During your company’s digital transformation, digitalisation is the next step you’ll need to take to optimising your systems and improving your productivity and profitability.
You’re at the point where all your files have been digitised and new files are being entered straight onto your server. The next step in your business’ digital transformation is to incorporate digital strategies that will allow you to make the most of all your digital data, this is called digitisation.
Digitalisation is when you integrate digital technologies into your everyday working life, after you’ve digitised everything you can. For example, you’ve moved your payroll from the traditional accounting ledgers onto your server. But to get the most of it you’ll need to move it from those Excel spreadsheets into optimised accounting software.
Digitalisation can help you to improve your productivity, as now repeating transactions in your books will be automated giving your accountant more time to find ways to reduce your costs. Additionally, digitisation can also result in improved profits and optimised systems and processes.
1. What is digitalisation?
Digitalisation is the use of digital technology to change your business model, providing new revenue streams and value-producing opportunities. It is a step on your business’ journey to digital transformation. Digitalisation will help your business to interconnect systems, processes, employees, partners and customers. This will assist your organisation to become the ultimate connected enterprise.
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Digitalisation is profoundly customer driven and will help your venture to optimise its customer satisfaction and engagement. To incorporate all these different systems, on the other hand, will be a significant investment of both time and resources, with savings and a return on investment only being seen in the long term.
Digitalisation also means being able to respond with agility and flexibility to new demands and to incorporate changes timeously in series production.
Your future customers grew up in a digital world and have become accustomed to accessing services on demand. Your customer is expecting immediate services, if your business causes them to wait you increase the risk that they might go somewhere else.
Keep in mind when implementing digitalisation that your user interfaces and process need to be comprehensible to people of all ages. Also consider that all of your channels, from bricks-and-mortar retail to both traditional and social media sources, and the Internet in general, need to be digitally integrated just as much as manufacturing, distribution and logistics.
2. How is digitalisation changing everything?
Previous industrial revolutions focused on specific technological developments, whether it was water and steam, electricity, electronics and information technology. Now, numerous technology accelerations are simultaneously, at an increasing pace, and are disrupting virtually all industries. This new tipping point isn’t set in years as in previously revolution, but decades.
Some of these growing technological developments are highly applicable across a range of industries, while other are specific to a few sectors. However, there are also some, such as blockchain, whose growing possibilities are still being realised and discovered.
Digitally savvy human behaviour
One of the main contributors to this growing digital transformation trend is the behaviour of consumers as expectations have outpaced the increase in technological developments. By 2020, mobile will account for over 50% of internet access revenue in more than three-quarters of countries, according to PwC’s report.
The human race is quickly become digital humans who rely on and expect a digital interface to be the primary mechanism they can control their lives with. “The smartphone is already the digital interface for a range of personal, business and entertainment activities, and is setting the pace for our expectations of ‘always on’ interaction and control at our fingertips,” explains PwC.
Case Study: Digitalisation has reached the point where chemical companies can work with farmers enabling them to receive precision agricultural data that combines meteorological, environmental, land and crop data.
Today, software algorithms can perform tasks that previously required a human intelligence, such as visual perception, speech recognition, decision making, and language translation. “AI is an “umbrella” concept that is made up of numerous subfields such as machine learning, which focuses on the development of programmes that can teach themselves to learn, understand, reason, plan, and act when exposed to new data in the right quantities,” explains PwC.
Machine learning is the concept were algorithms learn from information without relying on rules-based programming. This is quickly being supplemented by deep learning, with algorithms being able to process more layers and dimensions than previously thought.
By 2018, more than half of large organisations globally will compete using advanced analytics and proprietary algorithms, causing the disruption of entire industries, predicts Gartner.
Robotics, augmented and virtual reality
Robotics is set to revolutionise the medial, manufacturing, construction and infrastructure industries.Case Study: Within the oil and gas industry, Royal Dutch Shell developed a robot with the sole purpose of monitoring its equipment and carry out routine safety checks at their remote facility in Kazakhstan.
Augmented reality can now add information or visuals to the physical world, through the use of graphics and audio overlay. This is used to improve the consumers’ experience with a task or a product.
Case study: At Boeing, factory trainees assembling a mock aeroplane wing worked 30% faster and 90% more accurately using AR-animated instructions on tablets than trainees using instructions in PDF documents, reveals PwC.
There is also virtual reality, which you can use to improve efficiency and effectiveness. Virtual reality is different from augmented reality because it is designed and used to re-create reality with a confined experience, as opposed to enhancing a current reality.
3D printing uses the technique of additive manufacturing to create three-dimensional objects. There items are based on digital models by layering or printing consecutive layers of materials. PwC reveals: “3D printing enables on-site or with-customer production, opening up considerable scope for value-chain disruption and bypassing the need to distribute or transport parts and products.”
Two out of three US manufacturers are already adopting 3D printing in some way, from experimenting with the technology to making final products, according to a PWC survey. But the potential of 3D printing will reach far beyond manufacturing. Now, in the construction industry, full buildings and bridges are being constructed using robotic arms attached to 3D printing heads, allowing them to build a function house in hours instead of months.
Case Study: In the medical field they are already experimenting with the idea of making synthetic, but functional body parts, implants and devices in a range of biocompatible materials.
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3. What are the risks if businesses fail to transform?
Digital transformation is not just a new trend to be ignored and underestimated. This concept is going to change the world, and if you aren’t on board, you will get left behind. The whole point of a digital transformation is to remain competitive and meet customer expectation, if you decide not to, you will quickly be left behind by your competition who have whole-heartedly digitally transformed and integrated digital strategies throughout their entire enterprise.
“If everyone else is moving forward and your business is standing still, you’re actually falling behind. You may be able to sustain revenue for a few months, but you won’t last long in a competitive market,” explains Larry Alton, business consultant and Forbes contributor.
No industry is immune
Just like no industry is immune, no industry is an island. Every industry needs, relies on or compliments another sector. Even if you aren’t directly connected to an industry, what about your suppliers? Your buyers? Consumers? Even if you aren’t directly impacted by the sudden advancement of another industry, everyone else is, and they will come to expect the same experience from you.
Every industries will need to be ready to stretch their horizons explains PwC’s report. To remain competitive now and in the future, your business will need to adopt advanced technology. This doesn’t mean industries will no longer be segmented, but it is expected that all industries transformed by digital transformation will experience lower cost bases, improved operational efficiency, and greater integration demand with customers and suppliers.
Case Study: Some of the logistic industry’s own customers are starting up logistics operations and new entrants to the industry are finding ways to carve out lucrative elements of the value chain by exploiting digital technology or new ‘sharing’ business models, reveals PwC
Amazon, for example, is leading the trend were large industrial or retail customers and suppliers are becoming players in the logistics market themselves. They are not only managing their own logistics but turning that experience into a profitable business model.
You won’t stay connected and relevant to customers
If you decide that you’re going to let digitalisation and a digital transformation pass your business by, you may find yourself quickly not being able to connect with your customers. If, for example, all you customers migrate to a new marketplace or platform, such as WeChat in China, and you don’t keep up, you could potential lose your entire customer base over the course of a few weeks.
“Technology will continue to advance and customers will find new and exciting ways to use it,” explains Axis Technical group. “If an organization continues to resist progress and decides not to keep up with technology, they are likely to fade away into obscurity.”
According to Axis Technical group, by not at least keeping up to technology advances, you could also become irrelevant. As an example, Kodak, a business you could arguable say, founded photography with the invention of the hand held camera, stubbornly refused to transform and go into digital photography, and they filed for bankruptcy in 2012.
To ensure your business remains relevant, you’ll need to implement new technology trending in your industry. “It’s important to know the extent of your customer’s technological expertise and stay on pace with them. If your clients cannot find you, your products or your services because of technological deficiencies, your business is destined for failure,” advises Axis Technical group.
Your competitors may be implementing a digital transformation
If you’ve decided not to implement digitalisation in your business, there’s no guarantee your competition will do the same. Consider all the different technologies you could be implementing, mentioned above. If just one of those technologies gives your competitor an advantage in anyway, they’re ahead of you, and once they’re ahead of you, you’ll find it challenging to catch up again.
Even an industry as specialised and high up the value chain as mining is not immune to the walls coming down. PwC’s Global Mining Transformation report paints a picture of a technology-transformed future: “In this future, players from the health sector bioengineer microorganisms to release coal seam gas, making hydraulic fracking obsolete. Fintech companies use blockchain technology and the data from drones to create tradable units in mines and their outputs and assets are traded faster than ever before.”
If your mining business, for example, wasn’t equipped to handle these technological changes, your suppliers and buyers would just move onto someone who is.
Your business could be digitally disrupted
Digital transformation is about enhancing the customer experience in every way possible. To improve your systems and increase efficiency to reduce customer waiting times. Digital transformations result in more automated systems, which create more data for personnel to use, to improve customer options and increase consumer satisfaction.
Every day, hour, minute that your business doesn’t undergo a digital transformation, you allow your competition to achieve the scenario above. But it isn’t just your competition, it could be another business from a different industry looking to improve their customers’ experience, and offering a service or product that suddenly makes your business obsolete.
In 2007, Apply launched their iPhone with a GPS app. They wanted their users to have ease and access when navigating. Their entire aim was to improve their customers experience with their product, and this one step disrupted the entire transport industry. Not only that, but it also lay the stepping stones Uber used to once again disrupt the transport industry.
Now, do you want to be Apple and Uber, or do you want to be a disrupted industry?
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4. Questions to gauge if you’re ready for a digital transformation
Although investing in your digital infrastructure is unquestionably the right course to take. Some organisations find it challenging to create positive results. “Estimates of digital transformation failures range from 66% to 84%. Such a high failure rate isn’t surprising, as leaders are trying to create entirely new competencies and wedge them into an organisation with strong legacy cultures and operating models,” according to Forbes.
Executives are typically pros at managing change, but a digital transformation is a much deeper change than the monthly or annual system update. Digitalisation is not just improving existing ways of operating, but is opening the business up to new ways of operating. To ensure your business is in the right space, here are a few questions to probe the broader organisations readiness:
Question 1: Are you upgrading your digital or is this a digital transformation?
Numerous companies have aimed for digital transformation and ended up with digital upgrades, increasing efficiency and productivity using technology is something you’re already doing. However, a digital transformation is when you use digital technology to change the way your business operates, specifically to do with customer interactions and the way your enterprise creates value.
“If you’re actually embarking on an upgrade instead of a transformation, ask yourself if that will be enough to sustain competitiveness when other business models based on digital networks create market valuations four times higher than average,” advises HBR.
Question 2: Will you share value creation with your customers?
The newest technology enabled business models focus on allowing customer and other networks to share in your process of value creation. For example, Uber relies on a network of drivers, Airbnb on property owner and EBay on sellers. These networks are critical for your business, and by connecting to external assets, these businesses can achieve significant profitability.
Sharing the workload is an obvious winning position, but some leaders don’t want to relinquish control or rely on an outside group. Harvard Business Review says that working with these external groups requires new, co-creative leadership styles, but also can allow organisations to tap into enormous pools of capabilities and under-utilised resources.
Question 3: Can you measure the value you’ve created?
You can only manage what you can measure, but you won’t be able to use traditional ways of measurement. Physical capital, human capital, tracking inventory, productivity, utilization and other traditional Key Performance Indicators, aren’t always affected by a digital transformation. The end goal of a digitalization is to improve revenue, profitability and investor value, but you’ll need to track intermediate indicators before you reach that point.
“For digital network businesses, this includes sentiment and engagement as well as network co-creation and value sharing. For example, when judging the success of the Developer Network, Apple can measure the number of developers creating apps for their app store, the amount of money generated by those apps that Apple shares with their community, and customer satisfaction with apps,” explains HBR.
5. Where do you start with your digital journey?
Now, you know what digitalisation is, how it will benefit your business, what risks will happen if you don’t digitally transform and how to know if you’re ready to transform. But how do you start?
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Here are some vital steps you need to take to ensure the success of your digital transformation:
Step 1: Know where to start
You’ll need to identify you current assets and the business model that your asset portfolio is creating. For example, does your organisation make and sell things or hire experienced employees and offer services. Do you develop intellectual property such as software or pharmaceuticals, or build and manage digital networks?
Once you have a clear idea of where you are, you can understand your strengths and weakness, and identify the processes you’ll need to change to eventually transform your business.
“Building up capabilities, adapting processes and IT and driving the cultural shift needed will take years. It’s critical to provide clear leadership from your top management, but equally important is convincing the top stakeholders who will need to roll up their sleeves and implement the desired changes,” advises PwC.
Step 2: Develop pilot projects
You first need to know, which technology will radically improve your business. You shouldn’t just incorporate technology for technology’s sake. With so much riding on the outcome of your digital transformation, you should implement pilot projects to show stakeholders and provide proof of concept and demonstrations of the technology.
“Not every project will succeed,” says PwC. “But, each pilot project will help you to learn the approach that works for your company. With evidence from early successes, you can also gain buy-in from the organisation, and secure funding for a larger roll-out.”
Step 3: Know and understand what the data you’re gathering means
70% of decision-makers report planned or current initiatives to encourage more data-driven decisions, according to Forrester. This makes unlocking the value of integrating business data vital to success in today’s marketplace.
You’ll need to identify and gather the right data, deploy it for the right reasons and effectively analyse it to ensure you make the right digital transformation decisions. PwC says: “Defining and developing an effective data analytics strategy will require a focus on:
- Predictive analytics and forecasting
- Prescriptive analytics
- Business driven decision-making
- Automated feedback to the organisation and connectivity to employees.
Step 4: Become a digital enterprise
“A lack of digital skills and transformation culture top the list of the challenges identified by survey respondents,” reveal PwC. Strong data analytics capabilities are vital for your businesses digital transformation, but digitalisation also calls for other technical skills. “Many industrial companies will need to develop digital skill sets around creative digital strategy design, technology architecture and design, user experience design, or rapid prototyping capabilities,” advises PwC.
If you aren’t developing the right digital culture, you won’t be able to hang on to the best talent. A true digital mind-set is highly collaborative, crossing business boundaries and outward to partners and customers. Enterprises that remain isolated by functional silos are unlikely to achieve the integration needed to fully digitally transform.
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Step 5: Plan your digital ecosystem and work towards it
To undergo a digital transformation, you’ll need to back up new technology and innovating with investments. Epicor’s growth survey found that, 88% of high-growth companies are planning significant investments in technology and innovation, while only 49% of slow-growth companies are doing the same.
First adopters can achieve breakthrough performance by taking their strategy a step further and understanding consumer needs and using digital technology to create and deliver value to the customer in an integrated innovation solution. “Real breakthroughs in performance happen when you actively understand consumer behaviour and can orchestrate your company’s role within the future ecosystem of partners, suppliers and customers,” explains PwC.
Despite the risks, digital transformations are essential for all businesses. There have been numerous examples of how digital platforms have upended long-established industries across the spectrum, from hotels (Airbnb and VRBO) to music (Apple and Pandora) to recruiting (LinkedIn) to retail (Wayfair and Amazon). HBR advises: “Legacy firms must prepare themselves, and hopefully get ahead of, the wave of digital transformation or risk being washed away like Kodak, Blockbuster, and Encyclopaedia Britannica.”