Everybody seems to be using the term ‘digital’ today. Politicians are laying the foundations for the ‘digital revolution’, product companies have off-the-shelf-solutions for being a ‘digital leader’, and consulting firms can help you with the ‘digital transformation’. However, you hardly ever find anybody who can tell you exactly what ‘digital’ is; in fact, the term means different things to different people.
At one end of the spectrum are the rather simple features, such as replacing paper. At the other end, ‘digital’ is a synonym for the transcendence of the industrial era.
Therefore, it is unsurprising that there is no consensus on the definition of digitalisation in the literature. Every author either comes up with their own definition or avoids taking a clear standpoint.
In the remainder of this book, we use the term ‘digitise’ (or ‘digitisation’) if we’re talking about modernising something with a few digital ingredients, for example converting paper to a digital format. Most of the time we take a more far-reaching perspective and use the term ‘digitalisation’ as the beginning of a new era beyond the industrial age. Businesses in the industrial age have been characterised by automation, standardisation, mass production and enormous increases in efficiency. So, what are the characteristics of their digital successors? For a closer understanding of the change encompassing us, look at an ordinary family at the intersection of the industrial and digital age: observe that parents and children have totally different preferences for maintaining social relationships and communicating.
For example, parents are used to making appointments with friends a few days in advance. Their relationships are characterised by well-thought-out arrangements. Communication is driven by the necessity to negotiate those arrangements. Young people behave differently. They are used to digital media that provide information instantly, allowing seamless connectivity with all their friends around the clock and automating repetitive tasks. They are not in favour of long-term planning and multi-step processes, but instead decide ad hoc and at short notice. They are also less reluctant to change plans.
We believe this to be the most important attribute of the digital age: the intensive usage of digital means to change and enhance the way we maintain social relationships and communicate.
Correspondingly, we define a ‘digital enterprise’ as an organisation that makes extensive use of new digital technologies, such as social media, mobile connectivity, analytics or embedded devices, to fundamentally enhance or alter its relationship with all its stakeholders, including clients, employees and suppliers, and its interactions with them.
The following table depicts the critical aspects of this new digital relationship:
The digital relationships and the fundamentally modified possibilities to interact have profound consequences: digital enterprises deal differently with innovation and have significantly different processes, organisational structures and culture, and business models compared to traditional companies.
Accordingly, ‘digital transformation’ (or ‘digitalisation’) is the organisational process of changing an enterprise towards being a ‘digital enterprise’. This transformation process is initiated purposefully to change the enterprise, as opposed to a force of nature that just happens to the enterprise.
This change is a fundamental one – it is nothing less than the reinvention of the enterprise, comprising its processes, organisations and business models.
Such a substantial change is necessary to facilitate truly digital relationships with the enterprise’s stakeholders.
