10 key digital transformation tools CIOs need

What is digital transformation?

Digital transformation -- or DX -- is the creation of fundamental business changes through digital technologies. Using computer-based technologies, organizations create new products, services, processes or operations. They may even create a new core mission and strategies to execute it. Digital transformation is not only about using IT to support key functions and the delivery of products and services, but also about using technology to work and perform in new ways, enhancing existing deliverables.

The concept of digital transformation has been evolving since the late 20th century and requires organizations to keep pace with technology advancements and continuously innovate on their use of them.

In other words, digital transformation is not a final state, a destination to reach or a project to complete; it is a constant state of using tech to change processes, improve the customer experience and deliver more value.

Digital transformation in context

Digital transformation is one answer to digital disruption. The latter is a threat to the existence of conventional businesses that fail to keep up.

The rise of ride-sharing businesses -- starting with Uber in 2009 and followed by Lyft in 2012 -- is one widely used example of this disruption. But digital transformation started even earlier. For example, Netflix's 2007 introduction of streaming movies and other videos also illustrates digital transformation's disruption. So do digital money-transferring services such as PayPal, launched in 1998, and Venmo in 2009.

The common thread among these and other digital disruptors is their use of information technology to transform traditional products and services, from taxi services to entertainment to banking.

Executives at most organizations have been feeling the pressure to likewise transform -- or face extinction. Nonprofits and government entities also have been feeling that pressure, recognizing that they, too, must keep up to meet constituent demands for digital services and digital engagement.

Seventy percent of business leaders face major digital disruption, and 85% believe the disruption will either maintain its pace or accelerate, according to the "Digital Disruption: New Face, Same Brutal Pace" report published by the management consulting firm Bain & Company in September 2022.

Benefits of digital transformation

Digital transformation is not merely a technology endeavor. Rather, its entire focus should be on using technologies to support organizational objectives and achieve better performance.

Digital transformation offers businesses many potential benefits. They include the following:

• Improved customer experience. Digital tools enable customers to more easily interact with the organization for information, services and purchases. Those same tools also enable the organization to deliver personalized services in both real life and online.
• Access to data-driven insights. As organizations modernize their tech stacks, they're better able to collect and analyze data to deliver near real-time insights that lead to more accurate decision-making and personalized customer experiences.
• Modern employee experience. Tools that create better customer experiences may also improve workplace processes. Increased automation, the use of intelligent systems and other digital technologies may help deliver experiences that employees have come to expect in their personal lives. Digital transformation may also help improve worker productivity. For example, automating repetitive tasks can increase the amount of time that workers have to focus on more complex high-value tasks. Automation and other transformations may also reduce errors and improve accuracy. Technologies such as data analytics, AI and machine learning may help workers more efficiently tackle tasks, providing even more productivity gains.
• Built-in cybersecurity. Cloud software vendors have put a lot of effort into security and updates that address vulnerabilities, though hackers may be more focused on exploiting cloud software.
• Potentially improved resiliency. As organizations embrace cloud computing to replace old technology, such as on-premises data centers, they gain from their vendors built-in redundancies that help to guard against outages.
• Better adaptability. People's appetites are increasing exponentially for the fast, easy and personalized experiences that digitally advanced organizations offer. Organizations that meet those expectations and can nimbly respond to changing expectations have a greater likelihood of surviving than those that don't.

Digital transformation tools

Although process improvement and culture change are key elements of successful digital transformation, information technology is clearly the single most critical component for success.

That's reflected in enterprise spending plans.

The global digital transformation market was valued at $594.5 billion in 2022, according to the "Digital Transformation Market" report published by market research company MarketsandMarkets. The report forecasts that the market for DX technologies will increase at a compound annual growth rate of 21.1% through 2027 to hit more than $1.5 trillion.

A number of key tools can support and enable digital transformation. Here are 10.

1. Analytics, artificial intelligence and machine learning

The digital sphere generates a staggering amount of data every day, so organizations seeking to use that data to gain insights and become data-driven enterprises must use analytics, AI and machine learning to turn that raw data into information they can use.

2. Automation

Organizations committed to transformation must be agile, which in part means eliminating as many manual tasks as possible through automation technologies such as robotic process automation.

3. Cloud CRMs

Organizations must deliver a consistently stellar customer experience to remain competitive in this digital age, which makes cloud customer relationship management an essential tool within the modern tech stack. Like all cloud-based technologies, a cloud CRM takes the day-to-day management of the system out of the organization and places it into the vendors' hands. That typically means higher efficiency and potentially lower costs, while its cloud infrastructure means everywhere and anywhere availability of the systems.

4. Cloud ERP

An ERP system itself helps streamline operations, improve efficiencies and facilitate data-driven activities by consolidating the information from various functions and departments into a single system. Cloud ERP offers this with anywhere, anytime accessibility. That accessibility gives cloud-based systems some advantages over on-premises ERPs, though cloud ERP has its downsides as well.

5. Digital accounting software

Digital accounting systems typically feature automation and intelligence, which can reduce manual work, improve accuracy and bring efficiencies to the accounting function.

6. Employee self-service platforms

As the name suggests, employee self-service technologies enable workers to access job-related and, in particular, HR-related information and services through web-based portals. These platforms create digital workplace experiences that help reduce friction for workers seeking such information and services, speed the delivery of the information and services, and reduce the costs of doing all that.

7. Low-code/no-code platforms

These platforms are software development tools that essentially eliminate the need to write code when creating new capabilities. They do this by offering a visual software development environment, with drag-and-drop components that allow business users -- sometimes called "citizen developers" -- to quickly build lightweight applications as well as application features and functions. These platforms also free up developers to spend their time on more transformative application creation, bringing further agility and efficiency to the digital enterprise.

8. Predictive and prescriptive analytics

Predictive analytics tools use algorithms to analyze data to create highly accurate predictions. Prescriptive analytics tools go one step further, using algorithms to first make predictions and then forecast outcomes if prescribed actions are taken. Both classes of technologies help organizations plan more efficiently and effectively.

9. Security tools

As every facet of an organization weaves in technology, the ability to secure the technology stack and protect all the data that systems hold has become paramount to meeting regulatory requirements as well as consumer and employee expectations.

10. Team collaboration and communication tools

The number of distributed teams had been climbing through the early part of the 21st century, but it increased exponentially during the COVID pandemic. At the same time, organizations engaged in transformation have required ongoing, cross-functional ideation and innovation. To support hybrid and remote work success, communication and collaboration tools have become critical.