Like any savvy business owner, you’re doing your best to keep up with the latest digital trends. Judging by the number of cloud-based subscriptions you pay for each month, you must be making progress.
Automated your accounting processes? Check. Equipped employees to meet and collaborate virtually? Check. Set up digital marketing channels and processes. Check and double-check.
“Going digital” hasn’t been easy. It’s taken a lot of planning as well as persistence. You’ve gone through a lot of trial and error, but, thankfully, that’s behind you. Now, you can back and enjoy the feeling of achievement, knowing that your organization is running on “state-of-the-art” technology.
Whoa! Let’s stop the daydream right there. Yes, you deserve congratulations for embracing digital solutions, butyou haven’t arrived at the end of your digital transformation journey. You’ve only just begun.
If you plateau at this stage, not only will you miss out on opportunities to build on what you’ve created, but you’ll also risk losing the value of the time and resources you’ve invested so far.
On the path to genuine digital transformation, as soon as you feel you’ve arrived, that’s a sure signal it’s time to embark on the next phase of your evolution.
Digitization versus digitalization
According to recent research by Gartner, more than 90% of organizations they’ve interacted with are “engaged in some form of digital initiative.” However, only 40% of these companies have successfully scaled their projects.
Many of these organizations with half-baked digital solutions may believe they’re actively undergoing digital transformation. However, they’ve tapped only part of the potential of digital technologies to revolutionize their business and make it future-proof.
As Gartner so bluntly puts it, “Most organizations are doing digital projects, but this does not mean they are a digital business.”
This statement doesn’t imply that all businesses should be striving to become tech-centered. Becoming a “digital business” doesn’t mean shifting the focus away from your core activities to new technology. It simply means becoming a thoroughly modernized business, one that leverages technology to keep a competitive edge.
In today’s business environment, if you’re not evolving into a “digital business,” you’re at risk of becoming extinct. And to become a true digital business, you must move beyond the starting phase of modernization, digitization, to the more advanced stage of digitalization.
Only two letters separate “digitization” from “digitalization,” but the difference is dramatic:
- Digitization means moving from analog to digital ways of doing things. For example:
- Moving from paper invoices to electronic invoices
- Shifting from making sales phone calls to sending email campaigns
- Digitalization means implementing digital solutions that change existing processes, renovating the business model. For example:
- Moving from sending invoices manually to setting up a project management system that automatically triggers an invoice once a project milestone is reached
- Shifting from broadcasting email content to implementing an AI-driven solution that customizes content based on user viewing patterns
In the digitalization phase, you’re able to integrate various digital solutions, including hardware and software. If your business depends on physical equipment, you’re probably also incorporating wireless sensor technology. Whole systems start talking to whole systems through a steady stream of shared data.
Where is your business on the spectrum from digitization to digitalization? Have the digital changes you’ve introduced simply made old ways of doing things more efficient? Or have they shaken up established workflows, created new value, and changed your opinion about what’s possible?
What real digital transformation looks like
On the journey to true digital transformation, digitalization is still not the final destination. Once you’ve achieved that milestone, you’re ready for the next phase: optimization.
Digital optimization moves the business toward seamless automation. At this stage, you’re ready to invest in “machine learning” technology, which teaches itself how to improve performance. For example, if you’re running a production line, you might implement technology to track the quality of your output and automatically stop and reset machinery that’s creating flawed product. If your focus is on the back office, then optimization might look like automated ordering, customer service, and post-sales support.
From optimization, the next stage is full digital transformation. “Full” doesn’t mean terminal, however. A business that has achieved digital transformation has implemented digital solutions across every aspect of the business, effectively remaking the business in a digital image. As a fully digital business, the organization enters a state of continual evolution. Transformation becomes a self-renewing, ongoing process.
In other words, the further you travel along the digital journey, the more comfortable you must become with metamorphosis as your organization’s ultimate mode of being. If you stay stuck in the first stage of digitization, you will run the risk of trapping your business in a hazardous state.
Risks of making only part of the journey
Because digital technology never stops evolving, neither can you. Once you’ve embarked on the journey toward digital transformation, you can’t afford to halt it partway. To do so is to invite at least three kinds of risks.
- You’ll risk losing the ROI you’ve counted on. If you don’t fully exploit the technology you’ve invested in, you may not make the gains in efficiency you’ve anticipated.
- Your team may lose faith in digital initiatives. Transforming your business requires buy-in from employees, who often find it burdensome to relearn established job processes. If you hit the pause button on digital before you’ve fully trained your team and created a digital-friendly culture, then employees may become skeptical and disengaged.
- You may fall behind competitors. Just because you’ve decided to put a cap on your digital ambitions doesn’t mean that others in your market have done the same. Today, it may look like you’re ahead on the digital curve, but that can change quickly if you don’t continue to consciously evolve your business toward the next level of digital transformation.
Signs you’re ready for digitalization
So how do you know you’re ready to take the next step toward digital transformation? Here are seven signs it could be time to level up your technology and your expectations:
- Paper has all but disappeared from your operations. Almost all of your business records, from every department, are now computerized.
- You’ve mapped business processes for multiple functions. You can describe, step-by-step, how procedures work in various areas of the business, such as accounting, sales, and human resources. (Accounting is often a great place to start doing this.)
- At least some of your digital solutions interconnect. You’ve either chosen solutions designed to connect one another, or you’ve used an integration tool such as Zapier to bridge gaps.
- There’s a seat in every meeting for Data. You may have heard that Starbucks keeps an empty chair at every meeting to represent the customer point of view. You’ll know you’re ready for digitalization when your team leaves room in every discussion for input from Data. Collecting and analyzing data has become a central preoccupation, and you’re ready to become a data-driven organization.
- You’ve become a learning organization. You’ve created a culture of continual learning. Employees have become expert at “Googling” and “YouTubing” to learn new technology. They also mentor one another, using digital tools such as instant messaging platforms and screen-capturing software.
- You have a vision for Business 2.0. You’re aware that digital transformation is never just about technology—it’s about evolving your business model to keep up with future change. You’ve created a Digital Roadmap to guide you toward your vision for a fully digital business.
- You have funding in place to fuel the journey. You recognize that digital transformation requires ongoing investment, and you’re prepared to spend enough money and time to yield results.
No one can dictate the shape or pace of your company’s digital journey, but one thing is certain—you won’t travel far if you don’t keep traveling. Pay attention to your progress, celebrate your successes, and keep your eye trained on the horizon, where your competitors are certainly looking.
 Gartner. (2020). Digitalization strategy for business transformation: Accelerate your digital transformation journey. https://www.gartner.com/en/information-technology/insights/digitalization