What is digitalisation, and how is it different from digitisation and digital transformation? Why is digital transformation important, are there best practices and examples of successful digital transformation in companies? These are the topics we'll be covering here, and there is lots of additional material in linked related content.
Digitalisation definition - what is it?
According to Zooma's article What is digitisation, digitalisation and digital transformation, the definition of digitalisation is:
The reimagination of business models, industries and societies based on new capabilities that digital technology and culture makes available to us.
In short, digitalisation is a fertile ground for innovation and growth; the impact of which can be disruptive. So how is this different from digitisation and digital transformation?
Digitalisation vs digitisation vs digital transformation
According to the same article, digitisation means "the conversion of existing products, services, processes or any other analogue format into a digital format." Hence, digitisation isn't about a changed business model or societal impact like digitalisation; it's simply about the format.
Finally, digital transformation is:
The process of creating the capability to exploit new opportunities made available by digitisation, digitalisation and digital technology at large.
Digital readiness is another commonly-used term - it refers to the ease with which people, teams and
organisations can make the switch from analog to digital. You can find out more about this term in our
article, What is digital readiness?
Is there a difference between digital and online?
A question often asked in relation to digitisation and digital transformation is how digital is related to online? Does something have to be online to be digital? Try to think about it this way, as explained in the article What is Online vs Digital?:
- Online means that someone or something currently is connected to the Internet.
- Digital, meanwhile, is a format or a process. It describes electronic technology that generates, stores, and processes data.
Digital can thus be both online and offline—for example; a digital audio file can both be streamed online and stored on a disc or hard drive.
Why digital transformation is important
Now more than ever before, the pace at which companies are pursuing digital transformation is essential for future relevance, profitability, growth and even survival. Why? As described in What is Industry 4.0, and why is it important? "we are rapidly approaching a pivotal moment in human history". The concept of Industry 4.0 and the second machine age is creating an environment where instead of competing on cost, we're moving towards competing on ability, where customers on a wider scale are asking; "can you do it?" rather than "what does it cost?".
How to do it - digital transformation best practices
First and foremost, as pointed out in our article 'Digital transformation: Best practices', the following is crucial to successful digital transformation:
- That the decision-makers commit.
- That you practice targeted communications.
- That you implement appropriate incentives.
What questions are important to ask your organisation?
To instil the right principles and behaviours within the organisation that is going to drive the transformation, we suggest that you and your company ask yourself the following questions:
- Do you know where the change is occurring? Review the frontiers where significant changes are happening, the core parts of the company affected by the change. Systematically work through the identified items and rank each issue by its feasibility.
- Which customer journeys matter? Identify the journeys, map every process, technology, capability, and transition needed to improve and deliver exceptional customer experiences.
- How will you collaborate across functions? Digital leaders prioritise internal collaboration and build cross-functional teams that need the mandate to get things done. Incentives must reward the successful delivery of an entire customer journey or a complete product rather than actions that matter for a particular function.
- What is your decided approach? Many successful companies test and iterate concepts on a small scale with customers. This way, they avoid getting caught up in overly ambitious specifications, and way too long planning cycles.
- Are the budgets tied to progress? Few companies can quantify the ROI of their digital initiatives. Decision-makers need to stay close and follow the development and always be prepared to either pull the plug if the KPIs fail to move in the desired direction or quickly pump in more budget if the performance justifies it.
- Do you have the mechanisms to challenge ideas? Not all ideas are good ideas. To prevent poor ideas from squandering resources, you could set up an advisory board to guide you and your company through its digital transformation.
- Are your people empowered to act? Empower the teams working with digital initiatives, and give them real responsibility so they can break through your functional silos, and get the possibility to take the lead.
- How does your IT-department operate? To become digital involves establishing a cyclical dynamic in which processes and capabilities continuously evolve in response to inputs from the prospects and customers.
- Have you prioritised your digital initiatives? Success is dependable on how your decision-makers and top management coordinates and prioritises initiatives when they run in parallel. Executives must prioritise the initiatives, align the dependencies between the initiatives, and coordinate the resources and budgets.
Do I need a digital transformation strategy?
In short, yes you do. A prerequisite for successful digital transformation is internal agreement on what a digital strategy is for the organisation. As explained in the article What is digital strategy? views often vary:
- Marketing usually sees a digital strategy as everything a company does when it comes to online.
- IT usually refers to something with the cloud when they talk about a digital strategy.
- Operations consider it to be data analytics.
- The R&D manager sees digital strategy as online products.
- Financial as online revenue touchpoints.
- Legal sees online and digital as a problem.
- And so on...
Digital transformation needs to be a main part of the business strategy. Decision-makers need to agree on having digital fully integrated into everything the organisation does.
Change management and digital transformation
Managing a shift in your digital strategy is like managing any change in how your organisation operates. It's tough since many favour the known status quo over the less known alternative. So what can you do?
Change in a company can be supported by the concept of internal "heroes", "role models", or "promoters". Elevate an individual that has the sought after behaviour and some others will follow. Like any method of achieving change, this method has a few pros and cons. And as explained in our article on the subject Digital transformation – do we need heroes? it can certainly be part of your toolbox, but can't be the sole method upon which your digital transformation relies.
As detailed in Is your organisation structured to manage change?, most organisational structures weren't built for, or indeed ever meant for, managing change and to take advantage of new opportunities. They were built for defending the status quo and to make the organisation more efficient and effective than the competition.
For many organisations, the answer thus may be to run a bi-modular organisation with one part of the organisation operating autonomous and being structured more like a start-up. All-in-all, to be able to take advantage of new opportunities as they present themselves, while the rest of the organisation is focused on optimising the legacy business.
The biggest barriers to digital transformation
In our article 'How to overcome the primary obstacles to digital transformation', we argue that only true pioneers have prior knowledge about how to successfully navigate new territories. The main obstacles that are hampering the digitalisation of other companies and organisations are:
- Lack of skilled expertise
- No management buy-in
- Legacy & technical debt
- Mindset and culture
- Siloed data
It must be part of every digital transformation strategy to solve and overcome these five obstacles. If left unresolved, there's a significant risk that any initiative to evolve and adapt to the new competitive landscape will fail.
Reasons why digital transformations fail
Most companies have initiated a digital change project of some sort or another. Yet, research shows that only about one in five industrial companies achieves results from these initiatives that exceed their expectations. In the article Why digital transformation fails, we go deeper into why that is, and what can you do to succeed, but here is the short version:
- Unclear vision, objectives and commitment. Make sure that a unified top management team has a captivating vision, clear objectives, and commitment to change before attempting a digital change project.
- Disjointed infrastructure, digital platforms and tools. Decide what is more important to your business success; a custom fit infrastructure, or time-to-market?
- Mis-aligned processes, organisational structure and skills. Redesign the organisation to fit the decided solution before you commit to the investment.
- Organisational inertia, mindset and lack of perseverance. Set aside time for impacted employees to be on-boarded, educated, and coached in how they need to change their way of working.
Keeping your skillset up to date
It can sometimes feel impossible to keep up with the trends and constantly tailor initiatives to match the current environment. In How to overcome your digital marketing skills gap, we set out five basic tips that are helpful if you want to overcome your digital marketing knowledge gap and stay up-to-date:
- List the areas where you lack knowledge (and then identify how to acquire those skills).
- Be curious, learn and stay up-to-date (e.g. sign up for online webinars and get certified via online training).
- Be critical (and find out why things work in a certain way).
- Learn by doing—test and evaluate (before you scale up – or bin the idea if it proves not to be working).
- Start networking (with knowledgeable people and don't hesitate to ask them for advice, incl. on LinkedIn, Twitter, their pods, blogs and other offsite touchpoints).
Examples of digital transformation in companies
You might have wondered and asked yourself the question we often ask: What traditional company is most 'onlinified' and digitalised? Despite digital transformation being decades in the making, this is not an easy question to answer for many when framed like this.
First of all, 'traditional' according to us means a company started before 1994. Some say Apple. Some say a bank. Some say a travel company. Others say Amazon (which started in 1994 and hence doesn't count). Most people, however, find it difficult to come up with an answer at all.
Why is this relevant? Understand that, when it comes to digital transformation, it is challenging to find companies to learn from and to use as good examples or best practice.
If you found this topic interesting, we also think you might like these other resources from The Onlinification Hub:
- Top 5 books to achieve digital readiness: A guide for business leaders
- The challenges of modernising B2B
- Is digitalisation a project?
- Why companies still need to focus on their digital transformation
- How to approach digital transformation
- Digital onboarding: Tips for introducing new employees
- Digital platforms: How to choose what's best for your company
- Why are buyers changing faster than sellers?