Artificial Intelligence and Digital Transformation 101
You’re probably going to fail at digital transformation.
At least, statistically speaking. McKinsey says that less than 30% of digital transformation projects succeed. In some industries, the success rate is as low as 4%.
But it doesn’t have to be like this.
A big reason digital transformations fail is because companies don’t adequately leverage artificial intelligence.
“The organizations with successful transformations are likelier than others to use more sophisticated technologies, such as artificial intelligence,” says McKinsey.
Yet, many business leaders still shy away from AI. They don’t understand it or don’t see how to apply it effectively to digital transformation projects.
In this article, I hope to change that. I’ll discuss why AI plays such an important role in digital transformation, and how it provides unique benefits during the process.
If I’ve done my job, you’ll come away with a clear picture of how to start incorporating AI into your digital transformation work.
What is digital transformation—and what isn’t it?
I’ll be honest with you…
The term “digital transformation” isn’t that descriptive. It skirts the line of becoming a buzzword. Love it or hate it, it’s now a common term.
But, digital transformation isn’t always a commonly understood term.
Digital transformation is when you integrate technology so extensively into your business that you fundamentally change how the business operates.
Digital transformation is not adopting a shiny new technology. It’s not buying a new software platform. It’s much more than that.
Digital transformation is when you rethink how your business works—from the ground up.
That rethinking makes two assumptions:
- That technology has been successfully applied to every aspect of your operations, from IT to product design to customer service to marketing and sales.
- That your talent and culture have also been upgraded to effectively use and improve this technology.
This rethinking doesn’t just take place on paper. Even with a great digital transformation plan, you still have to actually adopt new processes, frameworks, tools, and technologies across different areas of your business.
This sounds simple, but it’s really hard. McKinsey estimates that less than 30% of companies succeed at digital transformation.
That’s because real, lasting digital transformation requires changes to almost every aspect of how you do business.
That requires buy-in and know-how from every department. It also requires difficult technology and organization challenges. Oh, and true digital transformation can take years and cost a fortune.
But it’s not all doom and gloom…
While digital transformation is hard, you can make it a lot easier and much more successful when you incorporate artificial intelligence into the process.
Why AI is a key part of digital transformation
AI isn’t just a buzzword…
AI comprises a group of real, game-changing technologies that are the key to completing a successful digital transformation.
AI is the “science of making machines smart,” which means teaching machines to do human-like tasks. We teach machines to see, hear, speak, write, and make predictions, recommendations, and decisions.
Unlike traditional software (think your typical automation, CRM, and operational software), AI has the power to analyze huge sets of data, then make predictions based on that data. AI can then improve its results over time by learning from the data.
Data is the key to understanding why AI matters to digital transformation.
AI is essential for digital transformation, because digital transformation relies on data.
Data is the lifeblood of every modern business. Every interaction your business has with customers and markets generates data.
This data comes from almost everywhere, including CRM systems, marketing platforms, website analytics, social media, online orders…and hundreds of other sources.
This data contains essential insights that keep your business successful and competitive. Insights like:
- What consumers want and don’t want.
- How consumers find and engage with your company.
- What products and services are most useful to create and promote.
- What behaviors make consumers likely to buy.
- What your competitors are doing to win market share.
- How to achieve better efficiency and productivity.
- How to achieve better profitability.
- And much, much more.
These insights help you make better decisions at speed—decisions that massively improve business outcomes.
There’s just one problem…
Traditional technology does a poor job of unlocking the value from your data.
The traditional technology you use today is entirely rules-based. It has been explicitly programmed by a human to perform tasks. But it can only do what it’s told to do. It never adapts or improves unless human programmers update it.
That means traditional technology can’t analyze data. It can’t learn from data. And it can’t improve how it operates based on new data. That makes traditional technology pretty useless for digital transformation.
Make no mistake, traditional technology is valuable. It has historically been used to automate and/or speed up tasks, leading to cost savings and productivity gains. It also has made activities more trackable.
(For instance, marketing automation software has made marketing easier and more metrics-driven.)
That worked well in the early internet era, when companies still relied on rudimentary online presences and lots of offline activities.
Today, though, this technology looks downright dumb. It can automate activities and track data. But it can’t truly analyze or predict anything. It can’t change or adapt to new information. Only AI can.
That makes AI a need to have, not a nice to have, for any serious digital transformation program.
Without the ability to analyze, predict, and improve based on data, your digital transformation will fail.
It really is that simple.
Today, your traditional technology can provide and visualize data, which is helpful, but now common. But it can’t help you learn from that data or make decisions based on it.
AI can. That’s why it needs to be front and center in your digital transformation work.
How AI helps digital transformations succeed
Companies are using AI to support digital transformation across most areas of the business. According to data from TDWI Research, the top five departments where AI is being used today are:
- IT — AI is used to detect and prevent security breaches, and automate processes.
- Operations — AI is used to partially or fully perform repetitive, data-driven tasks, like accounting functions.
- Engineering / R&D — Predictive models use AI to do everything from simulate outcomes to perform preventative maintenance.
- Customer service — AI chatbots and intelligent assistants are used to provide fast, convenient, and rewarding experiences for customers.
- Marketing — AI has hundreds of marketing use cases, including predicting churn and conducting behavioral analysis on your customers.
According to the same research, organizations are mostly using structured data, text data, and time series data in their digital transformation work. This makes sense. All three are areas where AI can be applied to extract insights and make predictions.
TDWI also says a handful of major use cases dominate AI-powered digital transformations:
- Building predictive models across a range of business use cases.
- Automating insight generation.
- Building intelligent apps for internal and external use.
- Automating data quality.
- Using robotic process automation (RPA) to automate activities.
- Deploying conversational AI in the form of chatbots and intelligent assistants.
When you look at the commonalities between all these departments and use cases, AI’s value becomes clear…
AI reduces costs and increases revenue at scale.
AI reduces costs by using your data to automate costly, time-consuming activities like:
- Data analysis.
- Customer communications.
- Data-driven finance and operational functions.
- Network monitoring.
- Creating and summarizing text and reports.
- Creating marketing and sales collateral and communications.
AI also unlocks unprecedented revenue opportunities by using your data to get better insights and make better predictions like:
- Understanding customer behavior.
- Modeling business outcomes.
- Predicting customer churn and customer likelihood to close.
- Predicting marketing and sales performance.
- Revealing new revenue channels and tactics.
At the end of the day, it’s not about buzzwords. It’s about data.
Data drives every aspect of digital transformation, no matter what type of company you are. AI is the only way today to unlock the value of that data.
How to get started with AI for digital transformation
The easiest way to get started with AI for digital transformation is to take our free class, Intro to AI for Marketers.
It’s a live, online class that lasts just 30 minutes. In it, you’ll learn:
- What AI is, and why it matters to marketers.
- How to identify AI use cases.
- How to find and evaluate AI technology vendors.
- How to classify AI applications within the five levels of the Marketer-to-Machine ScaleTM.
- What business outcomes AI can help you achieve.
- How to measure the value of AI tools on your company’s efficiency and performance.
- How to prepare your team for piloting and scaling AI.
It’s taught by Marketing AI Institute founder/CEO and AI expert Paul Roetzer—and it’s completely free.
But space is limited. Click below to reserve your spot today.