Digital transformation in economy
Regardless of whether you call it an evolution from classical Digital Age to the economy of complexity, a jump from the traditional 3rd technological platform to the prophesied 4th technological and social platform, or an industrial revolution, digital transformation is here. This new type of transformation aims to exploit the full potential of our increasingly inter-connected society. Networks of things, business processes, but especially people, can be leveraged to create a new era in our daily lives, businesses, organizations, industries, and, arguably, all aspects of human society. As most complex phenomena, it is easier to be understood, not at its entirety, but by refuting false oversimplifications of it. What is not digital transformation?
Digital transformation is not just digitization
A less involved term, and a component of digital transformation, digitization is the process of converting analogue resources of an organization, such as paper documents and multimedia, to digitally stored information. Although it is an essential first step, one often encounters the fallacy of identifying it as the same process with digital transformation. It is primarily important in traditional and slow-paced sectors, such as the healthcare industry and public sector institutions, where the extensive amount of information, along with bureaucracy, slows down, or even prohibits, re-organization attempts. Nevertheless, emerging technologies, such as Natural Language Processing and cloud computing have been the key to facilitating the digitization of our increasingly digitalized society by providing efficient conversion and storage solutions.
Not just a disruption
Technological disruption is often regarded as the holy grail of start-ups and innovation-oriented companies. Success stories, such as Uber and Airbnb, have set business specialists on a quest to discover the hidden potential of cutting edge technologies in order to lead a virtual race of innovation. However, this oversimplification can prove misleading, as it is ignoring a fundamental property of digital transformation: its human dimension. Transformation emanates from the needs of people, not technology itself. Naturally, technology can serve as an innovation accelerator, but viewing it as goal, and not a means, can lead to failing at the primary objective of the market, which is the satisfaction of its consumers. Furthermore, innovation should not blatantly aim at disruption, which brings to mind a violent and abrupt change, but at continuous and stable progress.
Digital transformation: A business transformation?
Although often viewed as a sheer need for extensive automation, one can anticipate that digital transformation will fundamentally affect all business processes, consumer-, client-, employee- and management-wise. Traditional methods, such as business process outsourcing, will evolve from solely aiming at minimizing the cost, to further optimization and innovation. Managed services providers will need to adapt to the mainstream adoption of cloud computing and the overall decentralization of business resources. Automation will need to be client-centered, as companies should be able to responsively respond, through intelligent crisis communication, to urgent needs generated by the fast-paced lives of their clients. Consumers will be placed at the centre of every optimization objective and information will be the catalyst that, coupled with big data and artificial intelligence, will be used to derive meaning and insights about their needs.
The increased reliance on software solutions will need to be monitored and evaluated. Customer experience should always be regarded as the evaluation metric of any attempt for automation, as adopting immature technologies, such as replacing traditional customer support with bots, can have the counterproductive effect of customer dissatisfaction.
The DNA of the digital leader
At times of vast changes and confusion, leadership is cornerstone to a successful business policy. In contrast to the general impression that technological advancements favour bottom-up approaches, it is anticipated that digital transformation will require changes at the higher levels of business management. Due to being a holistic process, transformation does not discriminate among the traditional silos of linear management thinking, but requires close collaboration between the different departments of a company. Among the caveats of emerging technologies, such as artificial intelligence, is their wide applicability, which dazzles business strategists and blurs the company objectives. In contrast, leaders need to maintain a clear strategy and prioritize their adoption of different technologies based on their company’s policies.
Both the definition of leader and leadership will have to adjust to the shifting needs of this new digital era. As transformation needs to be orchestrated by people at different levels of the managing hierarchy, any CxO can be eligible for a digital leader. Furthermore, leadership will not only aim at adapting, but at pro-actively responding to the imminent needs of the market. Due to this new collaborative form of leadership, limiting responsibility to individuals will not be possible.
Despite the suggested practises by specialists, there is no panacea to dealing with the effects of digital transformation and businesses, as well as any organization affected by it, will need to place their decision frame in the appropriate, anthropocentric, context. As any revolution, digital transformation, as well as our ability to effectively react to it, will be evaluated ex post.