Digital Transformation is the order of the day.
Yet, we use words like “digitization”, “digitalization” and “digital transformation” interchangeably. Is “Digital Transformation” the new website? The Mobile App that the CEO has been asking for since the last board meeting? Or maybe even that expensive CRM that’s going to cost this year’s IT budget? Even within industry, there’s lots of debate, so confusion is no surprise.
We thought we might try and simplify this for everyone, so here’s how we see it:
Digitization is the process of going from analog to digital, and in the context of a business process, could be a synonym for process automation. So, for example, instead of manually issuing paper invoices, you might use Excel, or you might invest in an ERP to automate this process. Note that the customer isn’t involved here.
Digitalization goes a step further. This involves the use of digital technologies (and data) to change existing business models, thus unlocking new customer value. An example of this is a traditional retailer launching a new e-commerce offering, with targeted promotions based on data from a loyalty program. Note that while intimate knowledge of the customer is helpful here, you can get away without it (and some do).
The most challenging part of Digital Transformation is the Transformation piece. This refers to infusing a new set of values in the existing workforce, that enable the delivery of products that customers love. You might have heard of terms like human-centered design or design thinking, agile or lean startup methodologies which are common organizing principles in a digital transformation journey. Key features of such a way of working are: no-silo thinking (enabling innovators to work in cross-functional, high-performance teams), focus on the customer (through design thinking tools), data-driven decisions and speed-to-value delivery (or continuous customer delivery). What is called for is a fundamental change in leadership, culture, and the day-to-day running of the organization.
At Red Dot, we specialize in this transformation, and enjoy working with leaders who have the courage and ambition to lead this systems-level change. As those of you with Smartphones might know, if you don’t upgrade your mobile operating system regularly, you soon won’t be able to run more and more of the apps that you absolutely depend on. Transformation to the new company operating system is key for sustainable digital innovation.
And finally, a fun little digital story:
Dr Richard Earlham spent 5 very calm and serious minutes in his fine, wood-panelled surgery asking me questions about my symptoms. He then stood up and said “Very well, young man, I will now proceed with a digital examination.” Being a software engineer, I was thrilled and asked whether a computer or maybe a scanner was involved.
“No”, he said, as he put on a huge stretchy rubber glove. “Digitus is the Latin word for finger”.
So, what’s your understanding of “Digital Transformation?” And how has the experience been for you? We’d love to hear from you in the comments below!