Digital Transformation – In the Field of Conflict between Evolution and Revolution

“Digital transformation” has been a hot discussion topic and the mega-trend of the last few months. But is this just a phrase or is there really an innovation behind the term? 

Only today are people talking about "digitalization,” although many process steps have been digitalized since the widespread introduction of personal computers in the 1980s. By contrast, there are probably other things that can never be digitalized, for example the casting of metal parts. 

While digital technologies influence the manner in which information is shared, communication designed, and transactions are handled, the term "digital transformation” reaches still further. It is a process of change – change of methods of interaction between individuals, companies, and business entities on the one hand and within organizations on the other. These changes can be disruptive, that is, radical – or they can be evolutionary. 

People talk about disruptive innovations if the innovations in question overtake that which has been proven and invalidate previously-successful business models. Digital transformation confronts established companies, ones that frequently feature rigid structures, with great challenges. It overtakes existing, long-standing market participants without giving them time to prepare themselves and adapt. The speed of change is enormous and this kind of transformation usually comes without warning. And then the change is frequently only noticed when it is already too late. There are many examples of this: Uber is mixing up the taxi industry, AirBnb the hotel industry. Digital photography brought Kodak to its knees, Netflix is changing the media world, Amazon is threatening classic booksellers. The consequence of digital transformation is often market displacement and is not necessarily the opening up of additional markets – but sometimes it is a mixture of the two. 

Source: Certify

Source: Certify

Digital transformations are sooner evolutionary, that is, slower, if established companies must react to changed customer behavior. For the constantly-growing community of digital actors is designing the interaction according to its own rules. Here it is no longer important how the company wishes to interact toward the outside, but rather which touch points the digital actor wants to use. 

The customers and consumers become game changers who determine in extremely short innovation cycles how digital interaction will take place. Even if two years ago we would actually have discussed whether a contact center should offer Facebook as an incoming channel in addition to e-mail and telephone, today companies can no longer foresee which Internet services will be used tomorrow. Digital natives change channels as often as they wish depending on the trend, so companies must be prepared to capture this communication in the most literal sense and avoid creating a point for external "disruption.” 
A digital transformation can therefore definitely be evolutionary, but it is very likely that an evolution will take too much time. Time matters: if a company thinks in evolutionary fashion – that is, non-disruptively – the danger of an external attack increases. Therefore, it is is very important to constantly define a company's own point of view and to predict possible changes in the behavior of digital actors (1). The pinnacle is reached if a company not only foresees future reaction patterns (if, then...), but if it succeeds in making its own ideas into digital standards. 

Perhaps the best example of this is Steve Jobs and the iPhone. Without the iPhone, mobile phones would likely still have a keyboard and hardly anybody would find this strange. Trends that yesterday appeared senseless or stupid (“why, we're doing well enough today”) such as second screen, buy now, and hologram data glasses, have become trendy overnight because a small peer group took up the topic and made it go viral.

Disruption is always radical. And old paradigms only fit the new situation in a few lucky cases, so it's better that you do not rely on this. In order to be able to work against external disruption by a multitude of digital actors, it is easiest to tap your own digital pool. Using crowd knowledge, you can take advantage of the knowledge and user experiences of your employees, for, in contrast to what Henry Ford wanted (2), everyone brings their brains in addition to their hands.

(1) Digital actors are all market participants who willingly and actively use digital media for interaction –regardless of whether they are "digital immigrants” or “digital natives.”
(2) “Why is it every time I ask for a pair of hands, they come with a brain attached?” Henry Ford

Posted on July 21, 2016 and filed under Trends.