Under these circumstances, I strongly advise against digitization (which your consultant won’t tell you)
Wann Sie anfangen sollten mit der Digitalisierung Ihrer Geschäftsprozesse, und wann nicht. Eine Übersicht der wichtigsten Voraussetzungen und 11 Bonus-Hinweisen.
Digitalization entails risks. If you don’t know or have a handle on these, I strongly advise against tackling digital transformation.
If you decide to digitize your company or conduct a large part of your business processes digitally, you should be aware that there are risks. While your consultant may not tell you the risks, you need to know what they are and weigh whether the risks outweigh the benefits.
Related: Guide to digitization for decision-makers – More clarity in practice.
Most importantly, you need to be aware that from the very first digitization project, Digital Transformation is a) almost impossible to stop and b) will consume a lot of resources.
Once again, Digital Transformation is not an evolution but a revolution.
1. The risks involved in digitization (what your consultant doesn’t tell you)
a) Security risks
Digitization brings with it some new security risks. For one, the Internet is vulnerable to hacker attacks and viruses. Companies conducting their business processes online can easily fall victim to cybercrime. Secondly, the data that is stored online is often not as secure as one might think. It happens repeatedly that websites, personal data of users, customers or suppliers are stolen or hacked.
b) Cost risks
Digitization is often associated with high costs. Organizations have to invest in expensive hardware and software to handle their business processes digitally. Often, external service providers are also needed to manage the transition. All these costs can add up over time and become a burden.
c) Risk of IT infrastructure dependency
As digitization increases, so does the dependency of the technology used. Unfortunately, you can’t change that. You can only manage it. If something goes wrong with the hardware or software, the entire business can be crippled. Even a simple Internet failure can have dramatic consequences and lead to lost sales or liquidity risks.
d) Risk of adapting too slowly
Above all, digitization has an impact on the way people work. No transformation comes without the need for change. In the case of a fundamental transformation, such as digital transformation, the change affects everyone involved, from management to clerical staff. Too slow an adaptation, or even worse, a non-existent change management strategy and implementation, inevitably has fatal consequences.
2. When you should not digitize
Most articles talk about how vital digitization is and why you absolutely must digitize. But there’s one question that’s just as important: when shouldn’t you digitize?
I want to share a small collection of points to review. If just one of the points is not met, you risk exposing your business to unnecessary risk.
a) If you do not have a clear goal in mind
Before you start digitizing your business processes, you should consider your goal. Make sure you clearly understand what you want to achieve before you start implementing it. Otherwise, you may end up disappointed because you didn’t achieve your original goal. Small practical tip: the actual goal will never be 100% achieved. It’s ok if not all the features are there at the very beginning, usually the go live. It’s just important never to lose sight of the target image and to adjust it only gently. You’d better take more time to plan and develop a proper target image. Main question: what specifically should have improved after the digitization project?
b) If there is no clear ROI strategy.
Just as important as having a clear goal is developing clearly defined metrics to measure return on investment (ROI). Could you make sure you know exactly how you will measure the success of your digitization efforts before you start investing? Otherwise, it may be difficult to prove the success of your efforts.
c) If your team is not on board
Digitization is not a one-man job – it’s a collective team effort. Before you start digitizing your processes and structures, make sure your team is also ready to leap. If you can’t, you’ll experience significant digitization problems, including complete project abandonment. Talk to your team and ensure everyone is on board and ready to embrace the change.
d) When there is no clear leadership vision
As with any other change, there must be a clear leadership vision for digitization. Before you start digitizing, ensure everyone in your organization knows why you are doing it and the goal. Otherwise, there is a risk that digitization efforts will fizzle out. Also, make sure you empower the various levels of management to be good role models for their employees as well.
e) If the infrastructure is not right
Before digitizing, ensure your company’s technical infrastructure is ready for the new era. If not, digitization efforts could be hindered and even fail in the end. Work with your IT team to ensure all systems are ready for the changes. I’ve seen organizations, especially early in the Corona pandemic, that have allowed IT infrastructure to atrophy. As a result, these ventures, all of them in the so-called critical infrastructure sector (e.g., construction companies, public utilities, network operators, etc.), were not only exposed to significant cyber risks, but also had a significant investment backlog.
3. Digitization project or digital transformation?
The main difference between digitization and digital transformation is their focus on time and content.
In the first step, digitization pursues the goal of making analog and decentrally stored information available digitally. The term “digitization” is used for this.
In the second step, the digitization occurs, namely the central processing of data (keyword Big Data) and its intelligent linking. This is where we get into process mining and process automation. Don’t be put off by all the terms. Everyone is just boiling water, and if you take it step by step and have the right expert, everything suddenly becomes very easy.
Digitalization is thus designed for short- to medium-term implementation and improves the efficiency of day-to-day operations.
Digital transformation, on the other hand, is more of a cultural change than a technological change. Here, the temporal focus is long-term. In terms of content, you deal with new digital business models, new organizational possibilities, and the anchoring of the digitization idea (keyword: always-on mentality) in the corporate strategy (yes, there is no digitization strategy in the true sense).
Digital transformation can thus hardly be reversed or “switched off,” and it is there to describe and shape the future. In addition, and this is the nature of the matter, you have to contend with a fair amount of uncertainty.
It follows: It takes far more time, resources, and external support to drive digital transformation than executing a digitization project.
4. The right conditions for digitization
There are so many levers in an organization, and no single definition for digitization in YOUR company. This can quickly overwhelm the person or people responsible for Digital Transformation.
Essentially, it refers to using digital technologies to automate and optimize business processes. Many recognize the benefits of digitization and want to adapt their business processes accordingly. However, not every company is ready for it. Before you decide whether digitization makes sense for your company, you should consider a few points. First, you must ensure that you create the right conditions for successful digitization. In particular, this includes a strong foundation in terms of technology and infrastructure. If you don’t have the necessary resources, digitizing your business can quickly fail.
I would also like you to ensure that your team is ready to embrace the new technology. It is often helpful to bring in external experts to successfully implement the project.
Another important aspect and starting point of any digitization project is the objective of digitization. Digitization should be used to save costs or open up new revenue sources. However, you should make sure that you are able to achieve these goals. For example, if you plan to enter new markets, you should ensure that your organization and culture can sustain that scaling. Otherwise, digitization could do more harm than good. So before you decide whether digitization makes sense for you, please take a look at these points carefully. However, digitization can help you take your business to the next level if you meet the right requirements and have realistic goals.
Digression: if you decide to digitize.
If you want to digitize, here are a few quick pointers:
Please be sure to include all your employees in all steps. I will describe how this can be done in another article.
Answer the question honestly: “What should have IMPROVED after digitization?
Paint a compelling picture of the future.
Get backing from senior management (if you are not part of the GL).
Get enough resources (people, budget, know-how). Note: A lot does not always help a lot.
Develop a good plan for these topics: Change Management, IT Security, IT Infrastructure, Test Management, and the project itself (team, organization, time & milestone planning).
Stick to the plan. Defend it as long as it is worth it.
Stay flexible. It may be that you have planned sh…ly poorly. Then you have to adjust courageously and radically.
Please be sure to include all your employees in all steps.
Yes, point 9 is double. Because it is the most important.
Read through all the points again if you are unsure about point 7.
5. Conclusion: Then companies should keep their hands off digitization.
If you don’t have a clear vision of what you want to achieve with digitization, you should steer clear of it. Even if it’s a large and complex undertaking, you should only digitize if they are aware of the challenges and know what they want to do.
Computer game packages (yes, there was that once) always had the minimum requirements to get the game up and running.
That’s how you have to think about digitization and digital transformation.
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