Digital transformation involves using technology to improve business effectiveness or efficiency. The idea is to use technology not just to replicate an existing service digitally, but to transform that service into something significantly better.

While the concept sounds simple, digital transformation can be a long, expensive, and complicated process that doesn't always go to plan.

Definitions of digital transformation vary with industry and project. What everyone can agree on is that beneath the hype, the fluff, and the confusion, digital transformation involves significant changes. The main components might include rethinking business models, changing the underlying technology stack, embracing emerging technologies such as AI, innovating with customer experiences, and potentially changing organizational culture.

Digital transformation might be one of the most used phrases in the IT industry, but its elements can vary. The scope and scale of a transformation range from a public-sector organization digitalizing its paper records to a blue-chip enterprise using a host of emerging technologies to support a wide-scale business transformation.

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Digital transformation can draw on many different technologies. The hottest areas are cloud computing, the Internet of Things, and artificial intelligence, particularly exploiting large language models (LLMs), generative AI (gen AI), and agentic AI. During the next few years, expect increased attention on other hyped-up tech topics, including physical AI, robotics, the blockchain, and quantum computing.

However, digital transformation is more than changing an organization using technology. All the evidence suggests that alterations to business processes and corporate culture are just as vital to the success of these initiatives. Digital transformation projects offer large and established organizations a way to compete with nimbler, online-only rivals. These transformation projects, which might involve launching new business models, are large in scope and ambition but come with risks.

Digitalization is not, as is commonly perceived, simply about implementing more technology systems and services. A genuine digital transformation project involves fundamentally rethinking business models and processes, rather than tinkering with or enhancing traditional methods. 

This creative requirement to rethink existing models remains a tough ask for business leaders. According to PwC's 29th Global CEO Survey, bosses today increasingly see reinvention as essential to growth. More than four in ten (42%) CEOs in the 2026 survey said their company has begun competing in new sectors over the past five years.

This reinvention could prove a critical step. PWC reported that CEO confidence in their company's revenue prospects has fallen to its lowest level in five years, as business leaders grapple with challenges such as uneven returns from AI, rising geopolitical risks, and intensifying cyber threats. Only 30% CEOs said they are confident about revenue growth over the next 12 months, down from 38% in 2025 and 56% in 2022.

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In short, many CEOs fear their organizations are unable to exploit digital and data as part of a wider business model change. This gap between innovation and execution helps explain why digitalization and disruption have traditionally been seen as the preserve of nimble startups.

Jem Walters, CTO at banking group Vanquis, co-founded the successful money-saving app startup Snoop in 2019, which Vanquis acquired in July 2023. He explained to how the nimble team at Vanquis was able to move quickly and decisively, embracing digitalization in a manner that might have been more complicated in the governance-heavy environment of a traditional bank.

Walters said the key to embracing digitalization is delivering enterprise-grade features as quickly as possible. "Everything works brilliantly on PowerPoint," he said, recognizing that startups have an inherent advantage in being able to test, learn, and transform. But digitalization and disruption don't have to be the preserve of startups -- there are great examples of digital transformation in the enterprise sector, too. 

As cited above, digital transformation can involve a large-scale shift to a new business model in a traditional firm. Examples of successful new business models include Microsoft moving from packaged off-the-shelf software to cloud-based subscription services and Netflix transitioning from posting mail-order DVDs to an online streaming platform.

However, not all digitalization programs are so grand. An oft-cited example of digital transformation is the transition of legacy systems to cloud platforms. Many companies began their transition to on-demand IT more than a decade ago. Even today, transitioning all older systems to the cloud remains a key ambition for many CIOs. It's easier for cloud-based organizations to update and change applications in response to new user demands. In this case, digital transformation supports nimbler IT operations, making existing processes much more efficient and effective.

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Using technology to change or remove an inefficient working process is another example of digital transformation. Think, for example, of the digitization of paper records. Using technology to change how information is recorded and stored makes it easier to search digital records in a way that would have been unthinkable in an era of paper records.

Digitalization is also a prerequisite for the introduction of generative and agentic AI. Many business and digital leaders have told that the foundation for emerging technology initiatives is a strong digital platform that provides a secure and trusted data source. Consultant Accenture also found that consistent data provides the foundation for AIs to operate in a trustworthy manner.

For those who weren't convinced about the positive benefits of digital transformation, the power of digitalization won over many doubters during the COVID-19 pandemic. Digital transformation strategies were fast-forwarded at breakneck speed. Executive teams that might once have hesitated about a multi-year investment in video-conferencing and collaborative technologies tasked their IT departments with establishing remote-working strategies in days or even hours. 

CIOs and their IT teams stepped up and delivered, from supporting home working to providing online learning, establishing new online e-commerce channels, and even creating whole new business models. The expert consensus was that the rapid digital transformation led by CIOs and their teams helped change the perception of IT for good.

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Today, rather than being seen primarily as a service to other functions, such as sales and finance, technology is now recognized as a critical factor for long-term business growth. Smart IT executives and business professionals use that recognition to pursue new digital transformation opportunities and embrace data-led change. In short, every successful company is a technology business, regardless of sector. 

With digital transformation proving its worth, business and digital leaders must find new technology projects to get their teeth stuck into, and that's far from a challenging search in an age of data and AI.

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Gartner's analysis of key technology trends suggested that disruption is accelerating and AI is no longer optional. The technology analyst reported that organizations that act now will not only weather volatility but shape their industries for decades to come. Current digital transformation trends include: 

• Cloud computing -On-demand IT has been at the core of digital transformation efforts for the past decade, but that focus doesn't mean the work is done. While many organizations aim for a cloud-first approach, few have moved their systems 100% to the cloud. Our evidence suggests that legacy tech remains a major hindrance to modernization.
• AI and machine learning - Companies have spent the past decade collecting information. That effort looks prescient with the emergence and rapid rise of gen AI and agentic AI. Professionals must now bring data together and use AI to improve customer experiences and decision-making processes. Investments in AI and machine learning will continue to grow as companies explore new opportunities.
• Automation -Executives who invested in robotic process automation to free up workers' time received a new boost from the rise of gen AI and agentic AI. Automation has moved from the fringes to the core of digital transformation efforts. Whether reducing software coding demands or introducing bots to automate service requests, companies are exploring how technology can cull repetitive tasks and allow staff to focus on creative and collaborative work that produces value.
• Cybersecurity -Underlying all these digital transformation efforts is a continued requirement for investment in cyber-defense mechanisms. Research suggests that pre-emptive cybersecurity is a key investment area as organizations face an exponential rise in threats targeting networks, data, and connected systems. Gartner forecasts that pre-emptive solutions will account for half of all security spending by 2030, as CIOs shift from reactive defense to proactive protection.
• Emerging technologies -AI might have hogged the limelight for the past few years, but other emerging technologies are bubbling up. These technologies will impact the business and its customers during the rest of the decade. Gartner's 2026 Hype Cycle for Emerging Technologies lists 29 disruptive technologies across four areas: autonomous business, hypermachinity, augmented humanity, and techno-societal fragility. Expect to see more investment in emerging areas, such as physical AI and vibe coding.

AI is the latest, and perhaps greatest, technology to impact digital transformation. Since OpenAI first unleashed ChatGPT on the world in November 2022, the AI hype remains cacophonous. While attempting to temper revolutionary expectations, MIT researchers reported that capabilities are already substantial and poised to expand broadly. They suggested that most of the work tasks they studied could reach AI success rates of 80% to 95% by 2029.

The rapid rise of gen AI is such that it wasn't even mentioned the penultimate time we updated this article (in August 2022). Since the last update to this piece in September 2024, CIOs and their business peers have told how their businesses are exploring how gen AI can boost productivity and help to transform workplace activities, such as content creation, customer service, and coding.

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Gabriela Vogel, senior director analyst in the Executive Leadership of Digital Business (ELDB) practice at research firm Gartner, told that gen AI is a rare technology, one whose potential influence has piqued the interest of chief executives as much as CIOs and IT professionals. All eyes on digital transformation are now turning to how the business can create a competitive advantage through AI. 

To this end, business and digital leaders have also started exploring agentic AI. Harvard Business Review researchers reported that agentic AI has significant potential to expand what organizations can do and how work gets done. They suggested the challenge is not whether businesses should adopt agents, but how to integrate them into workflows in ways that preserve accountability, maintain quality, and enable employees to work effectively alongside their agentic colleagues.

No one likes a futurist who sits on the fence, but I'm afraid this prediction requires some splinters. While the rapid rise of gen AI has been remarkable, it's important to recognize that the rollout of high-profile services, such as ChatGPT, Microsoft Copilot, Anthropic Claude, and Google Gemini, is the visible manifestation of many years of research. What we see today with gen AI is the tip of a much larger development iceberg beneath the surface -- and how that iceberg will change shape is up for debate.

After several years of hype, we're seeing the first signs of gen AI fatigue among business leaders. Most companies struggle to move gen AI projects from initial stages into production, and MIT research suggested that 95% of gen AI projects fail to deliver value. Deloitte found that over two-thirds of executives believed fewer than one-third of their gen AI experiments would be fully scaled.

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Those indicators point to some concern about the long-term impact of AI on digital transformation. reported last year that several areas of AI have slipped into the Trough of Disillusionment, where interest wanes because explorations fail to deliver promised returns.

However, it's also important to recognize that those challenges aren't stopping companies from investing more cash into AI initiatives. Worldwide spending on AI is forecast to reach $2.52 trillion in 2026, a 44% year-over-year increase, according to tech analyst Gartner.  

John-David Lovelock, chief forecaster and distinguished VP analyst at Gartner, told that digital leaders who make the most of these investments in AI work closely with colleagues across the organization. "Success is all about line-of-business functions as well," he said. "How well are you focused on defined business outcomes? How well can your partners help you with meeting these requirements? What level of investiture do they have?"

While most experts agree that digitalization involves using technology to make a process more efficient or effective, almost every project that uses technology gets badged as a digital transformation initiative.

Digital transformation has become the go-to marketing phrase for almost any technology initiative. The term is applied so broadly that some experts believe it is becoming meaningless. Its ubiquity is such that it's no surprise when an attention-craving organization calls its new app or even something as mundane as a laptop refresh program a "digital transformation initiative."

Tech workers also express cynicism about the grand talk of digitalization. IT professionals don't want to spend their working days digitally transforming rather than engineering and developing. For their part, CIOs will tell you the implementation of technology is simply the conduit to help the business meet its objectives, whether selling more widgets, making more money, or raising customer satisfaction.

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To critics, digital transformation offers tech vendors another opportunity to rebrand their offerings; it's not uncommon to see systems and services sold as a golden bullet for digital transformation. Such hype is just more fuel for detractors who feel that digital transformation is a solution seeking a problem.

None of this criticism should come as a shock. Even back in 2017, analyst Gartner warned that over-selling meant digital transformation was fast approaching the trough of disillusionment. Almost 10 years later, critics would say we're now at the bottom of that trough.

One way to help silence the critics would be to find another name for digital transformation. We should stop using the term blindly and instead focus on the outcomes we're trying to achieve with technology.

That approach resonates with the CIO community. Almost every IT chief will tell you that their organization is running business transformation, not technology transformation, projects. That's certainly the case for Richard Corbridge, CIO at property specialist Segro. "I like business transformation more," he told .

"I think the word transformation has become a bit untrendy; a bit tried and tested. Transformations have been happening for such a long time. Transformation is a word that's been bandied around for so long, but I think it's just common now and is part of modern business practices."

Other industry commentators suggest culling the phrase digital transformation and creating a slightly modified alternative, such as digital landscape, underlying digital environment, or data-led plumbing. 

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The big problem with all these alternative names is that they mean even less than the concept of digital transformation. For all its inherent faults, we all have a preconceived idea of what digital transformation means, whether it's implementing the cloud or using AI to automate manual tasks.

These kinds of digital transformations have shown how technology changes the business for the better. Proving the value of technology has been a tough battle for CIOs and other IT professionals. Yes, the concept of digital transformation has flaws. However, the IT industry should be pleased that the business recognizes the great work the technology team is undertaking, regardless of what it's called. 

Remember that the rest of the business tends to struggle with big IT concepts. Take the example of the phrase "cloud computing," which used to receive nonplussed expressions from non-IT execs 10-plus years ago. Now, the cloud is a broadly understood and accepted term. 

Cloud found its footing by proving its value -- and so it is with other digital transformation projects, such as exploring AI or implementing IoT and sensors. The business has seen the value of digital transformation in recent years and wants a lot more in the future.

That question is something we've considered at . As we suggested, CEOs and their boardroom colleagues have heard about the potential power of emerging technology, and they want their IT teams to deliver a new type of data-led change program: AI transformation.

So, given this fixation on data-led change, is digital transformation now AI transformation? Huy Dao, director of data and machine learning platform at Booking.com, is charged with delivering value from AI, including agentic services. He said his experiences suggest AI-powered change is part of a larger entity.

"In my opinion, digital transformation is a bigger brand level that also includes data and AI," he said. "When I think about digital transformation, it's not like applying data and technology in a new field. It's mostly transforming existing business processes and technologies and making processes more data-driven and more digital."

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Dao said it's important to recognize how quickly the field of AI is evolving. He said professionals now have access to tools and services they didn't have before, such as chatbots and coding assistants. The result is rapid AI-enabled digital transformation.

"I can tell you firsthand how AI has changed my ways of working, how we operate as a company, and then how we want to leverage more of that technology to benefit our end customers, and also give our internal employees, like me and my fellow developers, tools that make us way more productive than before," he said.

Beneath the buzzwords, there is a crucial concept: digitalization is helping smart businesses change the established economic order -- and the effects are everywhere. <...