What is digital transformation and AI?
More businesses are adopting digital transformation and AI. Discover the benefits of digital transformation, and learn what it means for the future of business.
By: Amanda Phagan, Edited by: Joey Morris
Last updated: June 5, 2025
What if you could revolutionize your business by shifting the technology you implement? Digital transformation and artificial intelligence (AI) redefine how companies operate, shifting from manual tasks to automated systems.
Discover what digital transformation and AI are, where they may be headed in the future, and how you can develop skills in these areas.
Understanding digital transformation
Digital transformation is the reshaping of business operations using new technologies to deliver value to customers. Beyond the addition of new tools, digital transformation requires a core shift in operations, strategies, and company culture.
Key elements of digital transformation include:
- Technology integration
- Customer experience focus
- Data-driven decision-making
- Agility and adaptability
- Cultural change
Companies may implement digital transformation by adopting tools like generative AI, cloud computing, automation, and the Internet of Things (IoT) to improve efficiency and workflows. They may also improve customer experiences with personalized interactions through apps, chatbots, and predictive messaging.
Benefits of digital transformation
By adopting a digital-first approach, businesses can make more informed decisions and adapt more nimbly to market changes. Success may rely on a mindset shift wherein leaders and employees embrace technology and ongoing learning. Additional benefits of digital transformation may include:
- Increased operational efficiency
- A competitive advantage over organizations unwilling to prioritize new technologies
- Better resource management and accessibility
- Opportunities for innovation
Examples of digital transformation
Today, digital transformation can take many forms. While it may seem like a new phenomenon (thanks to the rapid and widespread leveraging of AI tools), many sectors have prioritized digital transformation for decades. Some examples of digital transformation in action include:
- Netflix: When Netflix started, its business model relied on direct mail. (Remember waiting in anticipation for our DVDs to arrive?) By embracing digital transformation, Netflix successfully transitioned into a streaming platform, disrupting the entertainment industry by providing viewers with a large selection of shows and movies with the push of a button.
- Adobe: Like Netflix, Adobe originally sold physical software products. Now, their subscription-based Creative Cloud program allows access to over 20 of its apps that customers previously had to purchase separately.
- Domino's Pizza: Around 2011, Domino's Pizza began prioritizing digital transformation with an interactive app that featured real-time order updates, autonomous vehicle deliveries, and even delivery through social media apps.
The role of AI in digital transformation
Artificial intelligence is a key driver of digital transformation. AI systems use algorithms, machine learning, and natural language processing to analyze data, make predictions, and automate processes. These capabilities make AI essential for businesses that value innovation and efficiency.
How AI supports digital transformation:
- Task automation
- Predictive analysis
- Personalized customer experiences
- Quicker and potentially improved decision-making
AI can automate repetitive tasks like data entry and customer service to save time and reduce errors while enabling employees to work on more strategic initiatives. It also analyzes data to help organizations predict trends, optimize supply chains, and anticipate market changes.
Simultaneously, AI may enhance customer experiences with personalized recommendations and targeted marketing. By processing vast data in real time, it can deliver insights for quick, informed decisions. It can also optimize processes like inventory management and quality control to improve efficiency.
Driven by these benefits, AI adoption is accelerating across industries. According to a recent survey by McKinsey & Company, 78% of respondents said that their organizations use AI in at least one business function, up from 72% in early 2024 and 55% in 2023. The most common business functions utilizing AI are IT and marketing and sales.
Future digital transformation and AI trends
In September 2024, the Department of State announced that AI is driving a global technology revolution to address critical challenges like food security and global health risks. Alongside tech leaders, the government launched initiatives to promote responsible AI use for sustainable development. This underscores AI's growing role in addressing complex global issues.
As of September 2024, McKinsey expects trending AI technologies to include:
- Quantum-sensing technologies
- Generative AI agents
- Clusters of large language models (LLMs)
McKinsey anticipates that these AI and data-driven innovations may revolutionize how companies operate by 2030, likely impacting employee headcounts. According to the survey report from McKinsey, about 31% of respondents whose organizations use AI expect it to decrease headcounts across business functions.
Stanford University's 2024 AI Index Report also references generative AI and LLMs, along with AI in science and medicine. The report highlights the rapid growth of AI in scientific discovery, citing innovations like AlphaDev, which enhances algorithmic sorting efficiency, and GNoME, which can help uncover new materials.
Develop skills to drive digital transformation and use AI
The rapid growth and adoption of AI across industries, from addressing global challenges to transforming business operations, highlights its enormous potential. As technologies like generative AI, quantum sensing, and LLMs evolve, the demand for skilled professionals in AI continues to rise.
If you are passionate about leading digital transformation through AI and want to tap into this technology's potential, strengthen your skills by enrolling in an online course, degree, or certification. Whether you're a seasoned professional or just starting your career journey, flexible education options are available, from introductory AI and machine learning courses for beginners to AI master's programs.