What is digital transformation?

- [Instructor] Since digital transformation is such an overloaded term, we need to define what it means before learning about it. Digital equals technology. But what types of technologies are used? Well, that depends on need. And that is usually related to the maturity of the company. Early stage companies generally digitally transform their systems. Mid-stage companies will digitally transform to automate. And mature companies will digitally transform their products and their internal operations. This is called a smart digital transformation. Tech can be sorted into system, automation and smart layers. The systems layer, this includes IT and business systems, such as BI, CRM, PLM, and CAD. We'd consider this low technology. The automation layer consists of automation, such as robots, RPA, which is robotic process automation, digital marketing and e-commerce. The smart layer consists of the Internet of Things, data analytics, the digital twin, blockchain and augmented reality. This is what we'd consider high technologies. The layers are generally implemented in order with the maturity that company, but they are independent of each other. A misconception is sequencing, that you cannot do, for example, the smart layer, before you finish all the layers before it. They're completely different and they can be done independently. Transformation equals change. But what can be changed? We can make external changes and internal changes. External changes refer to changing physical products or the customers, both in a B2B or a B2C environment. And when we mentioned products, for the rest of this course, we really mean products and services. Now once these products are changed or digitally transformed they are commonly referred to as smart products. For example, a smart watch or a smart lock. Internal changes refer to the changes in the operations of a company. And it's a process commonly referred to as IIoT or the industry Internet of Things and industrie 4.0. And when its' changed or digitally transformed, they are commonly referred to as smart operations. Examples of smart operations include a smart factory line or smart support. Digitally transforming something results in a thing that is data-driven and software defined. An example of data-driven software is Netflix. When they make recommendations is based on your previous viewing history. Data-driven and software defined products or operations are called smart products or smart operations. And this is a type of change being taught in this course. So bringing it together, digital transformation equals change from technology. And it's important to note that in this course, we're talking about the smart layer, the high technology layer. We can make interna digital transformations for the operations or external digital transformations for our products. And it always results in something that is software defined and data driven. Practically speaking, a digital transformation is a sum of a series of digital initiatives using high technology. Each digital initiative being implemented to realize a feature. This is the nuts and bolts that we'll discuss in the next chapter. There are many forms of digital transformation, but as discussed, we won't consider the systems or automation layers here. Instead, we'll focus on how to use high technologies, such as the digital twin, the Internet of Things, and machine learning to create extraordinary value for our customers and our businesses. But before we get into the tech, we need to get the why right. Or put another way, we need to digitally transform for the right reasons.