life, they’d opt for celibacy.

This kind of major change in lifestyle and values inevitably means that the brands consumers engage with need to change substantially to meet their new, updated needs.

You Must Start by Understanding “The Outside”

The first step in digital transformation is to truly and specifically understand how the world has changed, and how your customers’ expectations and needs have changed. Your curiosity should also extend to the other key players in your value chain, like employees, suppliers and distributors. They’ve all changed and continue to change in their own transformation journeys.

It’s one of the reasons for the current “Great Resignation.”  Many companies are out of step with the priorities, preferences, and values of their own employees.

It’s only when you have properly focused on the bigger picture of the transformation of both our society and your constituent that are you in a position to consider the “inner layer” of transformation, which is necessary to be sure you and your company are not only keeping up with the speed but also the direction of the transformation of the world.