What is digital transformation? Ongoing reinvention

Digital transformation definition

Digital transformation is an organization-wide strategy aimed at leveraging digital technologies to modernize key business processes and to introduce new services that better engage customers, support employees, improve operations, and drive business value to the bottom line.

When done correctly, digital transformation becomes embedded in the enterprise strategy, with the organization’s CEO, executive team, and entire workforce embracing digital transformation as a continual reinvention essential to the organization’s success.

Why digital transformation matters

With technology disrupting every industry, digital transformation, also sometimes referred to as DX, has become an existential need for nearly every organization today.

Because digital transformation involves integrating digital technologies into all aspects of business operations to improve products and services, streamline processes, and introduce new revenue streams, digital transformation has become the No. 1 strategy for organizations seeking to reinvent their operations and business models for the modern business era.

Figures from PwC’s 2024 Global CEO Survey indicate just how pervasive the need for transformation has become, with 97% of CEOs reporting they had “taken some steps to change how they create, deliver, and capture value over the past five years.” Moreover, 76% of CEOs said they “took at least one action that had a large or very large impact on their company’s business model.”

[Related: 10 digital transformation questions every CIO must answer and 5 surefire ways to derail a digital transformation (without knowing it)  ]

At the same time, many CEOs also reported they expect to be out of business if they don’t significantly advance their transformation capabilities, with 45% of respondents doubting that “their company’s current trajectory would keep them viable beyond the next decade — up from 39% just 12 months earlier,” according to PwC.

IBM’s 2024 CEO Study shows similarly high pressure on executives when it comes to transformation, with 72% of the 2,500-plus chief executives it surveyed saying they “see industry disruption as a risk rather than an opportunity.”

That same IBM CEO Study also found that C-suite confidence in IT has waned over the past decade, underscoring how important digital transformation is to the CIO’s agenda. Without taking a business-centric approach to modernizing their organization through the integration of digital technologies, long-term business survival is unlikely.

What defines a successful digital transformation strategy?

Many organizations fall short on their digital transformation objectives because they lack clear vision, shortchange cultural transformation, or fail to make the necessary long-term commitment, among other factors. Organizations, and IT leaders in particular, must recognize that digital transformation requires a continual, organization-wide effort in order to succeed.

“Digital transformation isn’t just investing in and adopting a new technology. It’s about evaluating how a technology modality can be integrated into existing technologies and processes to find new sources of value,” explains Rahul Kapoor, a management professor and chairperson of the management department at the Wharton School of the University of Pennsylvania.

[Related: 8 reasons why digital transformations fail and 7 secrets of successful digital transformations ] 

Furthermore, successful digital transformation requires enterprise leaders to do so in a way that distinguishes their organization in the market, says Kapoor, who also serves as academic director of Wharton’s Leading Digital Transformation Executive Education program.

“One of the most important opportunities for executives today is not to embrace a general view of digital transformation but to really craft what digital transformation means for their organizations and their business. That’s where the opportunity for value is,” he says. “Each organization needs to develop their own flavor of digital transformation based on how it can add value to their customers and the broader ecosystem.”

And today, more so than ever, digital transformation means doing all that work on a continuous basis.

“The end goal is to keep moving the organization to new levels of performance and capabilities, to get better against your competition,” says Kristy Ellmer, who as managing director and partner at Boston Consulting Group is one of the core members of BCG’s transformation and turnaround unit, BCG Transform.

Given that need for “always-on transformation,” Ellmer says executives must build the capacity for their organizations to continually transform.

“We have to build the capabilities to be constantly changing,” she adds.

Digital transformation for 2025 and beyond

Digital transformation has evolved over several decades from a niche initiative to a fundamental need today.

“Transformation is not a luxury; it’s something business has to do to survive,” says Niranjan Ramsunder, CTO and head of data services for UST, a digital transformation solutions company.

Digital transformation became a key strategic initiative in the mid-2010s, as mobile, cloud, analytics, and other advanced information technologies took off, enabling businesses and consumers to easily engage via digital channels. And it accelerated in 2020, as work, commerce, and everyday activities shifted online in response to COVID-19 lockdowns.

[Related: 10 digital transformation roadblocks — and 5 tips for overcoming them ]

Today, advancements in artificial intelligence and generative AI are fueling the next surge in transformation, with the majority of chief executives seeing AI as monumental for their organizations’ futures. A survey released in 2024 by research firm Gartner found that 58% of CEOs believed that AI “will have the most significant impact on their industries in the next three years.”

Rapidly maturing immersive technologies, the still-developing field of quantum computing as well as other advancing technologies will supercharge the pace and scale of transformation even further, according to executives, consultants, researchers, and analysts.

Recognizing they must continuously transform — as technologies give them opportunities and as changing market conditions require them to do — leading CEOs and their boards have incorporated transformation into how their business operates, says Joshua Swartz, a partner in the digital and analytics practice at Kearney, a global management consulting firm.

Thus, he says these digital leaders no longer think about transformation as a big project to do but rather as part of their everyday work.

“They’re changing the way they operate, the way they sell, the products and services they produce for their customers today to the way they need to do it tomorrow,” Swartz says. “And they’re doing that in modular ways.”

Digital transformation trends and leadership

With that emphasis on continual reinvention, leading-edge organizations are constantly building new skills within their workforce through training existing employees and acquiring new ones who can bring to teams the newest talent capabilities.

They are also actively engaged with the vendor community as partners to identify emerging technologies that create new transformation opportunities as well as disruption risks. And they balance the need for short-term gains with strategies that will pay off over the long term.

Additionally, Swartz says leading organizations have created new positions and departments to drive transformation.

[Related: 7 sins of digital transformation ]

“Many organizations now have an executive vice president or chief transformation officer whose team is able to manage all the various planes in the air — the initiatives driving transformation,” Swartz says.

“It’s not just the most mature organizations that have this; anyone who takes transformation seriously is doing this because they recognize that it is essential,” he says, noting that the organizations most skilled at transformation have recognized that DX is not a technology initiative — and therefore not solely the responsibility of a CIO or CTO — but rather a business imperative that should be owned ultimately by the top business leaders.

“I don’t think digital transformations are relevant any longer; business transformations are,” he adds. “We need to focus on the business outcomes we’re trying to capture.”

Ellmer sees the same trend, noting that the most successful organizations understand that transformation can’t be “episodic anymore. They have to do transformation holistically.”

She says this not only is contributing to the rise of the chief transformation officer, but it is also contributing to the need for DX leadership to have an equal voice within the C-suite and the visibility, authority, and resources — including top talent — to be effective change agents.

Additionally, the chief transformation officers at these top organizations are not being burdened with other roles and responsibilities; they’re not the transformation and digital officer or the data and transformation officer, for example. “The best of them have the role as singly the chief transformation officer, so they have someone who is only focused on driving transformation that gives them a competitive advantage,” Ellmer says.

BCG research has found that this position produces results.

“Most companies’ performance rose significantly over a three-year period after the CTO’s hiring — outperforming each company’s industry — according to BCG’s study of 350 CTOs. And not only did hiring a CTO benefit underperforming companies, but also those already overperforming their industry,” Ellmer and her colleagues wrote in an April 2024 report.

Ellmer says the chief transformation officer is so effective because the role breaks down siloes, thereby coordinating activities and changes across all the functions within the organization, and has responsibility and accountability for DX success. All that, she notes, also helps make transformation a habit within the organization, which boosts the chances of not just periodic but actual ongoing success.

Digital transformation challenges

BCG’s Bruce Henderson Institute has found that up to 75% of transformations fail to meet their goals. Some of that may be due to misguided efforts, but Ellmer and others point out that organizations must contend with many challenges as they seek to transform.

“The Path to Digital Transformation: Where IT Leaders Stand,” a 2024 report from Insight and CIO.com parent company Foundry, listed gaps in technology skills and knowledge, budget constraints, and infrastructure not optimized to support new technologies such as gen AI as the top three challenges to DX today.

Experts say cultural resistance to change, change fatigue, siloed activities, and organizational complexity also can tank transformation efforts. So can focusing on technology adoption without clear business reasons for doing so.

“The success of digital transformation for any organization is not how well you know the technology or how many experts you have who understand the technology; it’s really about how you integrate technology into your organization, into your ecosystem, in order to extend your existing value proposition as well as create new value propositions,” Kapoor says.

Digital transformation examples

Examples of successful transformation abound; here are three of note:

Sysco, a multinational food distribution company, morphed its pandemic-era pivot, which included helping its customers make their businesses more digital, into a post-pandemic hypergrowth strategy by leveraging analytics, AI, and other digital technologies. Its “Recipe for Growth” blueprint, announced in May 2021, calls for the company to grow 1.5 times the size of the entire industry — an ambitious plan that earned Sysco a 2023 CIO 100 Award for innovation and IT leadership. “The Recipe for Growth has everything to do with how we run the business — the cloud and the underlying technology, how we deliver software and all the fundamental foundational capabilities that underpinned our strategy,” says Tom Peck, executive vice president and chief information and digital officer at Sysco.

Over the past decade Domino’s Pizza, one of the world’s largest food delivery companies, transitioned away from legacy processes and technologies to reinvent how it engages and serves customers. This shift allowed it to successfully compete with digital-native food delivery platforms, streamline operations, and foster innovation. Key features of its ongoing digital transformation efforts include delivery tracking and personalized marketing campaigns, successes enabled by its modernized tech stack, analytics, and AI.

Deere & Co., better known as John Deere, has delivered its recognizable green tractors as well as other construction, farming, and landscaping equipment for nearly 200 years. But it has also been widely recognized for its use of data, analytics, and other digital technologies to deliver new products and services. For example, the company embeds AI into its farming equipment, enabling it to tell the difference between weeds and crops. It includes automation and intelligence into its machines, allowing them to operate without drivers. And it delivers data-driven insights to its customers in the fields, helping landowners and operators more effectively and efficiently manage their fields and forests. Of its commitment to digital innovation, chairman and CEO John May says: “We don’t create tech for tech’s sake. There’s purpose behind everything we do, so that our customers have the tools they need to tackle some of the world’s greatest challenges.”

Stages of successful digital transformation

Although every organization follows its own digital transformation journey, experts say there are five common steps that most organizations follow as they advance the technical initiatives that support their transformations:

1. They align objectives with business goals. Successful organizations start with the questions: What business outcomes do I want to achieve for customers, and what problem is the business trying to solve? They then align their goals with the outcome the business is striving to achieve.

2. IT and business come together to co-create. Alignment and collaboration across functional areas of the company are essential to digital success. Many organizations create cross-functional teams to help drive digital transformations.

3. Companies pick the right strategic partners. Whether it’s a global consultancy, system integrator, or boutique design shop, IT leaders need help fulfilling digital imperatives to reduce time to business value.

4. They redesign business and products around customer outcomes. Customer experience is a key motivator for digital transformation, and most digital initiatives are tailored to improve customer interactions and open new avenues for business.

5. They retrain employees around digital. Upskilling on the latest technologies has become a business imperative for competing in the digital era.

Digital transformation roles and skills

While emerging tech and revamped processes are crucial, having the right skills on staff is essential to any digital transformation.

Software engineers, cloud computing specialists, and digital product managers remain key roles for companies seeking to roll out new products and services. DevOps leaders galvanize software development by merging development with operations, enabling companies to continuously iterate software to speed delivery.

[Related: 13 essential skills for accelerating digital transformation ]

Data scientists and data architects are also in high demand, as companies seek to glean insights from vast troves of data, and transformations lean increasingly on machine learning and artificial intelligence.

UX designers, digital trainers, writers, conversational brand strategists, forensic analysts, ethics compliance managers, and workplace technology managers round out the talent priorities.

Of course, leadership matters. Many CIOs have appended the chief digital officer (CDO) title to describe their remit, while some are simply rebranded as a CDO. Sometimes the roles CIO and CDO roles are distinctly bifurcated. Typically, these calls are up to the CEO.

But it doesn’t matter who owns the digital imperative, as long as someone is competent using technology to drive revenue growth — and is capable of bringing together all the elements.

“They’re orchestrators,” says Nitish, Mittal, a partner leading the technology practice at research firm Everest Group, adding that they understand that technology is not the main goal but rather a means to an end — whether the end is driving more productivity or creating more customer engagement.

More on digital transformation:

• 7 secrets of successful digital transformations
• 10 ways to accelerate digital transformation
• 13 essential skills for accelerating digital transformation
• 5 hot digital transformation trends — and 2 going cold
• 8 reasons why digital transformations fail
• What’s next for digital transformation?
• 5 surefire ways to derail a digital transformation (without knowing it)