Definition of digitization
Digitalization is the use of digital technologies to change a business model and provide new revenue and value-creating opportunities; it is the process of moving to a digital business. In the context of this definition, Gartner also says that only about 70 percent of companies entering the digital business will succeed. So far, the digital transformation has mastered those сompanies that consistently map their business processes to digital systems, while at the same time putting the benefits to their customers at the center and significantly increasing them.
It also means the seamless integration of partners, existing sources of information such as social media, Internet of Things and many more and even the actual customers themselves. Such integration of all factors involved often requires and requires new and innovative business models. which ultimately contribute to increasing customer value.
As a simple example Spotify or Netflix are here called – companies that provide their customers with a huge portfolio of digital music and films for a monthly fee for use. While Apple has already used IT to consistently map its sales and distribution processes to IT systems, these companies are also using a new business model.
If the above points are the key success aspects of a digital transformation, then a corporate definition of the term “digitization,” according to the F-Net Group, is as follows: Digitalization means increasing customer value by consistently mapping enterprise processes into digital systems, including them customers, partners, and new sources of information, which can usually only be achieved by innovating business models.
The core components of the digital transformation
Transformation: processes (“business processes”), technology (“digital systems”) and innovation (“innovative business models”). Only the combination of these three components leads to the greatest added value of digital transformations: significantly increased customer benefit. Figure 2 illustrates how the three components relate to each other.
If one of these components is missing, there is a risk that no new or increased customer benefit will be created at the end – nothing new will be achieved. After all, we have seen the combination of two of the three elements in business process reengineering and automation projects in recent decades.
The House of Digital Business as a model template
They thought in advance about the “Big Picture”, the target image of their transformation. So far, there has not been a model for such digital transformations, which is why we are taking the first step in this direction with the House of Digital Business. The model should not be an exact blueprint, but show all important components of a digital business and put them in context.
The new value proposition stands at the top and forms the roof of the house. On the one hand, it is supported by innovative business models, products and services that are made available to the customer via app and via secure access wherever possible and at any time. On the other hand, the new value proposition is supported by the data generated by the customer in the use of the products and services offered as well as its networked end devices. More and more products today contain IT functionalities and generate or collect data. But many companies have yet to learn how to use this data. Pioneering work here, for example, the car manufacturer Volkswagen, which has something with the vehicle data of its customers, which the Internet giant Google does not have.
In the digital age, the company’s digital ecosystem must also go beyond its own enterprise IT. Existing external data sources and services from partners and other providers are shared to provide new services and apps to the customer. For example, the car rental company Hertz uses location-specific weather data to send customers an offer to upgrade their convertible to the smartphone at short notice if the weather permits.
The foundation of the House of Digital Business is the corporate culture, organization and governance necessary for digital transformation. Talking about the challenges of the digital transformation, IT and business decision makers have time and again confirmed to me that cultural change within the workforce is the greatest challenge of digital transformation. The long-standing practice of change management, ie working in the system, is supplemented or even replaced by change leadership, ie work on the system.