Digital transformation or ERP transformation?

The popular phrase "digital transformation" can be read in many high-profile technology blogs, heard during powerful CEO keynotes and seen splashed across tech company advertisements, but what does it actually mean? And how is it different from an ERP transformation?

First let's break down the phrase and examine one of its components: transformation. The dictionary definition of transformation is "a thorough or dramatic change in form or appearance". If you put a different adjective in front of it, such as visual, it's easier to understand the definition. Just imagine a friend with a full, bushy beard showing up at a party with a clean-shaven face – now that's a dramatic change.

While not quite as visual, a digital transformation can achieve the same effect for an organization. When a company decides to digitally transform, their mission is to implement a thorough change in the form of improving the business outcome while leveraging technology. 

How does it differ from ERP transformation?

For many organizations, implementing (or upgrading) an ERP system is a transformation on its own. Adopting a software suite of this magnitude is enough to tackle without overhauling your entire business model. This is why ERP implementations typically focus on enhancing existing business processes to achieve the efficiency gains that businesses want the most. An ERP transformation simplifies the tools used to operate a business and empowers users with streamlined processes, whereas a digital transformation disregards the necessity of business processes in favor of a better outcome for the organization as a whole.

Simply put, an ERP transformation can be a step along the digital transformation journey but is not the journey itself. To digitally transform, your business must be willing to disrupt the status quo and reimagine better processes and not just the tools that support them.

An analogy

Prior to their digital transformations, the banking industry had a standard business process for depositing checks. When a customer wanted to deposit a check into his or her account, the customer would drive to the bank, fill out a deposit slip and hand the check to a teller. Over time, banks improved on this process by introducing ATMs. The customer would still have to bring her check to the bank but spent less time by using the ATM to make the deposit instead.

This process improvement greatly increased customer satisfaction by lowering wait times and providing the convenience to make deposits even when the bank was closed. This change is analogous to an ERP transformation. Using technology, banks took an existing process and made it better.

Fast forward to today, this process is almost non-existent, yet customers are still depositing checks. Banks have completed a digital transformation by eliminating the process of customers having to physically bring checks to the bank, and instead replaced it with the ability to snap a photo of the check using an app that automatically deposits it into his or her account. Once one bank made this digital transformation, it completely disrupted the industry standard. Competitive banks had to follow suit or risk losing their customers.