Digitization has been talked about for years. It is hard to count how many industries talk about it, how many consulting projects plan it, and how many new services and processes have been created based on it. Of course, a lot of data is now digital, there are lots of online services, and IT is somehow involved in most processes. But is this enough to count as real digitization? Or is it actually more the case that most companies just add digital data and computers to very old processes instead of planning their operations and customer experiences based on digital models?
It is typical to hear stories how a customer-facing employee cannot do what the customer wants because “our IT system works like this.” Management and process consultants are selling expensive consulting packages to create new processes and educate employees to follow them, but many employees have doubts about whether this really helps their business. Many employees feel it is hard to find internal company information and use internal systems. At the very least, it takes a long time for any new process to see real use.
Does it really have to be so difficult? Of course, we can say it always takes time to get employees to unlearn old things and pick up new things. At the same time, these employees are also everyday consumers who learn quickly to use new things like social media, chat apps, online shopping and streaming video services (and combinations therein). Why is it that these same people are often frustrated with their employer’s IT systems and services – sometimes to the point of using commercial services they understand as a workaround to their company’s internal processes?
Designed for digital
We can see that many successful digital services offered by companies such as Amazon, Facebook, Google, Netflix and Tencent are designed for the digital era. They have successfully leveraged the internet in ways no one could have imagined when the internet emerged as a commercial entity in the mid-1990s, and have out digital technology at the core of their business models.
Many other companies – including media companies, telco carriers, and retailers – have tried to adapt to this new environment. Some of them have died, some of them have survived, but none of them have really been able to replicate the success or even the business models of the digital giants. Which begs the question: is it simply impossible to modify an old company to make it compatible with digital reality?
Most startups are built on digital technology today. Many incumbent companies have tried to learn from them and even acquire them. Very often the outcome is that startup activities are isolated to a corporate VC or innovation unit. IT is still often seen as something that lives its own life inside the IT unit. New models or digitalization don’t exist at the core of these companies – they are just wingman functions.
We have seen this in the media, telco, advertising and retail businesses for some time. Now we are seeing it in the finance and banking business. We cannot blame these companies too much, because it hard to get to real digitalization to work in practice. Sometimes, digitalization requires you to shred your entire legacy IT, destroy all old processes, and demolish your organization. It sounds like you’re being asked to drag your company through chaos with no guarantee of success or even survival. At the same time, if you don’t do it, you are probably doomed and will disappear from the market sooner or later.
Customer experience is the heart of digitization
We have seen a lot of hype about startups and digitization. Corporate people show up at startup events in ripped jeans, they acquire fancy new services, and management consultants charge huge fees during the transition process. But isn’t there a way to skip all that and just start to build businesses and services on new digital technology? Certainly this may still require consultants and external help, but the result would be the ability to really operate in a new way, rather than simply buying time to stay in your comfort zone.
One key thing about new businesses built digital from the ground up is that the whole design process is based on customer experience – as it must be. Whatever mandatory internal or regulatory processes are in place, in the end it all exists solely to offer value to the customer. This sounds like a simple guideline. But it’s actually far more complex. In fact, it takes a lot of courage and concentration to work like this. And it’s especially difficult for existing big organizations encumbered with legacy IT, organizations and processes, internal politics and a lot of people in their own comfort zones who would very much like to stay there.
Now that the hype phase of startups and digitization looks like it will be winding down soon, it’s now time to think in a more mature way about how to do new things. There’s nothing wrong with startup and digitization models, but we have seen many failings and gaps when they are adapted directly in corporations. We particularly need bold leaders in corporations that are ready to shred old things, cannibalize old businesses and build totally new models. New, truly digital processes might actually be easier to implement than these ineffective intermediate models if they are based on customer experience and made as easy for employees to use as Google, Amazon and Facebook without having to call in expensive consultants.
If I may, my response to your ‘does data, online services and IT count as real digitisation?’ is – only partially. Many wrongly associate digitisation with tech as though digitisation is tech and tech is digitisation. It is not. Tech is but one of its tools, as is data.
Digitisation can be defined as how business is carried out over the internet. Business is always first. Tech/IT is then used to tool it for the digital channel. The term ‘digital economy’ which is often spoken in the same breath as digitisation sums it up – it is about the economy.
I have studied digitisation for years, spoken to startups and traditional firms. And indeed, the latter just can’t get it while it is natural for the former. One reason I think is that traditional firms look at new things as add-ons, sometimes treating them merely as solutions. Startups however seem to operate with a distinctively different culture aligned with the digital economy ie. the right foundation.
And indeed digitisation is customer-centric, data-centric, partnership-centric, operating with an open culture (otherwise partnerships, crowdsourcing, OpenAPI, OpenData et al won’t work).
I agree, good points.
It seems to me that Transformation is very much like Evolution, in that very few Organisms or Organizations succseed, and perhaps that is not a bad thing. So just as the Megladon has come and gone, so to have many of the companies we worked at, bought from, trusted… And so to will many of the digital native companies of today be replaced by newer companies tomorrow.
Something like that, but a fast evolution, and you must really adapt to survive, it is not enough to fake.