Digital Modernization – An evolutionary & methodical approach
As traditional barriers to entry fade, companies look to modernize using digital tools and advanced — but proven — technologies. This makes digital modernization a critical part of a company’s Board and, more importantly, the CIO’s agenda. Examples of companies utilizing digital modernization to their advantage are everywhere. Amazon began by selling books online and gradually ventured into other businesses using digital technologies to disrupt everything from retail to financial services. Digitally advanced players are utilizing new technologies to improve critical internal processes, make their businesses more agile, and win customer minds and wallet share.
However, digital modernization is more than just having a Twitter handle or putting a chatbot on your website. Implementing SMACI (Social, Mobile, Analytics, Cloud, and IoT) is not digital modernization either. If done in silos, digital modernization efforts may end up driving customers away, so the key is ensuring that digital technologies are aligned with each other and integrated with the digital backbone of the underlying infrastructure.
We hear a lot about successful
digital modernization, but little is said about the effects of digitalization
gone wrong. Failed digital modernization projects can erode brand value and
customer trust, or even put a company permanently out of business. Therefore,
it is critical that organizations undergoing a digital modernization follow a
synchronized and coordinated approach. In this article, we will try to shed
light on what digital modernization is, and how companies looking to transform
should navigate the journey.
In the digital realm, we classify
organizations into two categories:
- Born Digital: Also referred to as digital natives, these companies have the benefit of starting in the Digital Age, and their business models are largely based on digital channels. Amazon, Google, Facebook, Uber, Airbnb, and many other emerging tech companies are in this group. Financial institutions like DBS Bank in Singapore or Tangerine Bank in Canada may also fall in this category because their initial business models were based on digital channels, even though their services may not be as comprehensive as their larger competitors.
- Digital Adopters: These are traditional companies like Walmart, Home Depot and large banks, which are working hard to beat their born digital competitors in the race to acquire and retain new customers.
Paraphrasing FedEx CIO Rob Carter, digital adopters are the ones who have a stack of technical debt that has powered their success in the past, but has now become a barrier to growth. Digital modernization is a three-phase journey. These phases are quite well known, but differences in terminology can create a lot of confusion. Before we dig deeper into digital modernization, let’s define these terms.
- Digitization: Simply put, digitization is converting physical data into an electronic format. Digitization can save organizations millions of dollars on physical document creation, storage, transmission and updating. It also includes related requirements for infrastructure set-up, protection against cyber threats, and loss of information or accessibility in case of a site failure.
- Digitalization: When an organization begins utilizing digital technologies to create new business models and processes, we call this digitalization. It enables banks to provide digital payments, helps startups like Uber enable resource sharing, and leads organizations towards improved operations and processes, such as using smart glasses to maintain equipment in a manufacturing plant.
- Digital Transformation: This is the pinnacle that every digital adopter wants to reach as fast as possible. However, business and technology leaders must understand that reaching here would be more an evolutionary journey than a revolutionary one. To ensure all gaps are bridged, efforts must be coordinated and synchronized across all parts of the organization and all steps, including the previous phases of digitization and digitalization.
Once an organization understands the phases of the digital modernization journey, they must assess where they stand before embarking. In the next installment, I will lay out a simple way to think about where some organizations currently stand in their digital modernization journey, and more importantly, where they need to go next.
Based in Toronto, Canada, Manish Jain is a Director in the Digital Consulting space. Currently, he is helping a global vaccine manufacturer in its Industry 4.0 program. Earlier, he has headed the Sales Strategy & Operations at Atos|Syntel.. With an MBA in Strategy & Finance and 14 years of experience in technology strategy, architecture, design, and development, he has served clients in multiple industries. He is passionate about customer experience & digital technologies, and believes that the customer should always come before technology.