You know how sometimes a word or a term becomes very trendy and starts to be used so much that it starts to work against itself. Ever heard of digitalization? Go to any business seminar, any corporate website, read any context relevant blog, listen to any analyst; digitalization is a Top 3 priority on the CEOs agenda. It is the most lucrative opportunity and the most menacing threat on any strategy grid – and has been that for quite some time. There are countless discussion forums, newsletters, portals, initiatives, seminars, studies not to mention solution providers, software companies, consultancies and other opportunists crying that digitalization is the phenomenon of the millennium and that It will change everything.
When you listen to the rhetoric, you will soon notice digitalization is a true multi-purpose term and it is probably the most (ab)used term in business jargon. Everyone knows the etymology of the word digital – this has absolutely nothing (or everything) to do with digitalization – depending on your perspective. For some, digitalization equals Big Data, Internet-of-everything (or IoT), for others it is e-commerce, mobility, robotics, 3D printing, social networking or whatever you can digitize and for some it equals transforming the analog world into zeros and ones.
My perspective is enterprise software. As far as I am concerned, digitalization has been around for as long as the digital computers and programming have been. Enterprise software (in its modern form) started I suppose from some very basic computer programmed applications providing business process support and automation. From MRP to ERP and later to more refined and intelligent business applications with state-of-the-art UX and multi-/omnichannel interfaces for all imaginable devices has been the evolution in broad strokes. Somehow the use of the term digitalization in any other context, beckons the invention of a different term, which has nothing to do with digitizing but applying the increasing availability of numerical data to entirely new business scenarios, new services and new capabilities.
One quite typical definition of digitized business is one which refers to blurring the digital and physical worlds. It converges people, business and things and in essence, thus providing countless disruptive business opportunities. If we take e.g. e-commerce or mobility or advanced analytics or intelligent networks as examples, stand-alone they do not constitute digitalization. Only when you genuinely exploit digital opportunities by means of application (integrating people with business or integrating machines with business/business intelligence/advanced analytics/embedded technology) do we start to hone into true digitalization. E-Commerce becomes digital when it natively integrates horizontally and vertically, when it provides intelligence for both buyer and seller and when the business scenario provides more than just the commerce transaction, however elaborate. Exploitation becomes meaningful when aggregate value increases.
For me, the beauty of digitalization as a phenomenon is that the biggest opportunity is ironically not technical at all. The most winners of digital business are those who can exploit its disruptiveness by harnessing technology-enabled net-new capabilities and redesigning business principles and changing the rules of play. This is probably why digitalization is positioned as both a threat and an opportunity in CEOs’ SWOT grids. Look at what happened to the music industry, to the publishing industry, to broadcasting, to business models in industrial machinery, to consumer electronics, to buying, to selling, to paying… to everything. The top 100 businesses in each discipline are different in the 1970s compared to today.
This is why digitalization is a boardroom subject. It is a make-it or break-it situation. There is a thin line between being digitally successful and choking on the phenomenon. Digital strategy must be coherent and business driven. It provides a platform for innovation, but merely digitizing business processes – applying lipstick on a pig – is superficial transformation. Even so, business leaders need to understand and internalize the capabilities of digital solutions because it helps accepting that new disruptive business models can indeed be in technology driven. It also helps to seek advice from leading experts as digital opportunities and routes for transformation are not always visible unless you zoom out far enough. Taking prompt initiative at this stage is also strongly recommended; why waste time improving your competitive advantage or even become a game-changer.