In a fast-paced technological landscape, businesses must continuously progress to remain competitive in the digital realm. What was once considered a nice-to-have, digital transformation has become an increasingly crucial strategy for attaining operational efficiency, profitability, success, and a competitive edge.

The global digital transformation market is projected to experience a compound annual growth rate (CAGR) of 23.1% from 2022 to 2030, reaching $3,810.05 billion by 2030. These statistics underscore the rapid infiltration of this trend across every industry worldwide. “Digitalise to survive” swiftly becomes the movement of our era, portraying digital transformation as the “inevitable reimagining of business” in the coming years.

This article dives into the implications of digital transformation for organizations across various industries and sectors, illustrating how it fosters efficiencies, productivity, and an enhanced customer experience. We have compiled essential digital transformation statistics, projections, and emerging trends that are currently gaining traction, providing insights into what others are undertaking and what steps are necessary to remain competitive in the digital era.

What is Digital Transformation Exactly?

Digital transformation refers to a fundamental overhaul of an organization’s operational structure. The objective, as articulated in the recently published McKinsey book “Rewired: A McKinsey Guide to Outcompeting in the Age of Digital and AI” (Wiley, June 20, 2023), is to establish a competitive edge by consistently implementing technology on a large scale. This aims to enhance customer experience and reduce operational costs.

Currently, digital transformation stands as the primary catalyst for enhancing innovation and operational efficiencies. Nevertheless, numerous business leaders still grapple with a clear understanding of digital transformation.

If we formulate the definition, digital transformation (DT or DX) could be described as utilizing digital technologies to refine overall business practices, elevate customer experience, and propel business expansion. Essentially, DX instigates a shift in how businesses function and provide value to their clientele.

In simpler terms, digital transformation represents the pivotal move that formally propels the business world into the digital era. It compels organizations to consistently question established norms, engage in more experimentation, enhance agility in responding to customers and competitors, and cultivate comfort with setbacks.

Numerous technologies fall under the digital transformation umbrella, including cloud computing, artificial intelligence (AI), machine learning (ML), big data, and the Internet of Things (IoT).

The Importance of Digital Transformation in Businesses

Not too long ago, the urgency to achieve digital transformation goals heightened significantly due to the COVID-19 pandemic, compelling numerous organizations to expedite their transformation endeavors.

In the contemporary landscape, digital transformation is no longer advantageous but is deemed necessary for businesses of all sizes, ranging from small enterprises to large corporations. Every study, research finding, and article underscores its critical role in enabling organizations to remain competitive and pertinent in an increasingly digital world.

Several advantages can be derived from digital transformation, including:

• Enhanced data collection
• Higher-quality customer insights
• Improved customer experience
• Elevated productivity
• Augmented profits

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Digital transformation is supposed to reshape the entire market, and organizations that neglect to formulate a digital strategy may risk falling behind.

• 87% of top business executives emphasize the importance of digitalization as a company priority, yet only 40% of organizations have successfully implemented digital initiatives at scale.
• According to data from PwC, 60% of senior executives believe that digital transformation will play a crucial role in business growth this year.
• A study conducted by the Digital Marketing Institute reveals that one in three companies views digital transformation as a matter of survival. CEOs also note that their digital enhancements have already contributed to a 56% profit increase.
• In contrast to their competitors, companies adopting digital-first strategies are 64% more likely to achieve their business goals.
• Research indicates that digitally mature companies are significantly more likely to generate revenues exceeding $1 billion compared to their digitally novice counterparts.
• CEOs highlight that digital transformation has the most substantial impact on operational efficiency (40%), time to market (36%), and customer satisfaction (35%).
• According to McKinsey, investments in digital transformation and the enhancement of customer experience can lead to a 20-30% increase in customer satisfaction and economic gains of 20-50%.

Driving Forces of Digital Transformation

The expansion of the digital transformation market is chiefly propelled by factors like the continuous increase in internet users and smart devices, technological advancements, and government efforts aimed at digitization. Moreover, unexplored opportunities to improve sales efficiency, streamline business processes, and leverage market dynamics all play a role in fostering market growth.

• A majority of digital transformation initiatives are motivated by growth prospects (51%), with increased competitive pressure being the second most common driver (41%).
• Additionally, factors such as high-profile data breach incidents and the introduction of new regulatory standards like GDPR are prompting organizations to adopt transformation (38%).
• Roughly 50% of companies embarked on a digital transformation journey to enhance customer experience and satisfaction.

The Role of IT Decision-Makers in DX Success

Top-tier executives play a significant role in propelling digital transformation forward. As an organization’s capacity to adapt to market changes and consistently deliver value to customers is profoundly reliant on technology, the success of digital transformation is notably influenced by CEOs. Additionally, Chief Information Officers (CIOs) are actively engaged in spearheading efforts for digital adoption.

• CIOs are most frequently responsible for or are sponsors of digital transformation initiatives (28%), while CEOs are assuming an increasingly prominent leadership role (23%).
• CEOs are instrumental in crafting workplace transformation roadmaps for 45% of organizations and contribute to their development in 63%.
• A staggering 97% of IT decision-makers are actively participating in digital transformation projects.
• McKinsey highlights that organizations with a committed Chief Digital Officer have six times greater odds of achieving successful digital transformation.
• The role of the CIO gained prominence due to the pandemic, and this increased visibility within organizations is anticipated to persist. 74% of CIOs concur with this statement, and 78% of their Line of Business (LOB) counterparts share this perspective.

To sum up, high-level executives play a crucial role in advancing digital transformation. Given that an organization’s ability to adjust to market shifts and consistently provide value to customers heavily depends on technology, the success of digital transformation is significantly impacted by the actions and decisions of CEOs.

Investment in Digital Transformation

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As technologies continually advance and emerge, companies must stay abreast by investing in their own transformations. Yet, maintaining the appropriate equilibrium in investment between upkeep and innovation is anticipated to remain a persistent challenge, as indicated by projections. The following statistics underscore the noteworthy surge in digital transformation investment.

• Global expenditure on digital transformation is forecasted to hit $1.8 trillion by the conclusion of 2022 and is anticipated to expand to $2.8 trillion by 2025.
• The World Economic Forum suggests that Digital Transformation could yield $100 trillion in societal and industrial value by 2025.
• A substantial 76% of companies are channeling investments into emerging technologies.
• Despite challenges such as escalating costs, economic uncertainties, geopolitical instability, and a global talent deficit, a recent KPMG survey of 2,200 tech executives, including 100 in the UK, reveals that businesses are heavily investing in digital transformation and plan to continue this trajectory.
• Deloitte notes that the average IT department dedicates over 50% of its budget to maintenance, with a mere 19% allocated for innovative investments.
• Projections indicate that direct digital transformation investment is on track to grow at a compound annual growth rate (CAGR) of 18% from 2020 to 2023.
• By 2023, it is expected to approach $7 trillion as companies build upon existing strategies and investments, evolving into digital-at-scale future enterprises.

Industry-Specific Digital Transformation Statistics

The global progression of digital transformation is evident, with a significant number of organizations implementing various initiatives. However, the interpretation and implementation of digital transformation can vary widely among businesses, influenced by their specific industry. The adoption of new technologies differs significantly from one sector to another, showcasing the diverse implications of digital transformation for each industry.

• Banking and finance services

Financial service executives globally prioritize enhancing customer experience as the primary focus for digital transformation initiatives, with 76% emphasizing customer investment, while 16% prioritize productivity and operational cost reduction in their digital transformation strategies.

The utilization of online banking by EU citizens is anticipated to double from 2009 to 2029.

Chatbots are projected to contribute to annual savings of $7.3 million on customer service budgets for banks by 2023.

According to McKinsey, 47% of digital investments made by financial institutions fail to yield a higher return than the cost of capital.

AI and machine learning advancements are expected to automate 25% of the insurance industry by 2025.

A significant 81% of insurers recognize that technology has become an integral part of the human experience.

Through digitization, an average insurer has the potential to reduce insurance costs by 15-20%.

• Consumer goods

Fujitsu notes that in the retail sector, key motivators for digital transformation encompass improved competitiveness (70%), cost reduction and efficiency enhancement (69%), stronger customer relationships (69%), increased revenue (67%), heightened employee satisfaction (60%), and the transformation of business processes (53%).

As per Gartner, 63% of retailers anticipate increased spending on business intelligence/data analytics, while 35% plan to allocate more budget to artificial intelligence.

A substantial 71% of retailers recognize digital transformation as a crucial component of retail technology.

Harvard Business Review reveals that shoppers utilizing more than four channels spend 9% more than those using only a single channel.

Mobile applications are the preferred shopping platform for 80% of customers, with maximum customer engagement observed through mobile apps.

• Automotive

The global autonomous vehicles market is anticipated to surpass $2 billion by 2030, exhibiting a Compound Annual Growth Rate (CAGR) of 39.1%. The integration of advanced driver assistance systems, coupled with the gradual introduction of automated vehicles, is projected to prevent 47,000 severe accidents, save 3,900 lives, and generate 420,000 new jobs across the automotive, telecoms, and digital sectors by 2030.

Shared mobility facilitated by cloud computing and data-driven services has the potential to expand revenue pools in the automotive industry by 30% by the year 2030.

TIM estimates that there will be approximately 100 million connected cars by 2025. Toyota faces the challenge in connected cars of efficiently managing the exchange of large volumes of data with the cloud.

The implementation of predictive maintenance through Internet of Things (IoT) connectivity tools will empower vehicles to analyze and optimize performance without human intervention. This approach is expected to forecast failures in advance, resulting in improvements of over 30% in maintenance uptime.

Leaders in the automotive sector anticipate that by 2025, vehicles will possess cognitive capabilities to learn the behaviors of drivers, occupants, and the surrounding environment continuously. As the vehicle acquires more knowledge, it will expand its advisory capabilities to encompass other options in mobility services.

• Energy

The diminishing significance of fossil fuels is being counteracted by the swift expansion of renewable energy sources, including wind and solar, bioenergy, and geothermal power. Projections suggest that the share of renewables in the global energy mix will see a substantial increase, ranging from 35% to 65% by the year 2050.

The growing prominence of renewable energy is underpinned by the ongoing electrification of the energy system. The portion of electricity in the overall final energy consumption is expected to rise from approximately 20% in 2019 to a range of 30% to 50% by 2050.

The transition to cleaner energy can be facilitated through the integration of technologies such as blockchain and other distributed ledger technologies (DLTs) with infrastructure. Many consider Infratech, in conjunction with electrification, enhanced efficiency through renewables, hydrogen, and sustainable biomass, as a pivotal driver of the energy transition.

Artificial Intelligence (AI) is anticipated to play a crucial role in the global shift toward clean energy. As per Forbes, there is a discernible shift away from centralized models of power generation and distribution toward decentralized models.

What Capabilities Are Needed to Move the Needle on Digital Transformation?

Successful digital transformation requires a variety of coordinated actions. Rewired lays out six capabilities critical for successful digital transformation:

The ability to craft a clear strategy focused on business value. Companies should focus their transformations on specific domains (customer journeys, processes, or functions) that generate significant value for the business. The transformation should be guided by a road map, which details the solutions and resources needed to deliver change to prioritized domains.

A strong talent bench with in-house engineers. No company can outsource its way to digital excellence. Being digital means having your own bench of digital talent working side by side with your business colleagues. The best digital talent programs go way beyond hiring: they should include employee value propositions that attract and retain the best talent; agile and digital HR processes to find, manage, and train talent; and a healthy environment where the best talent thrives.

An operating model that can scale. Digital transformations depend on cross-functional teams that bring together people from across the company. Most companies already have a handful of these teams, but scaling to support hundreds or thousands of them requires a new operating model. There are three primary operating models to consider: the digital factory, the product and platform model, and the enterprise-wide agility model.

Distributed technology that allows teams to innovate independently. Technology in an organization should make it easier for teams to develop and release digital innovations to users continually. To make this happen, organizations should foster a distributed technology environment where every team can access the data, applications, and software development tools they need. Recent technology advances can help create this distributed environment—these include the thoughtful use of APIs to disengage applications, the availability of developer tooling, the selective migration of high-value workloads to the cloud, and the automation of infrastructure provisioning.

Access to data that teams can use as needed. Reliable, current data are crucial to successful digital transformations. Data architecture should produce data that are easily accessible by teams across an organization and should be continually assessed and updated. Strong governance is required to enable this capability. The core element is the data product, which structures various pieces of data into a coherent unit that can be easily consumed by a range of teams and applications.

Strong adoption and change management. In the past, the technology adoption cycle was a linear process of gathering requirements, developing solutions, testing, and then training the end user. This process often resulted in low adoption rates and ultimately low business value. Digital transformations follow a far more iterative process of designing, prototyping, collecting feedback, and improving the solution so it can capture the full value potential. As a rule of thumb, for every dollar you spend on developing a digital solution, plan to spend at least another dollar on implementing process changes, user training, and change-management initiatives. Companies should think about adoption and scaling at the beginning of their transformation so they can build in the resources needed to deliver the change.

No digital transformation can be successful without coordinated action across all these areas.

What are the Reasons for a Business’s Failure in Digital Transformation?

The emergence of digital transformation has become a tangible reality for the majority of organizations, introducing novel approaches to conducting business in virtual realms. Nevertheless, numerous IT leaders continue to grapple with obstacles such as financial constraints, skill gaps and shortages, resistance to change, and compliance apprehensions.

• According to a survey by PwC, 45% of executives believe that their company lacks the appropriate technology for implementing digital transformation.
• Many companies still view digital transformation as a cost center (28%), and obtaining data to demonstrate return on investment (ROI) is a challenging task (29%).
• Cultural issues, including entrenched viewpoints, resistance to change (26%), and legal and compliance concerns (26%), are significant obstacles.
• In a survey among retailers, the primary challenge in digital transformation implementation is perceived as complexity, with over three-quarters (76%) rating it as somewhat challenging or highly challenging.
• Other key challenges include the availability of skilled staff (75%), upfront costs (75%), the time required to realize benefits (75%), and concerns about security and privacy (74%).
• Anticipating the future, 76% of CIOs expect difficulties in finding suitable skill sets in technology areas like cybersecurity and data science.
• A survey of employees identifies the CEO as the most common obstacle to digital transformation, with 35% citing this challenge. Additionally, 82% of IT security and C-suite executives have experienced at least one data breach attributable to digital transformation.

Reasons Behind Digital Transformation Failure

In various sectors, digital transformation stands as a key to enhancing efficiencies and elevating customer satisfaction among businesses. Nevertheless, not all employers possess the requisite skills and knowledge for successful digital transformation (DX). The most significant challenges faced by companies today are the digital skills gap among employees and internal resistance to change, often leading to the failure of digital transformation initiatives.

• Lack of resistance in employees: Approximately 70% of digital transformation failures primarily come from the resistance of employees.
• One-dimensional approach: Forbes suggests that 84% of DX projects collapse due to a one-dimensional approach, neglecting to address all three levers of digital transformation.
• A clear vision in need: Only 40% of businesses successfully navigate these challenges to establish a truly integrated digital transformation strategy. This entails having a clear vision supported by strategic imperatives and quantified business outcomes, aligning digital initiatives with the overall business strategy to ensure sustainable competitive advantage.
• Industry dependence: A McKinsey study notes that the success rates of digital transformation vary based on industry and company size. Industries with a high level of digital maturity, such as high-tech, media, and telecom, boast success rates of 24%, while traditional companies exhibit success rates ranging from 4-11%.
• Internal conflict: An astounding 75% of executives acknowledge that their business functions compete rather than collaborate on digital projects. Consequently, 64% of executives do not witness a substantial increase in revenue growth from their digital investments.
• Poor customer-engaged applications: Many organizations fail to understand their customers adequately, with 41% investing in digital transformation without conducting thorough customer research.

In Conclusion

This piece delves into the consequences of digital transformation for enterprises spanning diverse industries and sectors. It showcases how digital transformation promotes streamlined operations, increased productivity, and an improved customer experience. We have gathered crucial digital transformation statistics, forecasts, and emerging trends currently gaining popularity, offering insights into the initiatives undertaken by others and the necessary steps to stay competitive in the digital era.

Relipa is greatly proud to own a rich portfolio of Digital transformation and software development. We deeply understand the utmost urgent needs of businesses in this fast-paced technological world. We offer a full cycle of digitalization so that our clients reach a new height of development. For any further concerns in digital transformation or even simply needing a consultancy in tech, we are here to help.