What Is Digital Transformation?

Digital transformation is a hot topic these days. From top five consulting firms and enterprise software vendors, to industry groups and professional associations, it seems like everyone is trying to get organizations to transform digitally. And as you might expect, digital transformation can mean a lot of things to a lot of people out there – from simply making a process digital, to a complete reimagining of the entire organization to be digital-first.

The approach to digital transformation I want to demonstrate here falls somewhere in between these two extremes: It's more than simply going paperless, but it doesn’t try to transform the organization from top to bottom. Instead, it focuses on high-value business processes and helps an organization reimagine them as digital-first to increase the value the organization and its customers get from them.

The Typical Path to Digitization
The digital transformation path most organizations are on is shown in Figure 1, which shows the typical progress from paper-based, manual processes to digital, automated ones.

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Figure 1: Typical Path to Digitization

An example of this typical path would be digitizing the mortgage origination process:

  • Level 1: Borrowers visit a branch in person, bring paper documentation, and fill out paper forms to begin the process; the broker processes paper, sends it via courier to a processing center; the mortgage application packet is compiled and vetted by document processors, who then pass the packet to underwriters; underwriters work with the paper documents to determine a borrower’s mortgage eligibility.
  • Level 2: Borrowers visit a branch in person or speak with a broker over the phone; borrower information is entered into an electronic form and the borrowers submit a combination of electronic and paper forms, which are scanned at the branch and submitted electronically for processing; document processors index the electronic documents and submit them electronically to underwriters; underwriters work with the electronic files to determine a borrower’s mortgage eligibility.
  • Level 3: Borrowers visit a branch in person or speak with a broker over the phone; borrower information is entered into an electronic form and a combination of electronic and paper forms is submitted, which are scanned at the branch and submitted electronically for processing; documents are indexed by a combination of automated classification and reviewed by document processors, based on business rules; a workflow engine submits the documents to the underwriting process flow, which can make basic decisions about eligibility, escalating to underwriters when needed; underwriters work with electronic files to determine a borrower’s mortgage eligibility.
  • Level 4: Borrowers fill out mortgage application online and submit all documents electronically for processing; documents are indexed by a combination of automated classification and reviewed by document processors, based on business rules; a workflow engine submits the documents to the underwriting process flow, which can make basic decisions about eligibility, escalating to underwriters when needed; underwriters work with electronic files to determine a borrower’s mortgage eligibility.
    Clearly this kind of optimization has benefits for the organization, but its limitation is that it's primarily focused on the needs of the organization: I.e. how can we optimize a process (e.g. mortgage origination) to gain value?

Digital Transformation Puts the Customer First
However, digital transformation promises to deliver even more value to the organization than digitization by rethinking core business processes from the customer’s point of view: I.e. how can we transform the process to add value to the customer (and in the process streamline operations and gain value)?

Consider, again, the mortgage origination example above. By simply digitizing the process, i.e. taking the paper-based manual process and making it (almost) fully digital from initial application (e-forms, electronic document submission) to loan close, what you've really done is to take a paper-based, document-intensive process and “lifted and shifted” it to digital, while the fundamentals of the process remain the same.

Digital transformation, in contrast, requires a customer orientation: i.e. considering what evolution of the process would add value for the customer. So in the mortgage process, instead of simply digitizing the paper associated with the current mortgage process, one digital transformation approach could be to provide a mobile home-buying app that allows customers to shop for homes more easily by sharing homes viewed with their partners and friends, allowing them to quickly determine what amount mortgage and at what terms they could be expect to be preapproved, as well as the opportunity to chat with a mortgage banker to get more details if they want. Once they get close to the buying stage, the app would lead them to develop a more formal relationship with a mortgage banker (rate quote, product descriptions, etc.); then, if they decide to proceed, it would thread them into a mortgage origination workflow that's basically the “born digital” process described above.

The Final Word
Although digital transformation is a complex topic that doesn't have a “cut-and-paste” answer for organizations, hopefully this overview cuts through the buzz and gives you a better sense for what digital transformation is – and for what it could mean for your organization.

Rich Medina
Joe Shepley
I’m VP and Practice Lead, focusing on developing Doculabs’ InfoSec practice and its applications in a wide range of industries.