What you need to know about digitalization
What you need to know about digitization, digitalization and digital transformation.
Written by Ronny Michelsen
Definitions of digitalization
The Norwegian Government:
«"Digitalization is about using technology to innovate, simplify and improve. It is about offering new and better services that are easy to use, efficient and reliable. Digitalization facilitates increased value creation and innovation, and can help increase productivity in both the private and public sectors."»
Gartner: «Digitalization is the use of digital technologies to change a business model and provide new revenue and value-creating opportunities. It is the process of moving to a digital business.»
What is the difference between digitization and digitalization?
Digitization is the conversion of physical, analog information into digital information.
Scanning documents, and converting music from CDs and vinyl to MP3 are examples of such digitization. If digitization is a conversion of data and processes, digitalization embraces the ability to collect and evaluate data, to make better decisions and enable new business models.
Fundamentally, digitization cannot take place until the information has been digitized.
So what is digitalization?
Digitalization is all use of digital technologies and digitized data, in order to:
Influencing how work gets done, transforming how customers and companies engage and interact, creating new (digital) revenue streams.
In short, digitalization consists of new or existing digital solutions being used in new ways.
The businesses that succeed in this transition are those that adapt their strategy so that it is in line with the change that the new technology brings to the business.
And before it's too late. In the age of digitalization, it's also important not to let the past ruin the future.
You need to let go of old methods and allocate both money and resources where they will be needed in the future.
However, that doesn't mean you have to scrap all the solutions you already have. Instead, use new technology to improve them and focus on building bridges between existing and new solutions.
So what is digital transformation?
Digital transformation is the profound and accelerating transformation of business activities, processes and competencies to fully exploit the changes and opportunities of digital technologies in a strategic manner.
Digitization is an important step towards digital transformation and has a major impact on products, services and people.
It marks a cultural shift in an organization, transforming how value is created and business is run.
But digital transformation is seen as broader than this. More than applying technology to existing operations and businesses, it is the capacity to quickly adapt when required through the intelligent use of technologies and information.
As technologies and business models change in the environment all the time, digital transformation is a continuous ongoing initiative.
Most companies and organizations have a «reactive view» of digital transformation. Often, they stay in old business models and with outdated technology, because previous investments need to be defended. And end up lagging behind.
While most people adopt new technology to stay competitive and relevant, few use it as a tool for innovation.
Restructuring and innovation culture
Establish an innovation culture that promotes the development of digital processes and procedures and enables the development of digital services and digital business models.
Training employees to prepare them for the challenges of the digital age and to enable them to take part in digital change.
Why is digital transformation so important?
Today's customer, internal or external, expects the same good experiences in contact with businesses as they have with technology in their personal lives.
It should be professional, simple and with fast deliveries of products and information.
Employee engagement is a hot topic, especially when you're dealing with a dispersed workforce that may never again be confined to the office.
Employers are looking for new ways to create productivity improvements, and digital technology makes employees more efficient. And better employee experiences lead to greater engagement. Strengthens ties with partners.
Customer demands are increasing and competition is fierce in many industries. Companies are becoming increasingly interdependent, collaborating with suppliers and distributors, subcontractors and specialized consultants, with the aim of producing a diverse range of products and services that interest customers.
One of the biggest headaches for many IT managers is how to place more data at the edge of their networks while keeping that data secure.
This is an increasingly complex task, requiring strict enforcement around access, data compliance, and protection against attacks.
Strategies for successful digital transformation
Three areas are particularly important for successful digital transformation.
Digital strategy: The first step is to have a vision. You need to know what you want to achieve with digitalization.
Someone needs to form a picture of where you should be, what your goal is, and give direction to the measures.
These are not set strategies. You must be prepared to change and adjust your strategy continuously.
Knowledge of digital technology: You need to know the possibilities and features of technology. If you don't, you won't know what to use it for.
Attract digital talent if you don't have the expertise yourself. The senior leadership team must take ownership and establish and define a digital strategy.
Innovation: The most fundamental insight that research has given us is that if you are going to have anything left to invest in information technology, you have to use it to do things differently or create something new.
There is no point in introducing technology to improve practices, but you can use technology to change practices.
In general, Norwegian companies may have had a somewhat naive understanding that simply acquiring a technology and using it will yield benefits.
Instead, you must use technology to work differently and smarter, deliver products and services in a different way, and communicate with customers in a different way.