What exactly do you mean by ‘becoming Digital’ ?
I overheard a conversation recently between two experienced professionals comparing how ‘digital’ different businesses are “…this organisation I know really understand digital; they now have all their contact details for clients in Outlook…and instead of production plans on spreadsheets they use an ERP system”
Whilst it may seem semantics there is a significant difference between digital, digitisation and digitalisation and in order to truly harness the full potential of Digital Transformation it is essential that you and your organisation are clear on the difference. According to an MIT CapGemini Consulting report one of the most significant barriers to Digital Transformation is ‘lack of familiarity with digital – “we don’t know how to do that”, without being clear in what we mean by ‘becoming Digital’ any progress will stall.
Digitisation is the process of converting data to digital formats
Digitising takes a paper-based process and makes it electronic. For instance, a client recently replaced the need for filing cabinets of HR records with a global online system. Previously this information would have been stored locally in one of their 70 onsite locations, requiring a significant amount of HR time and effort to produce management information. The HR Team can now automate reporting freeing up their time for more value-added activities, such as using the digitised data to facilitate strategic resource planning discussions.
For continued business success in today’s markets, achieving growth in productivity and profitability; digitising is essential. However, despite more than 20 years of business digitization history, the MIT Center for Information Systems Research (CISR) has found that only 28% of established companies have successfully digitised. Furthermore, research has found that companies cannot adopt new digital business models; their core systems, processes, and data, if they have not digitised first.
Digitalising is the act of implementing digital solutions to improve business performance
Typically, critical business processes like sales orders, production planning, maintenance schedules, manufacturing operating procedures are run on legacy systems or separate spreadsheets. Whilst the data is digitised these spreadsheets and systems don’t talk to each other and are time consuming to operate, update and maintain. Further time is wasted creating management information to accurately report on operational performance, comparing performance of each shift or measuring the conversion accuracy of sales opportunities to orders.
It seems the daunting prospect of traditional (long and expensive) ERP implementation maybe deterring leaders. Perhaps you have had experience of development and testing over running, often meaning that time for engaging workforce, and embedding behavioural changes would be sacrificed.
Digital technologies such as internet of things, data analytics, robotics, and artificial intelligence can help extend visibility into a company’s operations all the way to customers’ mobile devices. ‘By connecting data flowing from the manufacturing plant with data flowing from customer activities, all then mediated through connected technologies, crunched in the cloud, and fed back into manufacturers’ systems, a virtuous data loop is formed that enables manufacturers to achieve unprecedented customer service’. Anson, Manufacturing 2020.
Operational Excellence still plays a vital role for the inherent benefits of discipline, standardisation and removal of waste. There is really no point in digitising waste. Business gains from digitalising and utilising digital technologies such as Artificial Intelligence are shown below;
Digitising may previously have helped achieve noticeable gains within your industry sectors and is still an important enabler for digital technologies. However, digitisation on its own is now not enough to compete. Digitalising more and more processes will not make your business digital.
Established companies have started to define innovative digital strategies which will transform their business to become entirely customer-driven. Schneider Electric SE has moved beyond selling electrical products to providing energy management solutions. Kaiser Permanente views itself not as a health care provider but as a patient-provider collaboration. BMW is not just an automobile manufacturer; it’s a provider of individual mobility. Philips has sold off multiple businesses, including its foundational lighting business, to focus on “improving lives through health care innovation.” MIT Don’t Confuse Digital with Digitization, Jeanne Ross.
What does this mean for leaders?
Leaders need to be able to hold the paradox of maintaining and continuously improving the business while at the same time, creating the conditions for innovation and future possibilities. In a previous article, a recommended approach involved creating a ringfenced area focusing on Digital Adoption. Leaders must provide a clear vision and relinquish control to a team who are then empowered to experiment and learn.
For digitising, digitalisation and Digital Transformation the message is consistent; without engaging digital adoption, ensuring the technology adoption is made through an empowered workforce, the technology benefits will not be fully realised. Whilst, the bridge to Digital Transformation crucially involves data, processes and technologies, organisation wide clarity on purpose, strategy and employee engagement is the important first step.