Extraordinary change is taking place throughout the insuranceindustry and everything that surrounds it.

Related: The critical components of insurance digitaltransformation

The whole world is going digital. It's the new reality, andthere is no getting around it. But just the word or even the ideaof digital has many people, insurers included, pondering the basicand fundamental questions:

• Why do we need to be digital?
• How do we go digital?
• What, exactly, is digital anyway?

To get a visual of what digital means for insurance, look throughthe lens of digital transformation.

Defining digital

Defining digital is important because it's a very broad topicwith far-reaching implications. Simply put (and without gettinginto the science behind it), digital is way of doing things. Andbecoming digital is a state that will be required for moving aroundin the digital world: communicating, shopping, traveling, doingbusiness, keeping a competitive edge and much, much more.

Going digital

Digital is such a broad concept that it is easy to get toonarrowly focused on just one part of the everything that makes updigital. For example, digital is a format for storing assets ofmany kinds; it's a way of transmitting data and information fromone place to another, and it's a way of interacting with data. Butthat's not all. The digitization of assets is just the first phaseor step on a pathway that will lead to the next phase of digital:creating the digital experience.

Related: 5 ways AI and data are transforming the insurancespace

The experiential phase of digital begins when digital assetscome into use. Now digital becomes the method that undergirds theinteraction. Digital assets are transmitted digitally to createdigital experiences via portals, mobile apps, websites, sensors, wearables andmany other digital things.

In the third phase, digital transformation, digital presence andcapabilities go beyond to an expanded and progressive digitalexperience that touches everything, connects the parts, resets theexpectations, broadens the horizons, and transforms the lives ofeveryone it touches.

Being digital

For insurers, the journey of digital transformation will involverethinking an insurer's value proposition and internal businessoperations, embracing data and advanced analytics, creating andsupporting all means of engagement andautomation across all the company, and delivering enriched customersolutions that are thoroughly integrated with internal operationsas a seamless, personalized experience from start to finish andeverywhere in between.

Digital is the thread that will connect and unite all systems,processes, and strategic initiatives and tie them together into anenterprise that is ready for the future. And digital transformationis the strategic initiative that will set the foundation, set thecontext, and set the direction for the next-generation insurancecompany.

In the new report, DigitalTransformation in Insurance: Discovering the Pathway to DigitalMaturity, SMA introduces its Digital Maturity Model, a modelfor developing a digital strategy that will be fundamental tosuccess in the digital world.

Deb Smallwood is a founder and CEO ofBoston-based SMA. Emailher at [email protected]. This article firstappeared on StrategyMeetsAction.com, and is reprintedhere with their permission. Opinions expressed in this article arethe author's own.