Guide to Digitalization for Decision-Makers – More Clarity in Practice
How you as a decision-maker can tackle the complex topic of digitization in a simple way
Digitalization is a maximally ambiguous topic. It is reminiscent of the discussion about Industry 4.0, and it has also emerged from it. But what does digitization mean for you and your company? How do you get started and which topic do you tackle first? This practice-oriented article provides you with the most important information in a compact form.
For whom is this article written?
You are a decision-maker in a service company, e.g. in the construction or telecommunications industry, and are entrusted with the implementation of a digitization project. And you want to implement your project in the best possible way. This article is intended to give you a comprehensive overview of what tasks you should work on in each phase and what information you should provide so that things run “smoothly” during implementation.
Specifically, I will build my articles along the phases of digitization. Practical examples will always come from my consulting practice.
Moreover, this article is written for practitioners. I will mention theoretical frameworks, but it always comes down to the right application, so I will be guided by the practical use of the frameworks. One more thing about the tone of this article: I don’t believe in soft-pedaling, but neither do I believe in an arrogant look-down attitude. The article is written directly and unembellished. Nothing is glossed over, and nothing is exaggerated. Anyone who wants to approach digitization with a pragmatic and practical approach is in the right place!
Start of digitization
And here we are already at the starting point in digitization. There are two things to keep in mind here:
- You simply have to start digitization.
- You have to define digitization for yourself.
Re 1. you simply have to start digitization.
The start of digitization is unspectacular. It needs one thing: your decision. And your decision is a serious one. Seriously meant because with this decision you consciously help decide a few things:
- Digitalization is making its way into your company. You want to transform your company digitally. From a successful company that works with analog tools to an innovative company that works with the latest tools and can provide your customers with different or additional products and services in the future. Here, digitization is the first step.
- Point 1 implies that you provide digitization with a space. Space means that in the future you give every entrepreneurial thought a small, free place and place a digital thought there. Sounds abstract? Maybe. Can you even do that in practice? If you want to, YES! Everywhere you hear or read the buzzword “digital mindset” in the media and in professional literature; that’s what it means.
- With the space, you should provide other resources. I’m talking about money for investments in software, hardware and in people. I will present how you calculate the investments for digitization in one of the next blogposts.
- People are your most important resource in digitization. You may write that on your website or in your brochures. The only thing that matters now is whether you mean it. People in digitization projects need support, not just from their superiors, but from all their colleagues. Because a new world is crashing down on these people. Most of my customers’ employees have not experienced or dealt with so many new influences and impressions, information to be processed or basic work for a long time.
- What no one tells you is that you have to part with a whole lot of people and things. After all, digitization separates the wheat from the chaff and acts like a renewal cure. Old software modules, risks, dependencies, incorrect master data, bad processes, but also employees who don’t want to go along with the change. In the case of the latter, however, digitization is never the reason to quit, but usually the effect. An explanation of this will also follow in one of the next blog entries.
So far so good. The start is done. A decision has been made, your decision. Let’s move on to the second point.
You have to define digitization for yourself
Here are two definitions I could find on digitization:
„The digitization of a company can be directed inward, e.g. when business processes are digitized in order to reduce costs, increase efficiency and boost productivity. A greater challenge of digitization, however, is the requirement of companies to innovate with the development of products and/or services in order to increase sales and gain market share in the long term..“ [Translated from German – Kofler, T., Das digitale Unternehmen – systematische Vorgehensweise zur zielgerichteten Digitalisierung, 2018, Springer-Verlag GmbH Deutschland].
„Digitization […] in itself is only the process of pressing analog media into bits and bytes (or other forms of 0 and 1 such as smoke signals). This mere mapping of information into a 0 and 1 version is accordingly called digitization.“ [Translated from German – Talin, B., Digitalisierung Vs. Digitale Transformation – Unterschied Und Definition, 2021].
And, does that help you implement digitization in your company?
I thought so. The definitions are therefore not wrong. But digitization no longer needs to be explained, whereas its implementation does.
And that brings us to the question: “How can I digitize my company?”.
So the work that needs to be done first is to work out your definition for digitization. Some people also talk about developing a digital strategy. Again, there are a wide variety of definitions in practice. But the start of digital transformation begins with the digitization of business processes.
Why is that?
If a company is in the process of tackling digital transformation, the starting position must be taken into account. In many cases that I know from practice, the last major digitization was several decades ago. That’s right. Almost always, it was around the turn of the millennium (some will still know it as the millennium or millennium change, i.e., around the year 2000) when SAP was introduced as the ERP system. After that, not much happened in terms of using software tools. Company growth was rapid, employee and revenue numbers multiplied, but the tools remained the same. Complex Excel files or Access databases have characterized everyday work ever since.
So digitization starts with business processes. And there you don’t start with just any processes, but with the processes that are most important for value creation. This results in the following effects:
- A platform is created in the company as a basis for future further development
- Data quality is improved in the medium term through cleansing and centralization to the greatest possible extent (it is mostly junk!)
- Process standardization can finally take place
- Communication with customers, suppliers and subcontractors can be significantly improved
- New data can now be collected
- The possibility arises to offer new products and services
Digitization of order management for service companies
For service companies, this process is the order management process. Here, the industry hardly plays a role. An order goes through the same phases over and over again:
- Order creation with customer order (exception can be fault clearance operations, here the technical and commercial order usually takes place by framework agreement and the so-called call-off on a framework agreement contingent can also take place after the fault clearance). – the collection of information from the customer order and the “marrying” of the information with existing master, equipment and material data.
- Work preparation – all actions are performed here so that a work order can be scheduled and executed.
- Scheduling – assigning the work order to a so-called “field service” employee. These are the people who are “out there” for service companies and do the work at the customer’s site. In other words, those people who generate the revenue for the company and who actively create and maintain value. These employees need certain information: about the order, about the customer, about equipment and systems, about lines, networks, etc. The end of an execution is always the return to the customer. At the end of an execution there is always the confirmation and completion report of an order.
- Service recording – the services that have been performed are collected in a report. Dimensions and masses, prices, pieces and linear meters play a role here. This information must be cataloged in so-called service specifications and must be available for selection. This report, e.g. called measurement, is then sent to the customer with the request for approval.
- Billing – the billing request contains the service released by the customer.
Completion of the order – this phase sounds rather unspectacular and is not often done in practice. Here, all information captured during the order (such as images, files, forms, approvals, etc.) must be saved in a legally secure manner. This is because in most cases it is not only the tax office that wants to be able to trace proof of the services provided for ten years to come. In the event of a dispute, other authorities, such as the courts, must also be able to trace what has been done and the care taken in the work. Construction companies know this only too well, because in the industry, installers are subject to a five-year construction warranty.
- Archiving – that’s it, the order can now be filed away. But how exactly? Here, too, an individual decision must be made for each type of document as to how it is to be digitally archived. And in such a way that it can no longer be changed in retrospect.
With this list, I have only lightly scratched the surface of the order management process. But enough to give you an idea of the complexity that awaits you if you want to fully digitize it.
Criteria for the individual definition of digitization
So digitizing the most important value creation process is one way you can approach digitization. The definition is largely dependent on these factors:
- Initial situation and available resources (employees, know-how, budget, time, IT system architecture, etc.)
- Monetary leverage or effects (ROI)
- Business/market development strategy
- Intensity of change for the organization
- Product life cycles
- Leadership culture
- Supplier structure and relationship
- Data quality
- Stakeholder structure
- Past digitization attempts
The list may not be complete, feel free to contact me in that case and comment on this article.
However, it already offers many easily verifiable clues that you can directly include in your considerations.
This will enable you to get an idea in no time at all of which options you should pursue in digitization and what makes sense at all from the above criteria.
Once these considerations have been made and the resulting results documented and analyzed, you can now start your first digitization project in concrete terms. Whether this is the development of a digital strategy or the digitization of your business processes varies from company to company. Some things can certainly emerge in parallel if a) sufficient resources are available and b) all initiatives are aligned with a common strategic vision. If you proceed in this way, you are currently (as of summer 2021) already better than 80% of the competitors in your market.