So what exactly is digital? What is digital transformation? What are the essential differences and internal connections between information digitization, business digitization, and digital transformation?
We found the answer in the different definitions given by major authorities.
Digitization: a simple term in meaning
Information digitization actually refers to the conversion of analog information into binary codes represented by 0 and 1, so that computers can store, process and transmit such information.
According to Gartner’s IT terminology: Information digitization is the process of turning analog form into digital form.
Information digitization is widespread in today’s corporate world: for example, converting handwritten text or typewriter text into digital format is a typical example of information digitization; converting music from LP to digital format or video from VHS tape to digital format.
In the information age, because of the limited technical means, for a customer, a product, a business rule, and a business process method, we can only manually enter it in the form of data, relying heavily on relational databases: tables (entities), Fields (attributes) turn everything into a structured text description.
Therefore, in a corporate environment, information digitization is very important for processing analog information and “paper-based” processes. But we should note that this is only the digitization of information, not the digitization of processes.
Digitalization: Focus on changing business models
If it is said that information digitization, it is the use of cloud computing , big data , artificial intelligence and other technologies to holographically reconstruct the colorful world in the computer world. Whatever the real world, we have the ability to store it in the computer world.
Then “business digitization” was born based on all the necessary support provided by IT technology, allowing business and technology to truly interact.
According to Gartner’s glossary, business digitization refers to the use of digital technology to change business models and provide new opportunities to create revenue and value. It is the process of turning to digital business. Digital business blurs the digital world and the physical world to create new business designs.
We can find the answer from more realities:
For example: Siemens, Schneider and other multinational giants, based on the same underlying database, connect all people, IT systems, and automation systems to create a “digital twin” for the real factory in the virtual world.
For example, Haier has created an interconnected factory system with on-demand design, on-demand manufacturing, and on-demand distribution by subverting and upgrading the traditional production model, making the entire manufacturing process highly flexible and meeting the needs of individual customization.
Digital Transformation: Beyond Digital
Companies often have a common misunderstanding. They will call the digitization of an application or business a digital transformation.
However, digitalization (information digitalization, business digitalization) is very different from digital transformation.
Digital transformation is not technological transformation. This broader term refers to customer-driven strategic business transformation that not only requires the implementation of digital technology, but also involves organizational changes in various departments.
It includes analysis and consideration of people, input and output, knowledge and ability, finance, corporate culture, whether it is acceptable or adaptable to transformation, benchmarking industry benchmarks, and formulating goals and ultimate goals for each stage. It is a transformation or even subversion of the way of thinking.
Therefore, digital transformation usually includes three aspects:
- One is the digital business model. The business models (business models) that companies have successfully operated in the past decades have been destroyed by digital innovation and are no longer effective. If companies do not make up their minds to “destroy themselves”, they are creating a variable, digital It will be at a loss when it comes to business models. This business model must be a business model enhanced by data and technology.
- The second is the digital operating model. It is to redefine the operation model of the enterprise under the conditions of digitization, clearly describe the relationship between business functions, processes, and organizational structure, and how to effectively interact with people, teams, and various components, so as to realize the enterprise’s strategy and final aims.
- The third is digital talent and skills. Companies must first help their leadership enter the digital age; companies must know how to attract, retain, and develop talents and skills related to the digital age through corporate culture and incentives; companies must adopt different organizational structures, work strategies and methods, Make robots and On-Demand workers effectively cooperate and integrate into business processes.
Business digitization is based on information digitization, providing all the necessary support based on IT technology, so that business and technology can truly interact. Enterprises need to go through the upgrade process from informatization to digitization (digitalization) and then to intelligence. Digitally connect products, services, assets, and business processes to make enterprise operations faster and more efficient.
They mainly include:
1. Information system/platform perfection
Informatization is the foundation of digitization. If an enterprise wants to realize digital transformation, it needs to complete the construction of informatization first. Enterprises with a good foundation in information technology are easily at the forefront of digital transformation. Companies that have not yet completed their informatization can take two steps in one step, and they have a chance to keep up with the times in their digital transformation.
2. Depth of Big Data Application
Companies should treat big data as assets, and different companies have different data application depths at this stage. The first is data collection, and then the data is analyzed through models. The core future application of big data is prediction. At present, most companies in the process of digital transformation are still in the data collection stage, and a small number of them are able to perform data analysis, but the advancement of accurate forecasting has just started.
3. Maturity of intelligent application scenarios
On the basis of digitization, intelligence has gradually penetrated into all walks of life with the help of technologies such as artificial intelligence, biometrics, and the Internet of Things. By analyzing the depth of enterprise intelligence application, we can preliminarily judge the progress of business digitization.
4. Process/service efficiency
Improving process and service efficiency is one of the goals of enterprise digital transformation. For example, informatization, data and intelligent applications can increase customer activity and precise services, simplify traditional business processes, improve business efficiency and accuracy, reduce operation and maintenance costs, and improve fraud risk identification capabilities. Companies can often use data changes to directly show process and service efficiency.
5. Application potential of digital technology
With the continuous development of digital technology, companies will gradually increase the maturity of digital technology applications. In the next three years, enterprises should predict the application scenarios that can be realized by digitalization, that is, digital technology will achieve new breakthroughs in analysis and prediction combined with many scenarios in enterprise business processes and management.
Through digital transformation, enterprises will create new business models and digital products and create new value. Mainly reflected in the first is the capitalization of industrial data to realize the direct or indirect realization of data, such as various types of big data exchanges; the second is to extend the industrial chain and broaden the scope of the industry, such as the development of data mining, analysis and forecasting services with big data as the core , Decision-making outsourcing services, etc.; the third is to use digital technology applications to create new service formats and activate new momentum.
1. Digital revenue scale/proportion/growth rate
Through a large number of interviews and surveys, we found that most of the companies in the digital transformation process started their digital business around 2017, and currently generate a certain amount of income, but it is still difficult to achieve profitability, and they are still in the stage of cultivation and development. The revenue scale, proportion of total revenue, and growth rate of digital business can reflect the development of innovative services or products.
2. User experience and personalization
Develop new products and services through continuous iteration, experimentation and testing, and achieve frequent and even continuous updates, and continue to provide customers with value. The system draws a portrait of the user according to the user’s behavior, and adjusts the marketing method according to the portrait.
Personalization delivers specific information to users, restricts or grants users the use of certain functions, or simplifies (such as e-commerce websites) transaction steps and operating procedures through stored user information. Another example is to provide product customization and personalized services. Reshape the experience of customers, partners and even employees through new digital information and interactive methods, and use digital to transfer value propositions.