DIGITAL TRANSFORMATION
What does it mean and what will it bring to your business?
What is the digital transformation?
Traditional businesses as you have known them for years have been changing to keep up with modern times and trends. More and more is done using technologies, and this changes our needs and expectations. The term ‘digital transformation’ then simply means transforming your business to fit into the modern digital era.
Benefits of digital transformation
The purpose of digital transformation is to improve and innovate your business model. As a result, you will:
- Lower the operation costs
- Speed up production and improve precision
- Create new products or services
- Improve security and work productivity
- Help you keep up with the competition and create new competitive advantages
- Acquire new customers
- Get the company processes under control
- Attract and maintain high-quality employees
- Gain a deeper understanding of the company’s data
- Simplify and adjust processes throughout the whole company and remove all errors
Why is it inevitable?
Customer-driven pressure on prices, quality and speed of delivery as well as on new products and services will only increase due to the dynamic age we live in. Companies that want to retain and strengthen their position on the market basically have no other option than to fundamentally innovate their business, the efficiency of internal processes and the scope of offered products and services.
Innovation of the business model brings new forms of customer satisfaction. In some cases, this is viewed as a matter of fact. Just like we don’t need to go to a bank in person, we expect easier shopping thanks to e-shops and configurators even from traditional businesses and service providers.
Just like mobile devices always offer new applications and services that used to come as special products (e.g., cameras), traditional businesses have to also consider how to upgrade their current products and what new functions and services to add (e.g., data collection for optimum operation and maintenance of devices).
PHASES OF THE DIGITAL TRANSFORMATION PROCESS
Phase 1
Digitalization of processes across the whole business
Phase 2
Replication of physical flows into a digital form (digital twin)
Phase 3
Innovation of the company’s business or operation model
Phase 1 Digitalization of processes
A whole range of data is transferred, stored or evaluated verbally, in paper form, or in different Excel or Word documents, in emails, etc. These files are often stored on local computers and are not easily accessible for other colleagues or the company management. For some activities the company has no data and relies on the experience and decision-making skills of its employees. In general it is true that what is not measured, cannot be managed. This means that if the company wants to optimize and automate individual activities, it needs the corresponding data.
The first step of digital transformation therefore is the transfer of all key information into a digital format so that this information can be easily processed and is always available.
It is necessary to:
- Specify information required for managing the company and completion of orders.
- Setup the collection of previously unrecorded information.
- Existing information needs to be transferred into a digital format (company ERP, server, cloud).
Benefits of moving to the next phase:
80 % of data processing today consists of entering, searching, and processing of data, while only 20 % is using these data for optimization of processes. The second phase turns this ratio around, and hence there will be less administration and more solutions.
Automated data collection speeds up the reaction time for requests, minimizes errors, allows the measurement and improvement of the efficiency/productivity of individual activities, and saves money. The discussion and solution of problems will be done using specific data and will therefore remove speculations about “what, who, when and how someone was supposed to do something”; there will be a record with a reference to a specific person for all key activities.
This phase will also allow the use of simulations to see what would happen, if...
Phase 2: Replication of physical flows into a digital form (digital twin)
One of the biggest advantages of digitalization is that processes can operate immediately, regardless of the working hours. To allow this, it is necessary to have automated processes for the entry, forwarding, processing and evaluation of data, i.e., without the need of human intervention. Employees will either check the outputs or can approve individual steps.
The second step of digital transformation is therefore the automation of the data flow from accepting an order, through processing of documentation, planning, purchase, informing the production and performing production and inspection operation, up to the preparation of accompanying documentation and invoicing.
The second phase still copies the existing organizational structure, way of making business, products, services, etc. This means that digitalization in this phase supports the “old order”, only the activities are done much quicker, more efficiently and the data is adjusted to the old organizational structure.
Moving to the third phase will help the company fundamentally innovate on the “old order”. The key aspects in this phase are data and material flows and the new organizational structure will be adapted to these flows. A number of surplus management and administration positions will be terminated, the role of employees as well as requirements on their skills will change. The company will be able to provide the customer with added value and do so faster and more efficiently.
Phase 3: Innovation of the company’s business or operation model
The main goal of the digital transformation is not to purchase an information system or specific technologies, but to innovate the business model (how we acquire orders), innovate the operating model (how we complete orders within the company) and innovate the product (what we offer to our customers).
The goal of this phase is to innovate the way the company runs, which products it offers, its speed of delivery, etc. It is crucial to configure a flow of information to customers, suppliers, and other business partners, between processes across the company. Companies create flexible processing models based on artificial intelligence, blockchain and other technologies connected to current and new information systems. The organizational structure and company management are then adjusted to match these changes. Significantly greater emphasis is placed on innovation and flexibility.
