Information technology has grown so much in recent years that it has a presence in just about every aspect of modern life.
Of course, technology is important in business, too.
Digital transformation is a broad or holistic term that refers to the process a business or organization undergoes to completely integrate information technology into its operations and to use that integration to significantly change and improve the way it performs.
Most businesses have already adopted some level of information technology into their operations. Digital transformation implies a next level of integration that fundamentally restructures operations with technology as an enabling framework for change.
Digital transformation can be applied to various aspects of a business.
Process Transformation
This entails the use of digital technology to alter the way processes are conducted within a business. Processes vary depending on the type of market activity a business engages in.
An automotive manufacturing business, for example, will have very different processes than a retail company.
In either case, digital transformation will enable these businesses to change the way they create or provide a product or service and interact with their vendors, suppliers, and customers.
The transformation will greatly improve these interactions and allow the business to meet its strategic objectives more effectively and efficiently.
Business Model Transformation
This implies that the business will use digital technology to alter the business's core functionalities. In today's business environment, market trends and consumer demands change rapidly.
Digital transformation allows a business to more effectively change its business model to keep up with the rapidly changing marketplace.
For example, a media company whose core service historically was delivering the news through a daily print newspaper may transform itself into a digital media outlet, delivering the news through online channels like a website, blogs, podcasts, and videos.
Domain Transformation
This refers to changes in a particular area of the business rather than just a specific function or process. For example, a credit card company can change the way customers submit applications for a new credit card.
At the same time, it can also change the intake process for these applications, as well as how they are reviewed, evaluated, and approved. This changes the entire experience for new customers.
In addition to making it easier for them to apply for a card, the approval process is also enhanced with reduced wait times, more efficient review of applications, and more reliable, data-driven approvals.
Cultural or Organizational Transformation
This implies a fundamental change in the value system and frame of mind embraced by the business.
These changes permeate the entire business from the top level down to the rank-and-file employees. It involves training, education, and commitment on the part of the entire team.
Digital transformation can be a cultural change in and of itself because it often requires the entire team to embrace a new approach and reliance on digital technology to meet strategic objectives.
Digital transformation can also empower a cultural change in other ways, such as how employees interact with customers or how they make decisions about the operations of the business.
Digital transformation affects accounting in many ways.
Accounting Automation
Accounting automation, also known as computerized accounting, refers to the use of software applications to perform the essential functions involved in the process of maintaining a business’s financial records.
Accounting software can execute fundamental tasks, such as capturing and entering data into the business ledger, reconciling discrepancies, updating records, and producing reports and financial statements.
Artificial Intelligence (AI)
Artificial Intelligence (AI) in accounting automation platforms can execute accounting tasks such as entering and matching data from receipts and invoices to purchase entries in accounts receivable and enforcing company policies in the expense reimbursement process.
Cloud computing in accounting involves the storage of information in a centralized database that can be accessed over the Internet (the cloud) from anywhere.
With cloud computing, accounting information is not stored primarily on one or more employees’ desktop computers. Instead, it is stored in a centralized place that everyone can access.
Data entry, which is the input of information into a centralized source, is dramatically altered by digital solutions. Traditional accounting systems involve data entry using paper ledgers.
Digital solutions can eliminate the need to manually enter this information. Instead, computer processes capture the data from different source materials and input it into a central information source.
Robotic process automation is a form of automation that performs repetitive assignments, including sorting, data insertion, form completion, and interpretation of text and data.
Unlike AI, RPA does not learn or develop logic, instead relying on structured data and rules. It can greatly reduce processing time and free up staff for other work by performing these time-consuming, repetitive tasks.
Digital transformation involves a strong commitment and effort from all levels of an organization. Everyone must embrace the concept of change and be willing to embark on the journey that it entails.
This includes a financial investment and a commitment to training, education, and implementation. It also involves having the right staff on board, with the right mindset and expertise, who can shepherd the change.
Digital transformation is often a long-term commitment. It will not happen in a few months. It might even take years. It may last longer than the tenure of the executives who initiate it, but it will set up a business for long-term growth and continuous evolution.
Digital transformation represents much more than purchasing software to improve one or two processes within the organization.
It leads to major changes across the organization, not just in the technology that is used, but how the technology is integrated and how the shape and character of the organization change as a result of that integration.
Today's business environment is rapidly changing. Digital technology is literally everywhere.
Businesses must be adaptable and changeable in order to survive and thrive, and in almost all cases, that includes incorporating the latest digital applications to improve processes and functions.
A business that is not prepared to undergo some degree of digital transformation is risking its competitiveness and its ability to survive in the modern marketplace.
Of course, leadership plays an important role in the digital transformation of an organization, and that starts at the top. CEOs must set the tone, direction, strategy, and priorities in any effort to pursue digital transformation.
The process also requires a tremendous amount of patience and flexibility because digital transformation is not an easy or simple process. It takes time and it may evolve in unforeseen ways as issues arise and new solutions become available.
Support from all levels of staff is also imperative. CFOs, controllers, account managers, staff accountants, and others all play a part. The process may require any and all of them to approach their responsibilities in a different way.
They may need to reimagine their traditional roles. This reimagining includes the need for them to embrace change, communicate clearly, be ready and able to collaborate with individuals and teams outside of their normal sphere, and have a willingness to learn.
Just as individuals and their roles contribute to the success of digital transformation, company culture also plays a part. Culture reflects the mindset, attitude, value system, ethics, and philosophy of a business.
The wrong combination or an insufficient assessment can doom any attempt at digital transformation.
In order to succeed, the culture must embrace the right combination of ideals. When it comes to digital transformation, this includes imagination, communication and respect, patience, a willingness to change and innovate, and a long-standing commitment to the efforts that make that possible.
Any business that embarks on a digital transformation without the necessary mindset, commitment, and execution runs the risk of failure. A number of factors can undermine success.
Poor planning, including the lack of clear goals and objectives, and an insufficient financial commitment can hinder any effort. Lack of vision from leadership and commitment from staff will deprive the effort of the support it needs.
Similarly, a lack of expertise, knowledge, and training can be a formidable handicap. An inadequate assessment of the corporate culture and what is possible will also lead to an attempt at transformation that lacks the appropriate strategy.
Finally, some businesses may try too hard, move too fast, and take on too much, leaving staff overwhelmed and unengaged in digital solutions.
The challenges of making a successful digital transformation mirror some of the potential benefits.
For example, a business that successfully undergoes a digital transformation is likely to undergo a cultural transformation. However, cultural resistance within the organization may also hinder its ability to make the necessary changes.
Digital transformation will also change the way that businesses interact with their customers. At the same time, consumer demands are always evolving. A business must be prepared to adjust to constantly shifting expectations. A well-executed digital transformation will position the business to respond to a rapidly changing marketplace.
Budgets may also pose a challenge. Technology is not inexpensive, and a business must be willing to invest in the necessary solutions to benefit from digital growth.
Strategy is also important. A business that is embarking on digital transformation must also have well-defined objectives and a clear vision of how the change will help it meet its long-term goals.
The BlackLine Transformation team will help take your modern accounting journey to the next level with leading practice optimization strategies from thousands of transformation projects. Schedule a demo with BlackLine today and take your digital transformation to new heights.
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