I have argued elsewhere that the term “Digital Transformation” ought to be reserved for large scale process change. Improving existing processes is better termed “Process Improvement” or “Process Redesign.” Having said that, let me further distinguish between Digital Transformations that are, in fact, redesigns, and those that really involve creating a new process from scratch.
A group of guys get together and decide to create a new company that will offer customers tailored bicycles. One of them has figured out how to do it, another has arranged the initial financing and a third is preparing a marketing plan. The guy who is going to manage the operations of the organization talks about how the process will work. They will advertise in magazines, but take orders on-line from a new website being developed. As orders come in, via the website, they will be forwarded to… and so it goes. A new process is defined, starting from scratch. (In a literal sense, there is no trans-formation, as there was no process there to begin with.)
Now consider a new process transformation effort that I actually participated in. A major bank decided to install Automated Teller Machines (ATMs). This was in 1970, and at the time no one else in the State of California had ATMs. There were a few banks on the East Coast of the US that already had them, but, for Californian's it would be a major shift in how they experienced banking.
The effort began when a team appointed by the head of branch banking recommended the move – which was going to cost many millions of dollars – and senior management and then the board of the bank approved the move. IT set up a team to examine the ATM machines on offer and to select the type the bank would purchase.
I got involved when my company was hired by the head of branch operations to determine the impact of the transition. We conducted interviews within the bank and at two banks on the East Coast and drew up a list of the processes and the specific jobs that would be impacted. Tellers in the branches would have to know how to respond to customer questions about ATM transactions. So would branch managers. New teams would need to be created to move money to the machines or repair them when they broke down. Others would need to be hired to work in a Call Center to answer questions from customers calling by phone or from the machines. As the ATMs allowed people to transfer money between checking and savings or to pay loans, people in those various departments needed training in the changes ATM transactions would make. People in finance and bookkeeping would need some training as to the new account entries being made and what sort of transactions would be involved. As the roll-out involved people standing on the sidewalk to greet and explain ATM transactions to people, “Greeters” would need to be hired and trained to help customers. It turned out that some 22 jobs would be created or changed. Some 12 major bank processes used in 8 different functional units were involved.
Although not much was made of it at the time, for many customers, this was their first interaction with a computer. It was the beginning of the digitalization of the bank – it ultimately transformed the bank from a place you could visit during “banking hours” to an institution that that was available 24-7. That, in turn, meant that bank employees had to change their mindset about a whole range of things that they had previously taken for granted. The idea of the “banking day” disappeared as transactions became continuous.
The introduction of ATMs at the bank in question, and then at other banks in California, was the beginning of a major transition. Gradually, banking was moved out of the branch offices to ATMs, and then to home computers and smart phones. The number of tellers needed by branches dropped dramatically. Relationships that had previously been more personal became more distant. Customers reported that they preferred to use ATMs. (Tellers were still asking for proofs of security that ATM machines had dispensed with, and it took time to get the bank to be more consistent about what it accepted as proof.)
I've gone into a bit of detail to emphasize that the installation of ATMs at banks was a digital transformation. It installed computers and a network to support them and it digitalized many different operations at the bank. The roll-out of ATMs impacted people in many different departments and in many different business processes that crossed departmental lines. It significantly reduced some jobs and it created some new jobs. It significantly changed how customers interacted with banks, and it changed customer expectations.
I would not call the shift that occurred at the bank a “process improvement” or even a “redesign” because more than one business process was involved. We created some new processes – to handle ATM calls, to put money in the machines and to transfer checks, and so forth, and we modified several different existing processes.
To sum up, transformation comes in many different forms. It is more than just creating new business processes, or even redesigning a major business process, starting with a blank sheet of paper. Digital Transformation refers to a major change in the way an organization does business, and it typically involves changes in the way the organization uses computer and infrastructure technologies.