Very often, we hear the terms ‘digital’, ‘become digital’ or ‘go digital’ as phrases for businesses being more modern and streamlined, however, it is clear from many articles and posts that people not necessarily mean the same thing with these terms. Largely spoken, they are all related to the two words
- digitization and
- digital transformation
However, digitization and digital transformation are also not the same thing, but even though these terms also are sometimes mixed-up, they may also correlate. This has recently been spotted in the great post by Jeanne Ross, try not to mix up these two words! However, they both belong to the digital agenda!
What is ‘digital’?
I have the age to remember the first digital watches – and how the CD-player as an innovation moved the music from analogue devices into the era of bits and ‘digital’ format – which eventually led to streaming of music data. And looking up Wikipedia (in English), it says that digital usually refers to something using digits, particularly binary digits; that was indeed the case of the CD-player versus the analogue voltage of record players. Now, the original meaning of the word ‘digital’ originates from Latin, which means typically finger or counting fingers, or just a finite number or digits. In other words, the simple evolution gives that digital is something that eventually ends up as a finite number of computerised bytes delivered somewhere of ‘some contents’ – we may just call it ‘data’. So if we apply the definition that digital means ‘data’, then at its heart, digital is about the creation of data from hardware and software; digital is about the intelligent transportation of data; and digital is about the use of data to power smart industries and businesses!
With digital in the meaning of data from anywhere in the business, consequently, digital transformation may be seen as the ‘planned change’ to a future usage of ‘data’ involving new (sometimes disruptive) technologies. Hence, digital is an embedded ingredient of both ‘digitization’ and ‘digital transformation’. Digital is the key ingredient of Digital Governance.
Digitization is often known from public sector, service sector and LEAN where the efficiency of the getting more ‘digital’ processes and lean processes by avoiding paper, snail mail, etc. is being achieved. Different companies are not all equally forefront in digitizing the business. Borsen recently posted an analysis of Postnord (Danish/Swedish mail provider, former royal post). In Denmark the public sector has achieved a higher digitization than the Swedish one. This has been achieved with a high management-focus on digitizing the work flow and citizen correspondence. In other words, the word ‘digitization’ involves standardizing of business processes and is associated and motivated by cost cutting and operational excellence; or as one could say, to do more of the same – just more electronically. It is not that these companies are passive, it is just that they don’t change the business model, but may watch the ‘new kids from the block’ introducing new games and business rules.
“Digitization involves standardizing business processes and is associated with cost cutting and operational excellence. In essence, it imposes discipline on business processes that, over the years, were executed by individual heroes in a variety of creative (but not always optimal) ways.” – Jeanne Ross
Digital Transformation represents a higher degree of change. However, we would argue that the key differentiator is that it is based on a different paradigm! It ‘splits rather than fits’ the existing processes, hence, it is a top-down approach to transform a company from as-is to the next digital era.
“Digital transformation is the strategy to execution toward a new business model which is based on a different paradigm, that it splits rather than fits the existing processes, and for that you need to map-out your future business model. Don’t start with your existing processes; start with your future operating business model!”
To make a transformation into a digital company, you need to consider the new way such a future company can achieve a market place with (maybe radical) different services, offerings, delivery methods, locations and meet-up. Companies that strategically seek to analyse and build this way, will not only look for more electronic ways to do the business of today, but they will seek a new operational model to serve customers with a different supply chain and operating model. These companies realise that they have to move the business model to reach the desired outcome.
Both disciplines are valid
Both disciplines are valid, but they clearly work from different paradigms. We recommend companies who want to become digital to work with it strategically, then to drive the strategy-to-execution and make it actionable and achievable. It is a totally different exercise as to digitize existing processes!
Where digitization involves a blueprint of all the business capabilities, then to map the low-hanging fruit to digitize the processes in prioritized order, then the digital transformation starts with strategy and architecture and forward-thinking; then to make scenarios or risk assessments to map out the actionable insights.
One may see the digitization as a pre-burner or enabler for the next steps, but if the paradigm of the business model isn’t changed nor if the digital transformation isn’t led by the business strategy, then it will have a hard time to sustain. We often recommend in workshops to illustrate examples of both artefacts, simply to get to the open-ended dialog of ‘where are we heading’ versus ‘where do we want to move to’.
Clearly, to strategize and map out the actionable insights may involve implementation and change management. We can help you to succeed!
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