How Digital Transformation(DX) Can Move Your Business Forward
It is no exaggeration to say that digital transformation(DX) has become critical to success in today’s business world. However, it is also the final stage of a process that is commonly misunderstood. In this series of articles, we examine how ordinary businesses can benefit from today’s digital economy, using a powerful and highly accessible set of tools.
The Road to Digital Transformation(DX)
Digitization. Digitalization. Digital transformation(DX).
These similar-sounding ideas hide key distinctions that are essential to modern business. While most companies are aware that upgrading to the digital world has its advantages, a much smaller number can clearly articulate what happens next – or why the fate of their business may depend on it.
With that in mind, let’s see what a journey into the digital world would look like for your company, one stage at a time. We’ll also spend a few extra moments showing you what the final destination looks like, and why it represents such a monumental improvement over where this journey began.
Part 1: Digitization
This step involves taking information from the brick-and-mortar world and storing it on computers. In practical terms, it means replacing pens with keyboards, post-it notes with emails, and filing cabinets with spreadsheets. By keeping your records in digital form, every department in your business becomes easier to organize, access and reference when needed – and an electronic record is kept every time you hit ‘send’.
Most organizations have reached this stage, at least for their internal information library. But a surprising number have left this goal only partially fulfilled. Some managers feel that many of their systems work well enough already, and upgrading entirely to digital would be an unnecessary expense, both in terms of time and effort. There is also a question of platforms to consider; spreadsheets do tend to look uninspiring, and managers might not know much about the alternatives.
Moreover, their workforce may be accustomed to the way things currently are and have their hands too full to want to sit down and learn an entirely new system. And if certain employees are already planning to retire or move on in a couple of years, then their managers may decide to just let them handle their own corner of the business in peace for the time being. In such ways, companies tend to let inertia take over, kicking the can further down the road so they can deal with the problem later.
But inertia is a poor business strategy, particularly during this period of rapid economic transformation. In recent years, nearly every major development – in all industries – has been fueled by digital innovation. Within such a context, resisting modernization by delaying the most basic business upgrades is the riskiest of all strategies.
In fairness, traditional forms of communication and information storage were indeed adequate to serve their original purpose. But the introduction of advanced computers opened incredible new doors, letting businesses see what they were missing if they continued to do things the old way. And as each company made its upgrade, pressure increased on their competitors to do the same. The old saying had got it all backward: invention is truly the mother of necessity.
The pre-digital world reached its potential long ago, in a world where heavy sets of encyclopedias were marketed by door-to-door salesmen, flights were booked by brick-and-mortar travel agents, all mail was sent through the post office, and people got their news from radio, TV and paper newspapers. Growth in all of these fields has ground to a halt – and in many cases, the entire business model has evaporated.
No matter how comfortable you might be doing things the old way, making the switch to digital is easier than you might imagine. Well-designed computer systems can be learned with ease and can reduce the workload on your employees. By allowing for increased efficiency, digitization lets companies save money on labor in the long run. Your team will likely be happier as well, as they have better tools to work with and can, therefore, spend more time on strategic thinking, problem-solving, customer interaction, and new ways to generate profit.
Digitization alone will not turn your company into Amazon, but it is a necessary first step towards a competitive 21st-century business. Its advantages are experienced by customers and clients only indirectly; public-facing innovations come a bit later in the process. But in terms of your organization’s internal procedures, digitization is like building your own corporate infrastructure. It allows you to achieve your current goals faster and more accurately, thanks to excellent improvements in workflow.
Most importantly, digitization prepares you to take the next steps on your digital journey, where it becomes possible to pursue an entirely different set of goals – and truly separate your business from the competition.
Part 2: Digitalization
The first part of this article explains the concept of digitization, a necessary precondition of digitalization. If you are still using analog data, or entering it manually, you are missing out on the huge benefits of digitization. Modern efficiency standards, as well as success in the following stages, depends on having all relevant information stored within your computer system.
As the next logical step forward, digitalization refers to the automation of business processes based on the information that you now have stored in the computer system. Bookkeeping, payroll, manufacturing, inventory, online ordering systems, customer communication – these and plenty of other customer-facing and back-office operations can be handled efficiently with the help of software programs designed to perform specialized tasks.
Whereas in the previous stage, your data was fed into separate computer systems for each department, digitalization allows it all to now be integrated into one network, which in turn follows a standardized format used by computer systems around the world. This integrated model allows for the introduction of software that optimizes most or all of your internal processes.
Known as Robotic Process Automation (RPA), such a leap in efficiency allows your organization to benefit from best practices around the world, which continue to improve as new techniques are discovered and refined. Advances in security also accompany this step, as company data can now be protected with cloud software technology.
At this stage, we can begin to see many new and advanced possibilities come into view. By installing the proper automated equipment in your factories, production can be vastly accelerated. Product diagnostics and quality control can be left largely in the hands of machines, which work more quickly and accurately than even the most experienced people.
Targeted marketing can divide your customers into groups based on their personal characteristics, and send different types of promotions to each group based on what they are likely to respond to. Once on your website or logged into your ordering system, customers can receive further helpful recommendations based on their search and purchase histories. After-sales service can also be facilitated through a friendly but automated interface.
Digitalization is how companies seem to know who you are. Perhaps you once bought flight tickets to Tokyo, and then later noticed several advertisements in your web browser, recommending hotels to stay in Japan, or the top sightseeing areas around Mt. Fuji. Digitalization operates in a similar way: Sales information and customer information can be automatically combined, then sent to the marketing department, which in turn uses software to craft specially tailored ads to spark your interest.
The better your data is organized within your internal computers, the more it can be integrated, analyzed, and applied to automate tasks that would otherwise be time-consuming. Taken together, these improvements represent a generational leap over non-digital operations, where employees process data by hand, company communications and advertisements are sent in bulk without being customized, and production lines rely on manual labor.
Furthermore, as daily tasks can be handled more quickly and with fewer resources, your staff will find itself with more time to focus on tasks that your computer system cannot (yet) handle: More face time with customers, and more opportunities to plan for the long term. Each of these benefits can lead to qualitative leaps in your company’s performance, above and beyond the improvements in speed and accuracy that become possible with digitalization.
Although the promise of this new business architecture is immense, digitalization also requires careful oversight before, during, and after the upgrade period. Employees must be made aware of what is going on, so that they can contribute to strategic discussions, as well as brainstorming for process optimization ideas. Their input during these periods is invaluable, as they know best which types of improvements would be most helpful for their departments, and which tasks may still need a human touch. They must also be trained to operate and oversee the new machines, while understanding the scope of their new role in the company.
Management must likewise have a clear vision of the possibilities under the new system. Indeed, a tool is beneficial only to those who know what it is for, and how it can be used. All departments must therefore become adept at using the new system, and receive briefings on how to keep data secure during the normal course of work operations.
Therefore, it is worth asking: How could advanced data processing and analysis add value to your business?
A fully digitalized company can continuously test for further potential improvements in system operations. Deep analysis of customer data can also provide insights beyond what traditional market research can deliver, making new types of service improvements possible.
An integrated database of customer preferences and real-time inventory / sales information could help you prioritize your production and marketing strategies, to optimize your supply with market demand. Ongoing analysis of tailored and targeted ad campaigns could improve your marketing efforts and corporate messaging. Automatically generated company reports could give you an up-to-the-minute snapshot of your current performance in all departments. And of course, with administrative tasks handled via software, your team could spend more of its time and energy focusing on future planning, rather than scrambling to catch up on yesterday’s paperwork.
Those planning meetings are likely to generate dozens of new ideas about the future of the company, thanks to the new opportunities made possible by digitalization. But near the top of the list should be the third step in the company reorganization process: Digital transformation.
Until now, our digital improvements have been confined to the factory and the back office. With the company’s internal system now fully connected and upgraded, it is time to let your customers experience the benefits of the digital process firsthand. If done correctly, this final step will put you alongside the world’s most innovative companies – and establish you as a true leader in your field.