[Articles](/articles.html)>[Business](/articles.html#business-articles)> What is digital transformation in business? # What is digital transformation in business? April 20, 2026 • 8 minutes Written by[Jennifer Verta](/blog/authors/jennifer-verta.html) Reviewed by [Kathryn Uhles](/about/academic-leadership/dean-kathryn-uhles.html), MIS, MSP, Dean, College of Business and IT Businesses operate in an environment that is ever changing. Understanding the impact technology can have on shaping organizations’ health and strategy is important for professionals who aim to stay competitive. ## An overview of digital transformation for businesses What does digital transformation mean for modern businesses? It refers to a strategic shift in which organizations integrate digital technologies across operations, products and services to change how value is created and delivered. The emphasis is not on isolated tools but on coordinated, enterprise-wide change. The term digital business transformation, often abbreviated as DBT or DX, describes the broader reconfiguration of how companies operate and stay competitive.  ### Digitization vs. digitalization vs DBT To learn about this business process, it's important to understand the difference between related terms in the field. First, digitization is the transforming of data from an analog to a digital format, such as when one scans a picture to create a digital version. Digitalization means using digital tools to enhance current processes and add value. A good example of this is when a physical store creates a social media account to reach more clients. DBT extends further, touching an organization’s strategy, structure and culture. Each term signals a different depth of change and business impact. ## Why digital transformation matters For some organizations, a digital shift can be a necessity to survive, but that is far from the only reason businesses embark on digital revolutions. ### Customers Many organizations embrace DBT in an effort to better manage and satisfy the experience demands of their customers. Some customers, for instance, may prefer companies that provide a range of digital options for interaction, purchase and service. It can be easier for organizations to meet these demands by gathering data, coordinating internal operations and[innovating continuously](https://www.phoenix.edu/blog/what-is-product-innovation.html). ### Operational efficiency Optimizing internal processes can be a core driver of effective digital change. This can involve streamlining processes to eliminate redundant activities or using digital automation to optimize and free up more bandwidth for valuable work. Intelligent processes might make it quicker for businesses to deliver products or services, and they might help leaders make better informed decisions. ### Competitiveness Another incentive to incorporate digitalization comes from market competition. Organizations that invest in modernized infrastructure may be better positioned for more sustainable growth. Their adaptability could allow for easier updates, venturing into new markets and better coping with market disruption. Businesses that integrate people, process and technology effectively, also known as[the golden triangle](https://www.smartsheet.com/content/people-process-technology), tend to be better equipped to maintain agility while driving business value. ### Cost The use of new digital technologies can also help reduce costs by improving processes or understanding which areas are not performing. A practical example of this could be a company moving its data to the cloud to save on both hardware and employee time. ## Technologies driving digital transformation A range of different established and emerging technologies is powering DBT. Together, they have the potential to reshape businesses’ operations and decision-making. Below are notable examples: ### Mobile technology Mobile platforms let employees and customers access systems and services on various devices. With mobile apps and the possibility of always-on availability, businesses have increasing opportunity to reach an ever-widening market. ### Cloud computing Cloud computing provides flexible infrastructure that allows companies to store, process and access data on demand. Using cloud platforms, organizations may scale IT resources as needed, support distributed teams and reduce operational friction. ### Internet of Things (IoT) Internet of Things refers to the category of devices that are connected to the internet and can gather and share data. They can be embedded in equipment, vehicles and even home appliances. ### Automation Automation tools, such as robotic process automation (RPA), reduce relatively simple repetitive manual tasks, such as data entry, document processing and basic workflows. Essentially, they function by replicating the process taught by the user. ### Artificial intelligence (AI) and machine learning (ML) AI and machine learning assist businesses in automating complex tasks. Different from automation, they can analyze large datasets, learn from them and improve their operations over time. Integrating these technologies into every business process can allow workflows to operate more smoothly, potentially increasing the value the business can deliver. As a result, teams can automate tasks, share information across departments, monitor operation and track performance. Moreover, in an age when data is power, information collected from cloud, AI and IoT tools can reveal trends, highlight performance gaps and guide planning. These analytics may help organizations measure the impact of initiatives, allocate resources effectively and adjust processes. ## Challenges in implementing digital transformation Organizations may face several obstacles when attempting to implement digital transformation. Besides simply not knowing where to start, companies might struggle with: - Changing how knowledge is shared, moving from a top-down model to every employee sharing their expertise - Fostering curiosity, helping workers notice their skill gaps and connect learning to decisions - Promoting an information culture, so data and tools reach every team, as well as partners and customers - Balancing old and new business practices, keeping existing operations running while adopting digital channels - Handling legacy systems, connecting or updating older technology without disrupting work - Choosing the right technology and managing costs, making realistic plans for adoption and results - Keeping leaders and stakeholders aligned, so priorities and decisions stay coordinated across the organization ### The power of acknowledging ambiguity A simple strategy to overcome resistance to change is to address uncertainty directly. Rather than attempting to remove ambiguity, organizations may benefit from helping teams operate effectively within it. Clarifying the overall corporate strategy, supporting experimentation, encouraging feedback and allowing phased adoption can help employees adjust during the transition. ### The role of leadership The direction leadership takes during a company’s digital evolution can make a difference in the operation’s success. When the C-suite and management clearly champion the business need and the potential benefits, employees may accept the changes more readily. When it comes to innovation, leaders may benefit from being intentional with their messaging. Using language that emphasizes learning, limited scope and clear time frames can help teams engage without associating change with the threat of failure. ## Cultural considerations in digital transformation Leadership normally sets the tone for how work is done. The actions leaders take, the behaviors they reward and the priorities they communicate can shape an organization’s daily routines and eventually its culture. When[leaders take a coaching approach](https://www.phoenix.edu/articles/business/what-is-a-coaching-leadership-style.html)and encourage learning, experimentation and collaboration, the organizational culture can better support digital adoption, and teams may better embrace change. ### Examples of digital transformation strategy Various approaches are available to companies to foster a digital-first mindset. One of the most well-known is the[framework employed by McKinsey & Company](https://www.mckinsey.com/capabilities/tech-and-ai/our-insights/from-disrupted-to-disruptor-reinventing-your-business-by-transforming-the-core), which provides a structured, four-step approach: 1.    Discover: Identify areas where digital solutions offer value 2.    Design: Build processes and tools aligned with priority business goals 3.    Deliver: Implement changes iteratively across teams and departments 4.    De-risk: Sequence initiatives to manage risk and maintain momentum Other strategies to sustain a company’s digital adoption might focus on clearly tying initiatives to business goals and giving teams a concrete sense of purpose and measurable outcomes. Small pilots to test solutions before a wider rollout can also be a good idea. Careful sequencing of implementations can reduce disruption, while encouraging interdepartmental collaboration can improve access to knowledge, tools and best practices throughout the company. ## Where is digital transformation taking place? Digital modernization occurs across functions and industries. For some companies, it might look like upgrading internal workflows through automation. For others, it can involve setting up digital platforms to connect employees and customers. Others might leverage analytics to improve planning and service delivery. Other examples of DX execution are: - A public healthcare system implementing a cybersecurity center able to monitor and block threats, while growing the number of digital services offered to patients - A major international sports tournament leveraging AI to enhance the content experience of fans using different devices - A car manufacturer that, when moving to an electric model, embraces digitization early in the process to offer its clients a more cohesive experience ### Digital evolution by various industries Industry context also influences how transformation unfolds. For instance, retail has adopted automation and data analysis to optimize logistics and create personalized buying experiences. Insurance clients can now use digital self-service portals to carry out a variety of operations, such as enrolling or submitting claims, which previously required interacting with agents. Manufacturing and supply chains now employ digital tools to monitor processes from securing raw materials to delivering final products. These can help companies better plan for contingencies and disruptions. ## How to prepare to lead digital transformation Professionals aiming to guide organizations through digital transformation might find further education helpful to bridge knowledge gaps. University of Phoenix offers various[online business degrees](https://www.phoenix.edu/online-business-degrees.html)to prepare for the next phase of their career. Reach out to the University[for more information](https://www.phoenix.edu/request/request-information). Read more articles like this: [What is Scrum Methodology? Online Degrees June 01, 2025 • 5 minutes](/articles/business/what-is-scrum-methodology)[What Can You Do With a Business Management Degree? Online Degrees July 12, 2024 • 13 minutes](/articles/business/what-can-you-do-with-a-business-management-degree)[What Are the Types of Business Models? Online Degrees January 13, 2022 • 6 minutes](/articles/business/what-are-the-types-of-business-models) ### ABOUT THE AUTHOR Jennifer Verta is a multilingual writer and content manager based in the Raleigh, North Carolina area. She holds a background in languages, marketing and digital communication and brings an international perspective to her work. Her areas of focus include legal, health, wellness and career advice content. In her free time, she enjoys traveling and discovering new cultures. ### ABOUT THE REVIEWER As Vice President, Accessibility, Equity and Inclusion, Kelly Hermann leads services to students with disabilities, digital accessibility initiatives and the Office of Educational Equity. She chairs the special interest group for online learning and distance education for the Association on Higher Education and Disability (AHEAD) and the accessibility task force for 1Ed Tech and frequently presents on the topic for AHEAD, OLC, WCET and other national organizations. This article has been vetted by University of Phoenix's editorial advisory committee.  [Read more about our editorial process.](/blog/editorial-process.html) ## FREE Business Programs Guide Make informed decisions with inside details about our business programs, the skills you’ll earn, the faculty who’ll teach you and more. ## Thanks for requesting the Business Programs Guide Download PDF now. Or access the link in our email. ## Free Business Programs Guide. Please enter your first and last name.