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Digital Transformation (DT) is not necessarily about digital technology, but about the fact that technology, which is digital, allows people to solve their traditional problems. And they prefer this digital solution to the old solution.[need quotation to verify]
The transformation stage means that digital usages inherently enable new types of innovation and creativity in a particular domain, rather than simply enhance and support traditional methods.
In a narrower sense, "digital transformation" may refer to the concept of "going paperless", and reaching a "digital business maturity" which affects both individual businesses and whole segments of society, such as government, mass communications, art, medicine, and science.
While the impact of this on businesses has been profound, many are struggling to realise the full potential of what digitisation and this is also clearly divided by Geography. According to the McKinsey Global Institute's Industry Digitization Index, Europe is currently operating at 12% of its digital potential, while the USA is operating at 18%. Even within the leading economies of Europe there are also some significant differences as, according to the study, Germany operates at 10% of its digital potential, while the UK is almost on par with the USA at 17%. This clearly demonstrates that, while business processes are undergoing great change making much progress in the adoption of digitisation, even advanced economies are struggling to exploit the full potential of digitisation.
In 1703 Gottfried Wilhelm von Leibniz explained and envisioned the concept that would be known as "digitalization" in his publication Explication de l'Arithmétique Binaire. Initially developed as a base-2 numerical system, using only two values, 0 and 1, the system was further developed and complemented by scholars such as George Boole (1854), Claude Shannon (1938) and George Stibitz during the 1940s.
Early digital computers
Today, Stibitz is considered one of many pioneers of the digital computer, through the development of the first electromechanical computer from his discovery of the automatic computing relays as well as the term 'digital'. The first electronic computer was introduced by John Atanasoff in 1939. The process of digitalization thereafter accelerated, with the development of personal computers such as the Simon in 1950, Apple II in 1977 and IBM PC in 1981.
With the introduction of the World Wide Web, the scope, dimension, scale, speed as well as effects of digitalization fundamentally changed, resulting in the increased pressure on the societal transformation process.
In 2000, digitalization began to be used more widely as a concept and argument for an overall governmental introduction of IT, increased usage of internet and IT on all levels. A similar development began in the general business climate in order to raise awareness regarding the issue and opportunity. In the EU for instance, an initiative called the Digital Single Market was developed, with recommendations for national digital agendas in the EU, which gradually and positively should contribute to the future societal transformation, with more modern development of communities, structures and to create a basis for e-governance and information society.
The debate surrounding digitalization has therefore gained increased practical importance for politics, business and social issues, and is linked to political work issues for community development, new changes in the practical business approaches, effective opportunities for organizations in operational and business process development, with effect on internal and external efficiency of IT to name a few.
Digitization is a sub-process of a much larger technological progress (see below): digitization (the conversion), digitalization (the process) and the digital transformation (the effect) that are collectively accelerating the global and societal transformation process.
In political, business, trade, industry and media discourses, digitization is defined as "the conversion of analog information into digital form" (i.e. numeric, binary format). Digitizing is technically explained as the representation of signals, images, sounds and objects by generating a series of numbers, expressed as a discrete value. The majority of sectors and industries in media, banking and finance, telecoms, medtech and health care have been strongly affected by this conversion of information.
Unlike digitization, digitalization is the actual 'process' of the technologically-induced change within these industries. This process has enabled much of the phenomena today known as the Internet of Things, Industrial Internet, Industry 4.0, Big data, machine to machine communication, blockchain, cryptocurrencies etc.
The academic discussion surrounding digitalization has been described as problematic as no clear definition of the phenomena has been previously developed. A common misconception is that digitalization essentially means the usage of more IT, in order to enable and take advantage of digital technology and data. This early definition however, has largely been replaced by the above definition, now linked to holistic views on business and social change, horizontal organizational and business development, as well as IT.
Finally, digital transformation is described as "the total and overall societal effect of digitalization". Digitization has enabled the process of digitalization, which resulted in stronger opportunities to transform and change existing business models, consumption patterns, socio-economic structures, legal and policy measures, organizational patterns, cultural barriers, etc.
Digitization (the conversion), digitalization (the process) and the digital transformation (the effect) therefore accelerate and illuminate the already existing and ongoing horizontal and global processes of change in society.
Opportunities and challenges
Digital transformation is a major challenge and opportunity. When planning for digital transformation, organizations must factor the cultural changes they'll confront as workers and organizational leaders adjust to adopting and relying on unfamiliar technologies. Digital transformation has created unique marketplace challenges and opportunities, as organizations must contend with nimble competitors who take advantage of the low barrier to entry that technology provides. Additionally, due to the high importance given today to technology and the widespread use of it, the implications of digitization for revenues, profits and opportunities have a dramatic upside potential. We can understand digital transformation through some real-world examples.
1. Digital transformation in hospitality management
It focuses on ambitious digital transformation, aiming to put the customer back at the center of its strategy and operations. We need to assess organizational structure to embrace digital transformation and identify how data from online content and reviews might play a role in increasing booking. Latest advancement in this respect are Online Travel Agencies, service aggregators like Expedia, Booking.com. We have another competitor in market which is not only digitally transforming the hospitality industry but actually bringing disruption with the help of technology, AirBnb.
2. Digital Transformation in e-commerce
Digital experience has become inevitable without e-commerce interaction. Big players like Amazon.com, Alibaba.com have already disrupted the shopping journey. But now we have more challenging tasks of avoiding sequence of events that lead to the security breaches like theft of debit and credit card numbers as well as the personal information of millions of customers. We need to improve over our infrastructure with minute details like safe transactional operations, improved customer satisfaction along with data security.
3. Digital Transformation in banking
It focuses on digital transformation of banking sector in seeking regional growth amidst a new digital era. Banks have already invested heavily in technology and infrastructure, which bring dramatic changes and rewired this sector for digital innovation. From online banking (bank in your pocket), to ATM availability at every nook and corner has enriched the user experience. Major forces of the digital transformation strategy involve the overhaul of organization, the rapid enhancements of highly scalable digital platforms, the leverage on technology to sculpt the customer experience, and the internal evolution and external partnering in seeking new digital innovation.
4. Digital Transformation in training
With the increase of online learning tools and facilities organisations and individuals are looking for more flexible ways per personal development. Using video driven lectures, online learning communities and learning management systems allows creating new business models which disrupt the traditional lecture driven training sessions.
In November 2011, a three-year study conducted by the MIT Center for Digital Business and Capgemini Consulting concluded that only one-third of companies globally have an effective digital transformation program in place.
The study defined an "effective digital transformation program" as one that addressed:
- "The What": the intensity of digital initiatives within a corporation.
- "The How": the ability of a company to master transformational change to deliver business results.
A report published in 2013 by Booz & Company warns that the impact of digitization "is not uniform". This points out that some sectors and countries have taken to digitization more readily than others. It concludes that "policymakers need to develop digitization plans across sectors that take into consideration the varying impact by level of economic development and sector".
In 2015, the World Economic Forum and Accenture launched the digital transformation initiative (DTI) to study and research the impact of digitalization. The initiative offers unique insights into the impact of digital technologies on business and wider society over the next decade. DTI research supports collaboration between the public and private sectors focused on ensuring that digitalization unlocks new levels of prosperity for both industry and society. A 2017 interim report claims that digital transformation "could deliver $ 100 trillion in value to business and society over the next decade".
A 2015 report by MIT Center for Digital Business and Deloitte found that "maturing digital businesses are focused on integrating digital technologies, such as social, mobile, analytics and cloud, in the service of transforming how their businesses work. Less-mature digital businesses are focused on solving discrete business problems with individual digital technologies."
In February 2017, a study by McKinsey & Company argued that "On average, industries are less than 40 percent digitized, despite the relatively deep penetration of these technologies in media, retail, and high tech". This study also points out the inequality in the penetration of digital change across industries, arguing that while in some industries there were core changes due to digitization, in others the impact of this phenomenon was limited to minor or secondary changes.
In July 2017, a survey of 1239 global IT and business professionals was released by the digital performance management company Dynatrace. While this study shows, that 48% of its participants "stated digital performance challenges were directly hindering the success of digital transformation strategies in their companies", the survey also refers to 75% of respondents, "who had low levels of confidence in their ability to resolve digital performance problems".
In October 2017 a survey of 890 CIOs and IT Directors across 23 countries by Logicalis Group established that 44% of respondents felt complex legacy technology is the chief barrier to digital transformation, with 51% saying they planned to adapt or replace existing infrastructure as a means of accelerating digital transformation.
- Caudron, Jo; Van Peteghem, Dado (2014). "How Digital Finally Became Important". Digital Transformation. A model to master digital disruption. p. 280. ISBN 9789090284224.
Digital Transformation is not about technology, it's about the fact that technology, which is digital, allows people to solve their traditional problems and they prefer that solution to the old solution, and that's all there is to it.
- Lankshear, Colin; Knobel, Michele (2008). Digital literacies: concepts, policies and practices. p. 173. ISBN 978-1433101694.
The ultimate stage is that of digital transformation and is achieved when the digital usages which have been developed enable innovation and creativity and stimulate significant change within the professional or knowledge domain.
- Heinze, Aleksej; Griffiths, Marie; Fenton, Alex; Fletcher, Gordon (2018). "Knowledge exchange partnership leads to digital transformation at Hydro-X Water Treatment, Ltd". Global Business and Organizational Excellence. 37 (4): 6–13. doi:10.1002/joe.21859.
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