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What Does "Digital Transformation" Really Mean?

Like "Internet of Things," the term is often undefined, or is defined very differently by various so-called experts. Here's what digital transformation is all about.
By Mark Roberti
Apr 30, 2018

There are a lot of articles being written and a lot of presentations being given at conferences about the need for companies to undergo a digital transformation to remain competitive. What exactly does "digital transformation" mean? Many articles and speakers fail to define the term. They seem to assume there is a common agreement, which there isn't. Some articles define it simply as the use of technology in all areas of a business to improve performance. Um… companies have been doing that for years. So, what's new here?

To me, digital transformation means breaking down the wall between computer systems and the real world. This enables companies to apply computing power, and eventually artificial intelligence, to every aspect of their operations, not just the existing digital aspects of their business.

Let me provide some examples. A retailer sells goods via a website. It gathers digital information regarding customer preferences, how customers navigate the site, sales volumes, sales velocity and many other factors. It can apply computer applications and AI to predict sales, and therefore ensure items are in the warehouse to be shipped, as well as suggest items that particular customers might like, based on what other customers clicking on similar items bought.

The same retailer has 60 percent inventory accuracy at its stores, has almost no insight into what customers are looking at or are trying on, and does a poor job of replenishing items that are lost, stolen or sold. Digital transformation would give a company the ability to collect data on all aspects of store operations, inventory levels and customer preferences, and apply the same or similar computer programs to in-store activity that it applies to online activity. When true digital transformation is achieved, the distinction between online and in-store sales disappears.

Manufacturers have been applying computer technologies to the factory floor for years. Most large manufacturers have some kind of manufacturing execution software, but so far, most of the data that goes into these systems is input by workers. Information regarding demand, for example, might come from other systems, but sales data was probably input manually or aggregated from data input by salespeople.

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