Digital Transformation

Vienna, 2017-04-22

Digitale Transformation

The term „Digitalization“ is pretty popular. However, sceptical comments can be read more often asking if the term „Digitalization“ actually justifies ist popularity.

Let me start with the meaning of the term „Digitalization“. Our reality, our biological life is analog, we eat nutrition and  drink sodas, we breath air, talk to friends and family, build houses in live in apartments, all analog. We listen to music in receiving acoustic waves at our tympanic membrane and we are able to see and watch our environment in perceiving light waves at our retina everything analog. However, to preserve those perceptions like images or music analog storage media like the vinyl record, the magnetic tape or the silver halide film was used in former days. If you intended to build a house, you had the need to create a representation of your house first – a blueprint created with paper and pencil. Also in computer science, there were analog models of computers in the beginning.

What was the problem? Why became scientists active in developing alternatives to analog models and storage media? Well, all analog models and storage media showed a lack of accuracy representing reality. Also the time of reliable storage was very limited and storage became easily destroyed. To create copies of your storage media for backup purposes was extremly cumbersome and caused additional loss of quality.

Information science provided a solution to these challenges – Digitalization. This methodology is very well known since a couple of decades in the information sciences – so nothing new indeed. It works according to the following principle. An analog signal – e.g. a sound wave – will be cut into small discrete splinters or fragments and every single fragment will be represented by a numerical value. A characteristic factor for the amount of discrete fragments in this process is called resolution. If we digitize with a coarse resolution, we are able to recognize this and perceive this digital model as one with a poor quality. However, if we digitize with a resolution that is so finespun that our biological receptors - our ears and eyes - will not be able to follow, than we will perceive this model as a perfect image of the reality. That sounds simple but needs some technical considerations, though. To achieve the required resolution in a digitalization process, technical devices are required that deliver the resolution we were talking about. And those devices are available only recently. One example ist he camera resolution in a mobile phone. The first mobile phones with built in cameras wee available around 2005 – not long ago at all. The resolution of the camera chips of those days was a few thousend pixels – quite an achievement at that time. However, the picture taken with those cameras were so aweful grainy that nobody used the camera actually.

Todays smartphones have cameras witha resolution of 20 Megapixels – even 40 Megapixels – and the pictures taken enjoy wide acceptance. Those pictures are transferred more or less immidiately into the cloud and are stored with original quality and resolution untampered until infinity. All disadvantages of analog modelling and storage are completely resolved.

What kind of impact has digitalization within our enterprises? For instance, we do some kind of modelling in our accounting departments. Every booking record represents a realbusiness activity. And the mission of accounting is to create an accurate and comprehensive representation of our business reality. In the sixties and seventies of the last century, the accountants did these in manually writing booking records into ledger sheets and these records were finally added and compiled manually to the annual financial statement of a company. Accounting is now carried out digitally since a couple of years. Digitalization of the accounting processes has been accomplished in almost all companies. This leads us to the next question: is it possible to digitize all value adding processes in a company and which kind of impact has such an undertaking for my legacy busines model?

In this respect, we are confronted with a true strategic and existential challenge. We actually don't care if our existing value adding processes can be digitized. We even don’t care what could be possible with digitized value adding processes.

The real question is: Can I meet the demand of my customers even better with a digitized value adding process than I could do in the past? In commencing a digital transformation project, try to answer the following questions:

• Which kind of customer demand would I like to satisfy?
• Which problem – which challenge does my customer have in this respect?

The key finding is: „Know Your Customer“

Only after answering these questions, you may take off and head for Digitalization – starting with your customer interface. New questions arise to be answered:

• How does my customer like to interact with me (in respect to the service portfolio defined before)?
• How does he like to order?
• How does he like to be informed about the progress of his order?
• How does he like to get invoiced after rceiveing the service / the product and how does he like to pay his invoice?

The key finding in this phase is: „Know Your Customer’s Interface“

After having answered all the questions above, the customer interface needs to be created and designed in a way that your customer can easily and comfortably access your service and product portfolio. The subsequent processes to deliver your services and products (= value adding processes) need to be system supported, automized and seamless to each other (finally even into accounting) in a way you are able to exceed your customer’s expectations and to achieve process costs that are as low as possible.

The term „Digitalization“ is therefore a loan given by the information sciences and represents a lot. However, intimate knowledge of your customers and your customers‘ demand, consistent process management and subsequent automatization of all possible processes through technological system support - which is possible only recently due to the accelerating technical development - is key. Digital transformation therefore requires strategic, interdisciplinary, hollistic and generalistc, systemic leadership.

Wolfgang P. Kalny