“Enterprises must embrace digital transformation if they wish to survive and grow sustainably,” remarked the Vice President of the Vietnam Chamber of Commerce and Industry (VCCI). This assertion holds significant relevance in today’s context. Digital transformation is not merely a trend but a critical necessity for enterprises in the era of the Fourth Industrial Revolution.

Context

Digital transformation in Vietnamese enterprises is progressing rapidly, driven by the swift advancements in technology, resulting in substantial changes across all types and sectors of businesses. An increasing number of enterprises are adopting digital transformation and achieving remarkable outcomes.

However, many enterprises still grapple with uncertainty about where to begin their digital transformation journey, especially those with limited financial and human resources. Successfully navigating this transition necessitates a clear understanding of digital transformation trends and their immense benefits for sustainable business growth. Consequently, identifying effective solutions to accelerate this process has become an urgent imperative.

What is Digital Transformation for Enterprises?

To understand why enterprises need to undergo digital transformation, it is essential to first define what it entails. Since each business operates in a unique field, the process of implementing digital transformation varies, making it challenging to provide a precise, universal definition. In simple terms, digital transformation for enterprises involves transitioning from traditional business models to digital ones by leveraging new technologies to reform operations, workflows, and organizational culture.

6 Levels of Digital Transformation in Enterprises

According to Decision No. 1970/QD-BTTTT, which approves the scheme to determine evaluation indices for digital transformation levels and promote enterprise transformation, the process consists of six levels:

• Level 0 – Not Yet Transformed: Enterprises lack or exhibit minimal digital transformation activities.
• Level 1 – Initiation: Enterprises show initial signs of engaging in digital transformation.
• Level 2 – Starting: Enterprises recognize the importance of digital transformation and begin implementing specific activities to drive benefits and enhance customer experiences.
• Level 3 – Formative: Digital transformation is applied to individual departments, yielding tangible benefits and efficiency.
• Level 4 – Advanced: Enterprises at this level leverage digital platforms, technologies, and data to optimize operations and customer experiences, effectively transitioning into digital enterprises.
• Level 5 – Leading: Enterprises achieve near-complete digital transformation, with business models and operations driven and shaped by digital platforms and data.

The digital transformation of an enterprise typically involves 3 main stages: digitization, digitalization, and digital transformation:

• Stage 1: Digitization: This stage entails converting data from physical (analog) formats into digital formats.
• Stage 2: Digitalization: In this phase, technology is applied to automate existing processes, improving efficiency and productivity.
• Stage 3: Digital Transformation: At this advanced stage, enterprises fundamentally change their business models by leveraging digital technologies.

The Rules of the Future: “Fast Fish Eat Slow Fish”

To raise awareness about the urgency of digital transformation for businesses, the National Institute of Digital Technology and Transformation has emphasized the severe consequences for enterprises that fail to embark on this journey. Local businesses risk losing competitive ground to national and international brands. Particularly, small domestic enterprises may be overwhelmed and eventually phased out by foreign “shark” companies.

Moreover, the future business landscape will operate under the principle of “fast fish eat slow fish,” where agility, not size, will determine survival. Even large corporations that resist digital transformation could face stagnation or obsolescence, ultimately ceding opportunities to smaller, more adaptive competitors adept at recognizing and navigating the rules of a rapidly evolving 4.0 society.

Case Studies: Lessons from Nokia and Kodak

Nokia and Kodak stand as stark examples of how even industry giants can falter when they fail to embrace change. Kodak, a dominant player in its field, clung to outdated strategies. Fearing that digital camera innovation would undermine its lucrative film and photo development business, the company ignored market shifts, ultimately leading to bankruptcy in 2012.

Similarly, Nokia’s decline and eventual acquisition by Microsoft were largely attributed to its inability to address the needs of future customers. While Apple and its iOS ecosystem promised revolutionary user experiences, reshaping how people interacted with mobile devices, Nokia persisted with its outdated Symbian operating system, failing to adapt to the market’s demands.

Boldly embarking on the journey of digital transformation presents local businesses with an opportunity to leverage their unique strengths, indigenous knowledge, and regional advantages to thrive in the global marketplace. By adopting digital transformation, these enterprises can compete on equal footing with national and international rivals.

Digital transformation is an unavoidable trend. However, it is not as simple as purchasing a piece of software or implementing a new technology. Instead, it requires a thoughtful approach that considers the enterprise’s specific resources and conditions. Successful digital transformation demands innovation not only in technology and processes but also in data synchronization on digital platforms and the upskilling of the workforce to adapt to organizational changes.

In Vietnam, the government is also working towards comprehensive digital transformation, aiming to establish a digital government, digital economy, and digital society. Within this broader context, any enterprise that fails to adapt risks falling behind and losing relevance in an increasingly competitive market.

Here are 10 reasons why businesses must embrace digital transformation:

1. Reduces operational costs for the business.
2. Improves the management of information and optimizes resource usage.
3. Elevates the quality of customer interactions and satisfaction.
4. Streamlines internal and cross-departmental workflows.
5. Enhances the flexibility and adaptability of the enterprise.
6. Boosts transparency and efficiency within corporate management systems.
7. Increases employee productivity and overall company performance.
8. Expanded opportunities and competitive edge.
9. Profit growth (Digital transformation leads to better profitability).
10. Contributes to the development of a more robust and positive organizational culture.

Common Mistakes to Avoid in Enterprise Digital Transformation

According to a report by BCG, 70% of digital transformation initiatives fail to meet their objectives. Several mistakes contribute to these failures during the transformation process, including:

Delays

Delays are common among businesses newly embarking on digital transformation with outdated mindsets. These businesses often view digital transformation as mere digitization or a simple technological upgrade—initiatives their competitors may have adopted long ago.

To overcome this, leaders must shift their perspectives and gradually transform their operations, workflows, and production methods using digital technologies.

Lack of Executable Plans

Digital transformation efforts fail when businesses propose impractical, non-executable ideas. Even with thorough preparation, if initiatives cannot be implemented in the market or fail to attract customers, businesses often revert to traditional methods.

Employee Resistance

Resistance arises when employees do not understand the reasons or benefits of digital transformation. Businesses must ensure their workforce is aware of the motivations behind the transformation and its advantages for both the company and its customers.

Underestimating Costs

Digital transformation is an expensive process because it involves reimagining the entire enterprise. Companies must ensure they allocate a budget that aligns with their goals and expectations.

Lack of Commitment

Digital transformation is a long-term journey that requires time and commitment. Businesses need meticulous preparation and a comprehensive long-term plan to guide their teams and set realistic timelines.

Skills Deficiency

A lack of necessary skills and knowledge among the workforce can lead to failure in digital transformation. Training and upskilling have a significant impact on employee capabilities. Businesses should incorporate tailored training programs that align with their specific industry and developmental needs.

No industry is exempt from the digital transformation wave. To remain competitive and better serve their customers, many companies are investing in embedding digital technologies into their processes and cultures.

Conclusion

Digital transformation not only improves operational efficiency and enhances competitiveness but also unlocks new opportunities in a world increasingly driven by technology. However, success requires a clear strategy, well-planned investments, and unified organizational commitment.

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