Causation or correlation - The link between approaches to digital transformation and business success
Techaisle’s 2021 US SMB and Midmarket Digital transformation adoption trends research covering businesses from 1 to 4999 employees (collectively named mainstream businesses by Techaisle) shows a correlation between digital transformation and business growth. Unlike many IT market terms, which tie to specific technologies, digital transformation is most often used to indicate an amorphous state. A state in which firms can seamlessly deploy new digital capabilities that streamline current or next-step processes, eliminating the friction inherent in basing these capabilities on manual tasks and physical documents/inputs. SMBs and midmarket firms view digital transformation as a proxy for business process efficiency. For many years, it has been a management goal, embedded, usually without a consistent set of steps and defined outcomes, in the IT plans of a substantial majority of small businesses (1-99 employees) and more than 90% of midmarket (100-4999 employees) firms. The pandemic brought urgency to these plans. The speed reflected the management’s understanding that highly automated processes are essential in a business environment where physical interactions are awkward or forbidden, adding necessity to efficiency as compelling reasons to invest in digital transformation.
Digital transformation segments
To refine the current and planned digital transformation adoption status perspective, Techaisle segmented the market to one of four phrases to characterize organizations’ attitude or approach towards digitalization of existing processes –
- Holistic: Digitalization is an essential aspect of overall business strategy
- Inclusive: Digitalization is a meaningful but non-essential aspect of overall business strategy
- Siloed: Digitalization strategies are underway in some departments, but there is no overall digitalization strategy for the business
- In the shadows: Digitalization may be occurring in areas of the company, but it is neither a departmental nor overall business strategy
- Nonexistent: Business has no digitalization activity or plan; firms have yet to begin digital transformation adoption.
Small business adoption of digital transformation is still at a primary stage. In 27% of small businesses (1-99), digital transformation is either “nonexistent, “in the shadows,” or “siloed.” However, this is vastly lower from 51% in 2020, indicating that small businesses drastically improved their approach to transformation within the last year. Midmarket firms, which have higher overall digital transformation adoption rates, are also much more advanced in their approaches. 90% of midmarket firms take either an “inclusive” or “holistic” approach to digital transformation today. Data shows that there has been an increase of 34% within midmarket firms (100-999) and a corresponding increase of 26% within upper midmarket firms (1000-4999) in their approach to holistic digital transformation from siloed or inclusive approaches.
Digital transformation and business growth