What is digital transformation? The importance of digital transformation

Digital transformation is an essential activity that any business needs to promote to boost business efficiency. So, what is digital transformation? What is an effective digital transformation solution for businesses? Let’s find out with 1Office in the article below!

1. What is digital transformation?

Digital Transformation is the process where a business applies technology to its operations to change its management methods, leadership, work processes, and company culture.

Simply put, digital transformation is the process of changing from traditional business models to modern ones based on the application of new technologies such as Big Data, the Internet of Things (IoT), Cloud computing, etc. Businesses can leverage the power of digital technology to create new value, improve performance, enhance customer interaction, optimize processes, and promote sustainable development.

2. Differentiating between digital transformation and digitization

Below is a table differentiating digital transformation from digitization based on specific criteria:

As can be seen, digital transformation is broader in scope than digitization, encompassing changes in how operations are organized and new value is created through the interaction between technology and the organization. Meanwhile, digitization primarily focuses on converting data from physical to digital formats to optimize management and access.

3. Benefits of Digital Transformation in Business Operations

Digital transformation plays a crucial role in the growth and success of modern businesses. It is not just about using new technology, but a comprehensive change in how businesses operate, interact with customers, and manage resources. The notable benefits of digital transformation in business operations include:

• Saves Operational Costs for Businesses: Digital transformation helps businesses minimize costs related to traditional operations and management. For example, moving from printing on paper to storing and sharing documents online reduces printing and paper costs.
• Optimizes Business Operations: Digital transformation allows for the automation of business processes, improving accuracy and processing speed. For example, an automated system for inventory management and reordering helps prevent stockouts and inventory waste.
• Better Information Management and Resource Utilization: Businesses can use data to predict market demand and trends. For example, a retail store can analyze sales data to identify which products are in higher demand and need to be restocked.
• Enhances Customer Experience: Digital transformation helps create a better shopping and customer interaction experience. For example, a mobile app allows customers to easily look up product information, place orders, and track their order status.
• Increases Business Agility: A digital infrastructure allows businesses to adapt quickly to change. For example, a manufacturing company can adjust its production line to switch from making one product to another quickly.
• Increases Transparency and Efficiency in the Business Management System: Information can be shared easily and transparently throughout the entire organization. For example, an online project management system allows all project members to track progress and contribute ideas
• Improves Work Efficiency: Employees can focus on creative tasks instead of repetitive work. For example, a system that automatically processes employee leave requests saves time for both employees and the HR department.
• Boosts Opportunities, Enhances Competitiveness: Digital transformation opens up new opportunities through the adoption of new technologies. For example, applying artificial intelligence to analyze customer data can help businesses better understand their needs and create new business strategies.
• Increases Profits and Sales Revenue: Improving the customer experience and business processes leads to increased profits. For example, creating a user-friendly website that makes online shopping easy can boost sales.
• Contributes to Building a Better Corporate Culture: Digital transformation can drive cultural change within a business. For example, using online tools to share knowledge and ideas between departments can foster a spirit of collaboration and innovation.

4. 3 Levels of Digital Transformation for Businesses

4.1. Data Digitization – Digitization

Data digitization (Digitization) is the first stage in the digital transformation process. This stage focuses on converting data from physical to electronic form. Here, information from papers, documents, and records is converted into electronic data for easy storage and access. The main goal of data digitization is to create an electronic database for information management.

An example is converting customer records from paper files to an electronic data management system.

4.2. Process Digitalization – Digitalization

After data has been digitized, the second level is process digitalization. In this stage, traditional business processes are improved and optimized using digital technology. Instead of performing manual activities, technology is applied to automate and optimize these processes. This helps businesses improve efficiency, save time, and minimize errors.

For example: applying a business process management (BPM) system to track and optimize workflows between departments.

4.3. Comprehensive Digital Transformation – Digital Transformation

The highest level of digital transformation is comprehensive digital transformation. This is the process of transforming an organization’s entire business model based on a digital platform. It not only involves digitizing data and processes but also includes how the business thinks, operates, and interacts with customers. New technologies commonly used in this stage are artificial intelligence (AI), the Internet of Things (IoT), and data analytics to create new value and expand the business model.

5. The current state of digital transformation among businesses in Vietnam

According to a 2020 analysis report by Vinasa, over 92% of businesses in Vietnam have shown interest in or have applied digital transformation in their business operations. However, less than 10% of them believe their digital transformation has been successful and has brought significant value to their business. Small and medium-sized enterprises account for 97% of the total, but most are not yet ready for digital transformation due to a lack of innovation and technological knowledge. 92% of these businesses do not understand digital transformation, and 72% do not know where to start.

By 2021, the vast majority of businesses had adopted software and solutions for multi-channel management, online sales, and distribution channel administration. The specific figures are as follows: 

• Approximately 100,000 stores in Vietnam use sales and channel management software like Kiotviet, Sapo, etc.
• Hundreds of thousands of businesses sell directly on e-commerce platforms like Lazada, Shopee, etc.
• 20% of advertising spending in Vietnam is allocated to digital marketing on platforms like Facebook, Google, TikTok, etc.
• 60% of businesses use accounting software, with 200,000 of them using Misa software.
• Over 200,000 businesses use e-invoicing software.
• Most businesses are equipped with digital signatures.

Overall, businesses are implementing digitization at level 1, which is data digitization. Some businesses have also reached the second level of digital transformation, which is process digitization. However, the efficiency brought to businesses is still not high. Many businesses still mistakenly believe that applying a few technologies to their business operations constitutes a successful digital transformation. This leads to subjectivity and misconceptions in the mindset and digital transformation activities of the business.  

6. Should businesses invest in digital transformation during the current period of economic volatility

Suffering from the consequences and repercussions of natural disasters, pandemics, wars, etc., the global economy has been severely affected over the past year. Vietnam is no exception. In particular, economic experts predict that the global economy will fall into a serious crisis in 2023. To date, many countries around the world have been on the brink of recession. Many businesses have had to cease operations or even go bankrupt. 

So, should businesses invest in digital transformation at this time?

In the context of the 4.0 revolution, implementing digital transformation is an activity and an inevitable trend that all businesses need to promote. However, the application of digital transformation will largely depend on the capabilities and capacity of the business, especially during a time of global economic volatility. Therefore, when deciding to invest in digital transformation, businesses need to carefully consider the following factors: 

• Financial Capability: During a period of economic volatility, investment can be difficult for some businesses. Before investing in digital transformation, it is necessary to consider whether the business has sufficient financial resources to implement the transformation project and sustain operations for the required period.
• Digital Transformation Strategy: Businesses need to clearly define their digital transformation goals and strategy. This includes identifying specific aspects of business operations that need to be digitized, processes that need to be optimized, and how to use technology to create value.
• Organizational Capacity: Implementing digital transformation may require changes in how operations are organized. Businesses need to assess whether they have sufficient capability and capacity to manage and implement these changes.
• Human Resources: A crucial factor is having enough personnel with the knowledge and skills to carry out the digital transformation. Businesses need to conduct training for existing employees or hire new staff with digital skills (if necessary).
• Risks and Challenges: Investing in digital transformation also means facing risks and challenges. It is necessary to clearly consider aspects such as data security, dependence on technology, and the potential for project failure.

7. Digital Transformation Trends in Vietnam in 2023

Trend 1: Multi-cloud Architecture

Multi-cloud architecture is the simultaneous use of two or more different cloud computing platforms to store, manage data, and deploy applications. This trend is becoming increasingly popular for optimizing work and data management for businesses.

• Enhance work productivity: Using a multi-cloud architecture helps centralize management and simplifies the process of managing work and data. This facilitates IT (Information and Communications Technology) teams in managing resources and tasks more effectively.
• Optimize cost management: A good multi-cloud management system can track and optimize cost management. Businesses can easily identify and control the use of cloud resources and adjust according to actual needs.

Additionally, managing different cloud infrastructures also poses challenges. Businesses need to seek automation and cloud management solutions to ensure effective management of different cloud environments.

Trend 2: Business Model Automation

Business model automation is the use of digital software to automate work steps in business processes, especially multi-step and repetitive tasks. The characteristics of business model automation are as follows: 

• Uses a combination of software solutions and digital technologies to automate work steps. Examples include: machine learning, robotic process automation (RPA), artificial intelligence (AI), low-code, etc.
• Focuses on automating processes and activities within the business’s model.
• Is specifically tailored to the needs and processes of each company, often involving multiple enterprise Information Technology (IT) systems.
• Is complex, involving connection and interaction with many different systems.

According to Deloitte, 93% of business leaders expect to use business process automation by 2023. This further demonstrates the growing popularity of the business model automation trend. Business model automation will be an effective solution to help businesses improve productivity, operational efficiency, and create a better customer experience. In fact, banks have applied solutions based on AI and BPA technology with the ability to reduce customer waiting times by 80% through process automation.

Trend 3: Hybrid Work Model

The hybrid work model is a significant trend following the Covid-19 pandemic, where employees have the flexibility to work from both home and the office. The characteristics of the hybrid work model include:

• Allows employees to work from home and at the office on a flexible schedule.
• This flexibility allows employees to manage their own time and not feel pressured to be present at the office every day.
• Businesses can adopt this model by assigning some departments to work at the office, some at home, or even rotating between both arrangements.

When businesses adopt this model, it creates flexibility in the work process for employees, thereby creating a balance between work and personal life. Businesses can build a flexible working environment for their staff, enhancing work performance.

Although the hybrid work model is not yet widely used in Vietnam, it is gaining attention from multinational corporations and has recently changed the perspective of some organizations.

Businesses can consider implementing tools and systems to support the hybrid work model, such as remote progress monitoring, document management, and customer collaboration. However, managing remote employees also poses challenges in maintaining team interaction and cohesion.

Trend 4: Application of Data Analytics in Business 

The application of data analytics in business is a crucial factor in the digital transformation process and business operations optimization. Data analytics tools help businesses capture, process, and understand information from data. It also allows for the generation of important insights from data, supporting business decisions based on accurate and scientific figures.

The reasons why businesses should apply data analytics to their operations include: 

• Cost savings and optimization: Data analysis helps optimize processes, minimizing waste and unnecessary costs.
• Increased productivity: Based on information from data analysis, businesses can optimize the work performance of employees and resources.
• Better decision-making: Data-driven decisions are more reliable, helping businesses formulate more effective strategies and actions.

This digital transformation trend is commonly applied by businesses in two main areas: marketing-customer relations and internal data analysis. Specifically: 

• Personalized marketing: Data analysis helps to better understand customers and create personalized marketing strategies based on their interests and behaviors.
• Customer prediction and expectation: Data analysis allows for predicting future customer behavior, helping to create appropriate strategies.
• Market data analysis: Understand the market, trends, and customer behavior to formulate business strategies.
• Production data analysis: Optimize production processes, improve quality, and forecast demand.
• Financial data analysis: Manage finances effectively, predict financial trends and risks.

Trend 5: The explosion of Customer Data Platforms (CDP)

A Customer Data Platform (CDP) is a system that collects and manages customer data from various sources such as websites, mobile apps, social media, email, sales transactions, etc. The goal of a CDP is to create a comprehensive picture of each customer, helping businesses better understand their behavior, interests, and needs.

Currently, CDPs have been successfully implemented in many businesses in Southeast Asia, helping to optimize marketing and create better customer experiences. In Vietnam, CDPs can be integrated with POS and ERP systems to optimize multi-channel marketing. Therefore, a Customer Data Platform (CDP) will be an effective solution to help businesses:  

• Personalized marketing: CDPs help businesses create personalized marketing campaigns based on information from customer data sources.
• Omnichannel customer experience: CDPs allow for tracking and optimizing the customer journey across various communication channels such as email, messages, social media, websites, physical stores, etc.
• Customer data management: CDPs help organize and manage customer data effectively, ensuring accuracy and security.

Trend 6: The widespread adoption of 5G and the Internet of Things (IoT)

The Internet of Things (IoT) is a network connecting devices, objects, and sensors, allowing them to exchange data and information to perform specific functions without human interaction. 

5G is the new generation of mobile networks with faster transmission speeds, lower latency, and the ability to connect a large number of devices simultaneously. 

The widespread adoption of 5G and the Internet of Things (IoT) is creating many new opportunities in digital transformation, from creating smart manufacturing environments to applications in healthcare, transportation, and many other fields. Specifically: 

• Industry 4.0: IoT and 5G together create a smart manufacturing environment, with the ability to monitor, automatically control, and optimize production processes.
• In the healthcare sector: IoT devices can remotely monitor patients’ health and transmit data to medical facilities for health status tracking.
• In transportation: 5G and IoT can create smart transportation systems, from traffic management to self-driving cars.

The application of 5G and IoT in production process management has helped Ericsson reduce design time and product defects. Similarly, the Yen Phong Industrial Park in Bac Ninh has also applied 5G and IoT in smart manufacturing, opening up a bright future for industry in Vietnam.

Trend 7: Focus on data protection and enhanced cybersecurity 

Focusing on data protection and enhancing cybersecurity is a crucial part of the digital transformation process. This ensures that business information is protected and online activities are conducted safely.

Applying Artificial Intelligence (AI) and Big Data in security helps businesses automatically detect and prevent threats and manage and process large datasets. To carry out these activities effectively, businesses also need to organize training and raise security awareness for employees. At the same time, building a cybersecurity culture also plays an important role in promoting compliance with security regulations and procedures.

Businesses need to comply with personal data protection regulations (GDPR, CCPA, etc.) to ensure that customer information is protected and used correctly. Adhering to security standards, such as ISO 27001, helps businesses demonstrate their ability to protect their information and increases opportunities for collaboration with partners and customers.

Trend 8: Contactless solutions and digital payments

The transaction value in the digital commerce and digital payment segments in Vietnam is currently high and is projected to grow impressively in the future, reaching approximately $19.5 billion for digital commerce and nearly $4 billion for mobile POS payments by 2025.

The number of digital payment users in Vietnam from 2017 to 2025 is expected to increase continuously. This indicates a growing acceptance and preference for using contactless and online payment methods. Popular e-wallets in Vietnam include Momo, ShopeePay (AirPay), and ZaloPay. These wallets have their own unique features and offer different functionalities, but they all aim to create a contactless and convenient payment environment for users.

Overall, the trend of increasing use of contactless solutions and digital payments is driving digital transformation and the development of the e-commerce industry in Vietnam. Choosing the right e-wallet and enhancing information security during the payment process will play a crucial role in building a safe and trustworthy business environment.

8. Digital transformation solutions – optimizing business operations

As one of the leading digital transformation solutions on the market today, the all-in-one business management software 1Office helps businesses optimize operations AUTOMATICALLY – QUICKLY – EFFECTIVELY. The software stands out with 3 main modules:

• Workplace – A module that provides a set of tools for employees to work and communicate internally.
• HRM – A module that provides a set of tools for corporate human resource management.
• CRM – A module that provides a set of tools for managing marketing, sales, and customer care.

With just the 1Office software, businesses can coordinate, monitor, and evaluate every activity/task of each employee and department, from the overall picture down to the details. Data is digitized, stored, and synchronized across the entire system.

Thus, this article has provided a detailed answer to “what is digital transformation?” as well as the digital transformation trends in Vietnam for 2023. Investing in digital transformation is an essential activity that businesses should actively pursue. Among the options, implementing the all-in-one business management solution – 1Office is a leading, effective solution that businesses cannot overlook. We wish you success!

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