Learn how digital transformation can benefit companies by keeping them competitive, boosting their productivity, and streamlining operations.
Today most people before buying something research it online.
Increasingly we interact with our family, friends, co-workers, colleagues, and parents of friends of our children, through digital media, such as mobile applications. And less and less through a traditional phone call, because if we do, it is also through a digital application, using today’s man’s best friend: the Internet.
And SMEs are using this strategic alliance with the Internet?
Some yes, but there is still a long way to go for many. And what is this path? The path of DIGITAL TRANSFORMATION.
Digital transformation is the process by which SMEs and any type of company manage to adapt to this new economic paradigm: The digital economy.
Now, you must be wondering what are the predecessor paradigms?
It’s a good question, as it helps to contextualize this new era. That is why I will begin with a brief description of each of them since the end of the Second World War, following a Western approach.
Bretton Woods (BW)
|International economic and monetary order is based on the establishment of the dollar standard linked to gold. This meant that the dollar was to be the reference currency for all other currencies, while each ounce of gold was set at a value of 35 dollars. In this way, the Central Banks could exchange gold for dollars and vice versa through the Federal Reserve.
This is how US supremacy was reflected in this new post-World War II world order. Here arise the institutions that support this order, along with the US treasury: the IMF, the World Bank, and the GATT, the predecessor of the WTO.
BW System Crash
|In a context of global inflation, the trade deficit of the US trade balance, and the Vietnam War emptying the reserves, in 1971 Nixon announces the end of the gold convertibility of the dollar, since it becomes backed by the authority that emitted. There was no longer a metal backing dollar issue. A new international monetary system had arrived. Since the dollar was not linked to gold, currencies began to fluctuate freely in the markets under the supervision of the central banks, which acted (and act) as a monetary authority.
An advantage of this monetary system is the possibility of creating money to introduce stimuli into the economy. On the contrary, the great risk that exists is that, by issuing an excessive amount of money, a country can end up suffering from runaway inflation and end up in ruin.
Globalization and Regionalization:
|In this stage, the formation of the great regional economic blocks such as NAFTA, MERCOSUR, and the European Common Market, today the European Union, among others, is consolidated. On the other hand, and consistent with this process, globalization, also called Globalization, is opening up, which refers to a transformation in the interrelation of states and intranational entities in the economic, social, political, monetary, religious, technological, etc.
Through this process, intranational actors become transnational, that is, they cross state borders, currencies become international, such as the euro, and international trade is strengthened, generating volumes never seen before and opening the way to the computer revolution, thanks to the wonderful human invention, the Internet.
This paradigm continues over time and mutates itself, democratizing itself more and more, giving rise, for example, to democratization and monetary decentralization through cryptocurrencies (we will see later how it unravels, is the game over coming?).
What is digital transformation?
What is digital transformation? It’s incorporating technology, digitizing procedures, preparing teams to work digitally, and modifying the business model for better performance in the digital economy.
This process was accelerated and strengthened after the covid 19 pandemic, due to the fact that people around the world were forced to stay inside their homes. However, the world had to continue functioning, and the only viable option was remote work. This necessitated the need for transformation to enable access to remote work, without any alternative.
Digital transformation is essential to avoid market obsolescence, as seen with BlockBuster, and offers increased productivity and cost-effectiveness.
This golden rule of this new paradigm applies to digital businesses and also to companies whose business is traditional, that is, offline. They must take advantage of digital tools to grow strategically.
So digital transformation refers to, on the one hand, transforming traditional company technologies such as CRM and automating processes. It involves adopting new digital technologies like social media, AI, cloud computing, chatbots, and augmented reality.
For this, the organization must transform 3 areas:
1- The business model, that is, transform it to adapt to the digital economy.
2- The user experience: Offering an improvement in the product and/or service by integrating all the channels of arrival at them.
3- The operations of the organization to achieve digital transformation, that is:
Here the role of the CEO stands out, who must manage to generate a strategic digital vision for the company and then develop a digital strategy and share it with the members of the company.
C- Internal teams.
Digital transformation needs a customer-centric strategy with a clear vision, supported by CEOs who train and equip teams. Adapting products and services based on the user experience through digital versions or new channels/tools is vital. Measuring necessary digital infrastructure is crucial to adjust the organization to the digital economy paradigm.